Credit defaults include loans businesses have missed payments on as well as overdue credit accounts held by suppliers like in the case of a restaurant which owes money to its meat or produce supplier.
A default is reported to Centrix when it is more than 30 days overdue.
"It doesn't get reported until it has passed that. It could be as much as 60 days in arrears or even 90 days in arrears."
When compared to 2019 (pre-pandemic), property services and accommodation/food services had the highest percentage increase in defaults.
McLaughlin said Monday's alert level announcement had done little to ease the pressure on businesses and he expected defaults to continue to trend upwards.
"If you listen to the commentators in the business arena there was really no hope for business in what was announced. If you are a retailer it is no change, if you are hospitality there is no change."
And McLaughlin said there was no timeframe put on the possible future changes.
"So if you are hanging on by skin of your teeth - because what you tend to see is a business account goes into arrears, then it goes into default, then it goes into liquidation.
"Or it's addressed right up front and the business is closed. And those closures have gone up quite materially as well."
Business closures in September spiked to over 13,400 - a fivefold increase on August based on Companies Office data, although around 6000 were removed from the register based on the belief that those companies were no longer carrying on business.
"This to some extent helps to explain the obvious spike this month. These removals appear to be part of a 'clean-up' process by the companies office."
McLaughlin said businesses needed a clear timeline for when they could reopen.
"I think that is creating a lot of the stress at the moment because if you know you can go back into business in say 21 days or 30 days then you know you have got X amount of money, then you know you can go to your creditors and say look can you give me an extra 20 days because things will come right. But there is just no clarity around that at the moment. I think that is probably the biggest challenge."
McLaughlin said credit defaults were the early signs of businesses feeling it tough and he expected it to get worse as along as Auckland continued under alert level 3.
But there were signs of a bounce-back in consumer confidence for the rest of the country after the drop from level 3 to level 2.
"With regions outside of Auckland now at alert level 2, credit demand has now fully recovered and is tracking at normal pre-lockdown levels. And while restrictions remain in place in Auckland, we saw a 16 per cent increase in demand at alert level 3," he said.
The report showed that Buy Now, Pay Later (BNPL) was the one sector that benefited from the level 4 lockdown. Its demand increased in August.
BNPL lends itself to e-commerce because it provides consumers an alternative to credit cards.
In March the Herald reported the use of Buy Now Pay Later payment grew 10 per cent in New Zealand last year and its use could outstrip card payments for e-commerce by 2024, a global payments expert has forecast.
Then Phil Pomford, general manager for global eCommerce, APAC, at FIS, said the global payments landscape was changing dramatically and Covid-19 had accelerated many trends that were already kicking off.
He said e-commerce grew at the fastest rate the last five years in 2020.
It had forecast 19 per cent growth in e-commerce in 2020 but now it expected that figure to be slightly higher.
The Centrix report showed the demand for auto finance and new mortgage home loans had also recovered strongly, after falling in alert level 4.
"This rebound in auto finance is a positive sign of economic confidence as new vehicles are often a large discretionary purchase.
"In August, the value of new home loans fell by nearly a third due to the lockdown restrictions hindering buyers from attending open homes or completing settlements.
"As a result, lending in August reached the lowest point since January. Demand for new mortgages recovered in September as regions outside of Auckland shifted to alert level 2.
"All other types of credit have recovered since the restrictions have eased across the country," the report said.
