COVID-19 Puts Families At Greater Risk Of Debt Traps
Increased stress and hardship await families if the Coalition Government does not address the needs of those on low incomes, according to Ngā Tāngata Microfinance and Child Poverty Action Group.
Ngā Tāngata Microfinance is calling on the Government to do more to support families on benefits and low incomes, following the concerning findings of The Commission for Financial Capability's (CFFC) recent report.
The CFFC’s household survey found 10 per cent of New Zealand households are already missing a rent or mortgage repayment and 34 per cent are facing financial difficulties.
Ngā Tāngata Microfinance general manager Natalie Vincent says given the data was taken at the beginning of the COVID-19 lockdown, it is likely the households facing financial difficulties already had those issues prior to this crisis.
"A significant proportion of the country was already struggling," says Vincent.
"The data also shows a tiny number who have savings to see them through a crisis. Low incomes and low benefits mean that people are not able to accrue any savings or set aside an emergency fund.
"And we know we are only seeing the tip of the iceberg of hardship. As the months roll on, and the impact of lost jobs, depleted savings, grace periods from companies ending - we expect to see the real impact of the financial crisis caused by COVID-19."
Child Poverty Action Group shares similar concerns as Ngā Tāngata Microfinance and CPAG Economic spokesperson Susan St John says the Coalition Government must urgently remedy the situation by revisiting the unfairness of the current welfare system.
"In the foreseeable future, family and child poverty will surge with its associated costs of poor health, stunted potential and high levels of transience and domestic violence.
"The Government must immediately address issues such as the discrimination in the current system that stops families on a benefit accessing the In-Work Tax Credit, the way couples get reduced rates compared to single people and the way benefit levels are set below the Government’s own poverty line."
Vincent adds that a financial crisis can also lead to worrying social consequences.
"Our no-interest loans are safe and fair, but not all credit providers are Responsible Lenders. If a family in desperate need takes out a high-interest, high-cost loan, they may never escape that debt trap,"
"As well as the risks inherent in financial hardship, we are concerned about the impact on their overall well-being. The stress caused by vulnerability and for some people, the first time they have encountered hardship, will have dire social and emotional consequences."
Ngā Tāngata Microfinance founder and chairperson Claire Dale says: "We don’t want to come out of the COVID-19 crisis to ‘business as usual’. In this team of five million, we need to ensure adequate incomes for all families and an end to child poverty."