Business and consumer credit defaults are up as tough economic conditions make it more difficult for some to pay their bills.
Credit reporting firm Centrix said business defaults rose 27 percent in the year ended December over the year earlier, while liquidations rose 16 percent.
The number of households behind on payments in December rose 0.9 percent on November.
"There's no question that many households are struggling to balance their budgets," Centrix managing director Keith McLaughlin said, adding there had been a significant drop in discretionary spending.
"Those that have been subjected to increased interest rates and also the higher cost of living are struggling to make ends meet and that's coming through and the increase in arrears and the household debt.
"Most impacted were the retail trade and construction sectors, reflecting the economic challenges facing many Kiwi business owners at the moment…
"Credit cards were the most impacted, although the conversion rate for these products has recovered as both lenders and consumers became more familiar with the regulations."
Lending rates were also down, with new mortgage lending with an 8 percent year-on-year drop in 2023, with volumes lower than in previous years.
The Credit Contracts and Consumer Finance Act (CCCFA) continued to drive credit lending down, with the overall credit conversion rates down 11 percent on 2021, when the CCCFA was first introduced.
McLaughlin said the government's proposed changes to the CCCFA would make the situation better for consumers on the low end of the income scale.
"I think a lot of people who were turned down [for loans] who shouldn't have been turned down will now be able to get credit from a reputable lender, as opposed to going to disreputable lenders."
McLaughlin said 2024 was likely to be another tough year as long as interest rates remained high and unemployment increased.
"We've seen things over the years like the global financial crisis and share market crash. When I look back on those, that impacted a certain sector of the population - those who were directly affected by the share market or those who had funds in the finance sector.
"I think this is more broad and I think people who have never been in trouble before, are now experiencing that for the first time, so it's a broader catchment than we've seen in the past."