Poorer families sinking in a sea of rising debt

• Published date: 29 May 2023

More than $250 million is also owed to Inland Revenue by families who were overpaid their Working For Families tax credit

The top 10 per cent of people with debt are paying on average $26 a week out of their benefits — higher than the Winter Energy Payment support — and with disproportionately higher rates of repayment for women and Māori.

Māori women owing debt to the Ministry of Social Development have a balance on average 50 per cent higher than Pākehā women and more than twice as high as Pākehā men.

The total amount of money owed to the Government — which includes loans for essentials ranging from clothing to household appliances and bill payments — has ballooned to $2.4b as of March.

Alongside that is more than $250m owed by families to Inland Revenue after they were overpaid their Working For Families tax credits — a bill that has grown over 25 per cent between 2021 and 2022 amid high inflation and wage growth and changing circumstances through the pandemic, pushing many families out of the criteria often without them even realising.

The mounting debt accumulated by those on low incomes has also sparked a call from campaigners for a Government inquiry into how it further entrenches poverty — akin to a recent survey that revealed just how wealthy the country’s richest citizens were, and how little tax they actually paid.

“We had a study for the very wealthy and found they were much wealthier than New Zealanders thought, I think people might be equally shocked to realise how poor the very poorest are,” Child Poverty Action Group economist Susan St John said.

The MSD data, released to the Green Party, showed as of March this year just under $2.4b was owed by nearly 600,000 people to the Government at an average of about $4000 each. This debt had to be repaid at an average of $16 a week — taken directly out of benefits.

Further information provided to the Green Party showed the top 10 per cent of people with debts had $26 a week taken out of their benefits — higher than the Winter Energy Payment of $20.46 for a single person (it is $31.82 for couples with dependant children).

This debt is incurred through recoverable grants for items including clothing, living expenses and medical bills.

The Government is reviewing overall debt and has implemented some measures to reduce it — including more than tripling the non-recoverable dental grant from $300 to $1000 — but amid a recent rise in the cost of living the debt mountain continues to rise.

The data also...