Debt takes many forms in an established financial system. This paper focuses on two categories of debt based on who the debt is owed to: public debt (debt owed to the government) and private debt (debt owed to non-government lenders).
Discussions of debt are often limited to only one of these types depending on the context. However, many New Zealanders will owe both types of debt and will experience interactions between them – for example, making repayments of one type of debt affects their ability to afford repayments of the other. It follows that a complete picture of individuals’ experience of debt requires us to consider both their public and private debt.
Data for this research was obtained from two sources. Information on public debt was drawn from government administrative records in the Integrated Data Infrastructure (IDI). Information on private debt was provided by the credit reporting agency Centrix.
The IDI is a large research database that holds individual level data about people and households. Stats NZ maintains and protects the IDI.1 We use debt records in the IDI from the Ministry of Social Development (MSD), the Ministry of Justice (MoJ), and Inland Revenue (IR). These are the same debt records used in our previous work.
Centrix is a credit bureau, providing credit checks and credit reporting. They hold the richest dataset of consumer credit information available in New Zealand, including comprehensive credit information, utility data, and supporting credit risk information. This information is aggregated from a wide range of sources – 72 credit providers including registered banks, finance companies, Buy Now Pay Later (BNPL), telecommunication providers, and utilities – with monthly payment behaviour data on more than 95% of credit-active individuals.
Data from the IDI and from Centrix were combined at a post code level. First, we used address information in the IDI to group people by post code and count the number with different types of public debt. Second, Centrix provided an equivalent, pre-summarised table of private debt by post code.
Third, the two datasets were linked so that for each post code we could observe both the number of people with different types of public debt and the number of people with different types of private debt
To the best of our knowledge, this report provides the first national picture of the links between public and private debt. The key insights from our research can be summarised as follows:
- There is significant variation in the prevalence of different debt types between post codes across New Zealand.
- Public debt shows a clear cluster: Fine debt to MoJ, debt to MSD, child support and WFF debt to IR all show higher prevalence in the same post code areas. This suggests that these four debt types tend to be owed by the same kinds of people.
- Private debt shows two clusters: Buy-now pay-later, secured loan, and unsecured loan debt are more prevalent in the same post codes, and credit card and mortgage debt are more prevalent in the same post codes. This suggests that each cluster of debt tends to be owed by the same kinds of people, and that people with debt from one private debt cluster tend not to have debt from the other cluster.
- There is a clear interaction between public and private debt: The public debt cluster and the first private debt cluster show a positive relationship, while the public debt cluster and the second private debt cluster show a negative relationship. This suggests that the clustered types of public debt tend to be owed by the same kinds of people who owe the first cluster of private debt and not by the kinds of people who owe the second cluster of private debt.
- There is a clear positive relationship between public debt and our hardship measures. There is also a clear positive relationship between the first cluster of private debt and our hardship measures.