Ratio of credit card debt to discretionary income in New Zealand - Data and Analysis (2002-2034)

IBISWorld forecasts the ratio of credit card debt to discretionary income to decrease by 0.50 percentage points in 2026-27, to 5.5%. In July 2026, the RBNZ (Te Putea Matua) opted to increase the Official Cash Rate by 25 basis points to 2.5%, in an attempt to quell ongoing inflationary impacts from the conflict in the Middle East. The RBNZ also opted to engage with forward guidance, stating that higher interest rates may be needed over the back half of 2026-27 to bring inflation back towards its 2% target. The promise of a cash rate hiking cycle is likely to disincentivise households taking on credit card debt, as interest repayments are likely to grow. At the same time, unemployment in New Zealand is likely to trend downwards after peaking in late 2025, driving up aggregate household income and pushing down the ratio of credit card debt to discretionary income.The ratio of credit card debt to discretionary income fell significantly in 2020-21 as discretionary income increased over the year, driven by government income support packages. The cash rate remained at 0.25% throughout 2020-21, keeping interest costs on household debt to a minimum. A fall in discretionary spending due to reduced economic activity also contributed to a reduction in aggregate credit card debt balances across the New Zealand economy. Changes in the ratio of credit card debt to discretionary income have been far less volatile since 2021-22. While real balances of credit card debt continued to decline in 2021-22, the 9.5% decline in real credit card debt was partially offset by a 6.6% decline in real household discretionary income, resulting in the ratio of credit card debt to discretionary income decreasing by less than 2%. 2022-23 marked the first increase in the ratio since 2014-15. Credit card debt balances declined throughout the year but at the slowest rate since before the pandemic, as the growing cost-of-living placed significant upwards pressure on credit card balances, limiting the annual decline. A 9.1% contraction in real household discretionary income, offset the modest decline in credit card debt, pushing up the ratio of credit card debt to discretionary income. The ratio plummeted in 2023-24, as real GDP growth supported strong growth in real household discretionary income, despite the cash rate sitting at 5.5% for the majority of the year. This allowed citizens to repay outstanding debt balances, pushing down the aggregate amount of credit card debt over the year. In 2024-25, the RBNZ started to decrease the cash rate, dropping by 1.75 percentage points over 4 cuts throughout the year. While real household discretionary income declined, placing upwards pressure on the ratio, the annual decrease in credit card debt offset this decline, causing the ratio of credit card debt to discretionary household income to fall by 1.6%. In 2025-26, the ratio remained stable at 6.0%, as real household discretionary income fell by 2.5%, while real credit card debt balances dropped by 2.7%.The decline in the ratio of credit card debt to discretionary income over the past five years is a continuation of a long-term downward trend that began in the mid-2000s. Consumer attitudes towards debt have been cautious since the Global Financial Crisis, when the ratio of credit card debt to discretionary income dipped significantly. Consumers have become increasingly wary of taking on credit card debt, as highlighted by the weaker growth in credit card balances ever since. Overall, IBISWorld forecasts the ratio of credit card debt to discretionary income to decline at an average annual rate of 0.24 percentage points over the five years through 2026-27.