5.3 Who is at risk
Debt is considered to be a problem when debt servicing costs are greater than income after basic living costs. Those with problem debt but positive net wealth have the choice of eliminating their debt by selling some assets. Some of those with negative wealth have sufficient income to continue to service their debt. Therefore, we have classified those who have both high debt servicing in relation to their income (ie, problem debt), and in addition, have negative wealth, as being most “at risk”.[54] As explained in Section 5.1, we do not have sufficient information to identify those respondents with debt servicing costs exceeding income after basic living costs. For this reason, we used an estimate of debt servicing costs relative to income for our problem debt classification.
The results of estimating the proportion of family units at risk in 2003/04 are given in Table 13 for non-partnered individuals and Table 14 in the case of couples.[55] In the case of non-partnered individuals, 34.2% of those with debt were estimated to have had negative wealth. Debt servicing obligations exceeded 30% of income for 6.5%; and exceeded 40% of income for 4.5%. However, being at risk is defined as having debt servicing above 30% (or 40%) of income and at the same time having negative net wealth. The proportion with debt classified as at risk was quite low; less than 2% using either the 30% or 40% threshold for problem debt. The proportion at risk was highest for the 18-24-year-old age group, with 3.6% classified as at risk in 2003/04.
For couples with debt, 8.5% had negative wealth and 7.9% were estimated to have had debt servicing obligations that exceeded 30% of their gross income. Less than 1% of couples with debt were estimated to have been at risk in 2003/04.
|
Age |
Number with debt[1] | Percentage with negative wealth | Percentage with debt servicing over 30% of income | Percentage with debt servicing over 30% of income and negative wealth | Percentage with debt servicing over 40% of income | Percentage with debt servicing over 40% of income and negative wealth |
|---|---|---|---|---|---|---|
| Total | 636,700 | 34.2% | 6.5% | 1.9% | 4.5% | 1.5% |
18-24 |
188,700 | 60.6% | 4.9% | 3.6% | 4.2% | 3.3% |
25-34 |
148,100 | 40.1% | 5.7% | 1.6% | 3.7% | 1.2% |
35-44 |
111,800 | 21.2% | 8.3% | 0.9% | 4.8% | 0.6% |
45-54 |
83,700 | 14.1% | 10.4% | 1.5% | 7.5% | 0.6% |
55-64 |
53,700 | 9.7% | 8.4% | 0.8% | 4.8% | 0.5% |
65+ |
50,600 | 6.2% | 2.1% | 0.5% | 1.5% | 0.3% |
1 Excludes those with negative reported income.
Sources: SoFIE wave 2, Statistics New Zealand; the Treasury
|
Age |
Number with debt[1] | Percentage with negative wealth | Percentage with debt servicing over 30% of income | Percentage with debt servicing over 30% of income and negative wealth | Percentage with debt servicing over 40% of income | Percentage with debt servicing over 40% of income and negative wealth |
|---|---|---|---|---|---|---|
| Total | 707,700 | 8.5% | 7.9% | 0.8% | 4.5% | 0.6% |
18-24 |
21,600 | 38.2% | 4.3% | 1.6% | 4.3% | 1.6% |
25-34 |
123,000 | 20.3% | 5.6% | 0.8% | 1.8% | 0.4% |
35-44 |
195,600 | 8.0% | 10.3% | 1.0% | 5.4% | 0.8% |
45-54 |
178,500 | 3.8% | 9.7% | 0.7% | 5.9% | 0.5% |
55-64 |
115,600 | 2.4% | 7.5% | 1.0% | 5.5% | 0.6% |
65+ |
73,400 | 1.9% | 2.8% | 0.0% | 1.9% | 0.0% |
1 Excludes those with negative reported income.
Sources: SoFIE wave 2, Statistics New Zealand; the Treasury
Notes
- [54]Of course, some families will have negative wealth and problem debt but sufficient assets to reduce debt to a level that they could service with their available income. For this analysis they have been classified as vulnerable. This implies that our estimates are conservative and may overstate the proportion vulnerable in 2003/4.
- [55]Although not included in the debt servicing regression models described in Section5.2, those with debt but zero reported income are included in the analysis in this section; 0.8% of the sample with debt reported zero income. About half of those with debt but zero income are calculated to have positive debt servicing costs, resulting in an undefined debt servicing ratio. We have classified those in this category as having problem debt on the grounds that they have insufficient income to service their debt (ie, they are in the over 30% and over 40% categories).
