Most private lending is secured on property, so large loan losses tend to occur when there is both a substantial fall in property values and a high unemployment rate. In most areas, New Zealand property prices did not fall very much or for long.
And painful as it is for those directly affected, New Zealand’s unemployment rate in the last few years has risen to only around the average for the last 25 years. Income growth is the most attractive path to lowering debt to income ratios. It has often been an important part of successful adjustments. But, so far, incomes are still well below previous expectations.