A collective total of $37m was owed by Tauranga Budget Advisory Service clients in September 2020. Photo / Getty Images
A collective total of $37m was owed by Tauranga Budget Advisory Service clients in September 2020. Photo / Getty Images
Tauranga residents seeking budget advice have accumulated more than $37 million in debt as the economic impact of Covid-19 on households worsens.
The latest Priority One Economic Monitor report shows Tauranga Budget Advisory Service clients had a collective total of $37m of total debt for September 2020 - with 72per cent of that owed to banks, finance companies or other consumer lenders.
Almost $6m - or 16 per cent - was owed to Government departments or agencies and the remaining 12 per cent, or $4m, was owed to retailers, family or friends, utilities, landlords, debt collectors, motor vehicle repairers, local government and health services.
Tauranga Budget Advisory Service manager Shirley McCombe said the total debt had grown from $34m in July - and total mortgage debt crept up from $15.4m in July to $16.5m in September.
She warns the pressure on households is likely to increase.
More than 1000 people sought help to feed their families during September and that is expected to rise in the New Year as families grapple with the cost of Christmas, holidays and back-to-school costs.
"This year, many will enter this expensive time of year well behind the eight-ball," McCombe said.
Tauranga Budget Advisory Service manager Shirley McCombe. Photo / George Novak
"October has long concerned me as we saw the end of Winter Energy Payments and mortgage "holidays" and subsidies came to an end for some."
McCombe said the rise in debts suggested people were getting behind in meeting repayments and borrowing more, and she encouraged people to seek help earlier rather than later.
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SocialLink general manager Liz Davies said debt could be "crippling".
"Once you're in it, it can be difficult to get out of it. It holds people back from being able to move on and get out of poverty."
The $37m divided by 415 clients meant an average of about $89,000 per person, which Davies said was "terrifying".
"That's a huge amount of debt for one small group of people to be carrying."
Davies said things were going to come to a head in January.
"It is always a stressful time but I think it is going to be far more so then, because the wage subsidies are gone and people on the benefit go back to the normal amount, which is hard to live on.
She said the stress can also impact people's mental health.
In the last few months, Davies said many social agencies were seeing a rise in the number of people seeking help, and they were expecting numbers to keep increasing.
"I think waiting lists are already quite high for many services."
Papamoa Family Services manager Janice Belgrave said the service was frequently seeing people who had lost employment amid the impact of Covid-19. The situation was compounded by the "financially crippling" costs of housing, she said.
"Rental costs are crippling for people. We are working more frequently now with people who lost employment as a result of the economic impact of the Covid virus on our communities.
"We also have families who have lost both incomes in recent months and have been using credit cards to purchase food, which they expected to have been able to repay when they secured employment again.
"But with the new jobs not being forthcoming they now have a credit card debt compounding their financial difficulties.
"People who have lost their jobs have in the past had a buffer to fall back on. We are finding that people in these circumstances have used their buffer and are waiting until they have nothing left and no other options before they come and seek financial mentoring support.
"For those whose Covid-related wage subsidy is coming to an end, we anticipate that Christmas will be a challenging time."
Belgrave said the most pressing need for many families was food.
"Purchase of food is often the only part of the budget that can be changed when the demand for debt repayment or other things are more pressing.
"Food is one way we can support our clients so they can meet their other financial responsibilities."
In the three months from July 1 to September 30 this year, the service's clients had resolved or repaid $19,663.54.
In the year to June 30, a total of $86,427.21 debt had been repaid or resolved.
Belgrave said the high debt figures were "very concerning", especially heading into Christmas.
Tauranga Community Foodbank manager Nicki Goodwin. Photo / Andrew Warner
The Priority One Economic Monitor also showed the total food parcel numbers issued by Tauranga Foodbank for September rose over 100 to 514, and 75 new clients registered.
Tauranga Community Foodbank manager Nicki Goodwin said many required more permanent help than just the one-off food parcel and were referred to the budget advisory service.
Salvation Army community ministries director in Tauranga, Davina Plummer, said they were seeing continued trends of pressure on housing, food and living costs on people on medium to low incomes and pensioners/beneficiaries.
"We provide social support, advice, emergency food clothing, furniture, counselling, social work and advocacy, parenting courses and the Positive Lifestyle Programme.
"We have 21 transitional houses, soon to increase to 29."
Plummer said their current financial mentoring met the needs of existing clients and they were recruiting another part-time financial mentor to respond to the demand for financial support.
Priority One chief executive Nigel Tutt. Photo / File
Priority One chief executive Nigel Tutt said uncertain economic times and potentially changing circumstances meant people will be more concerned about debt.
"While unemployment in the Western Bay hasn't increased by a large amount in recent months, we expect that some households will be affected by fewer [work] hours and less part-time work."
