The financial debt hangover of 2025 will be more than just an economic issue – Opinion

Financial stress is at an all time high
THREE KEY FACTS:
Sasha Lockley is chief executive and co-founder of Money Sweetspot, a social enterprise Fintech lender. She is also involved in the social enterprise, community and not for profit sector as chairwoman of Thriving Communities Aotearoa, and a previous board member with Lifewise, Friendship House, and Debtfix.
OPINION
We often hear the term “stretched middle” thrown around in conversations about New Zealand’s financial challenges, but, in reality, what we’re witnessing now is the stretched majority.
The pressures that once defined the struggles of lower income earners now apply to many more New Zealanders.
Being “middle-class” no longer comes with the financial security it once did.
Dave Letele’s heart wrenching announcement of the closure of the food bank is a clear indication of this shift, highlighting the increasing number of everyday Kiwis now forced into survival mode.
As Letele said himself: “People think it’s always the same poor people, the problem is you’ve got working and middle class now being pushed down into needing services like ours”.
This comment speaks volumes about the state of our country’s financial wellbeing. The people showing up at food banks aren’t those traditionally seen as disadvantaged – they’re regular working people.
At Money Sweetspot our customers earn an average of $70,000 a year, and 92% of these customers are employed. Despite earning higher than the national median income of $61,000 per year, many of the people we talk to are constantly juggling their finances and are still struggling to stay afloat.
New Zealand consistently ranks among the most expensive countries to live in globally, so while shocking, it isn’t unsurprising that financial distress is not just a low-income problem – it’s affecting those once considered financially stable.
Businesses are closing and unemployment is on the rise, and those who do find work often do so with a painful salary cut – like the customer we saw who took a $20,000 pay reduction just to stay employed.
These are not isolated cases, but signs of a system that is failing more people every day.
A widening gap: where do people turn?
Community groups, charities, and social enterprises have long been the lifelines for millions of Kiwis, but even these critical organisations are struggling to survive under the weight of growing demand.
The closure of Letele’s food bank begs the question: where will the families who relied on it go now? The stretched majority is left with fewer and fewer places to turn, leading to a vicious cycle that worsens the financial gap for more Kiwis.
We are facing similar challenges. Of the 368 people who applied for financial resets in September, we were only able to help nine.
The remaining 359 applicants remained burdened with nearly $4 million of debt (most of which at interest rates of more than 30%). And while we did our best to connect them with financial education resources and local financial mentors, the reality is that we, and other community and social providers simply don’t have the capacity or resources to help everyone.
So, what happens to them now?
The debt hangover: a grim outlook for 2025
As we approach the end of 2024, the financial situation for many Kiwis remains bleak. While we’ve seen some green shoots of economic recovery, these changes haven’t significantly improved the lives of everyday New Zealanders.
In her recent speech to the Financial Services Council, Finance Minister Nicola Willis sharply critiqued this very issue, stating: “While businesses and financial markets might feel relief from these cuts, families are left behind”.
Most New Zealanders, especially renters or those without access to affordable credit, remain burdened by high costs for essentials such as food and rent.
Despite CPI showing some signs of cooling, many essentials continue to rise in cost, leaving wage growth trailing far behind.
Without significant intervention, the debt hangover awaiting in 2025 will be severe, with personal debt suffocating more families who are already stretched to their limits. For many, the OCR cuts feel like a distant economic tool, disconnected from the daily realities of putting food on the table.
Without bold, immediate action, these measures will do little to address the growing financial pressure faced by the stretched majority.
Solutions: turning the tide with social investment
Despite the bleak outlook, there is hope. Social investment can make a real difference in addressing these financial crises.
The Social Investment Agency, introduced by the Government, is a promising initiative.
It has been encouraging to see the progress of the Impact Investing Network members and community, and the 2030 Sustainable Finance Roadmap created by the Centre for Sustainable Finance becoming less of a document, and more about tangible progress, such as the recent establishment of Thriving Communities Aotearoa.
We need more than promises – we need action, and we need it now.
Without immediate intervention, the stretched majority will continue to expand, and more Kiwis will be caught in the downward spiral of financial distress.
We need to rethink how we fund and invest, with wider access to capital that supports not just specific projects but operations and enterprises in a sustainable, long-term way.
Multi-year funding support and a shift away from short-term thinking would provide the foundation for creating systems that can walk alongside people on their journey to financial stability.
Conclusion
The closure of Letele’s food bank is a symptom of a much larger problem, one that affects the stretched majority of New Zealand.
With growing numbers of working Kiwis in financial distress, now more than ever, we need bold social investment solutions that provide the funding and resources to support those in need.
Without immediate action, the financial debt hangover of 2025 will be more than just an economic issue – it will be a crisis that defines the future of New Zealand’s expanding stretched majority.