ANALYSIS: By Susan St John

With the coalition government’s second Budget being unveiled, we should question where New Zealand is heading.

The 2024 Budget laid out the strategy. Tax cuts and landlord subsidies were prioritised with a focus on cuts to social and infrastructure spending. Most of the tax package went to the well-off, while many low-income households got nothing, or very little.

Even the tiny bit of the tax package directed to low-income people fell flat. Family Boost has significantly helped only a handful of families, while the increase of $25 per week (In Work Tax Credit) was denied all families on benefits, affecting about 200,000 of the very poorest children.

In the recession, families that lost paid work also lost access to full Working for Families, an income cut for their children of about $100 per week.

No one worked out how the many spending cuts would be distributed, but they have hurt the poor the most. These changes are too numerous to itemise but include increased transport costs; the reintroduction of prescription charges; a disastrous school lunch system; rising rents, rates and insurance; fewer budget advisory services; cuts to foodbank funding and hardship grants; stripping away support programmes for the disabled; inadequately adjusted benefits and minimum wage; and reduced support for pay equity and the living wage.

The objective is to save money while ignoring the human cost. For example, a scathing report of the Auditor General confirms that Oranga Tamariki took a bulldozer to obeying the call for a 6.5 percent cut in existing social services with no regard to the extreme hurt caused to children and struggling parents.

Budget 2025 has already indicated that Working for Families will continue to go backwards with not even inflation adjustments. The 2025 child and youth strategy report shows that over the year to June 2024 the number of children in material poverty continued to increase, there were more avoidable hospitalisations, immunisation rates for babies declined, and there was more food insecurity.

Human costs all around us
We can see the human costs all around us in homelessness, food insecurity, and ill health. Already we know we rank at the bottom among developed countries for child wellbeing and suicide rates.

Abject distress existing alongside where homes sell for $20 million-$40 million is no longer uncommon, and neither are $6 million helicopters of the very rich.

At the start of the year, Helen Robinson, CEO of the Auckland City Mission, had a clear warning: “I am pleading with government for more support, otherwise what we and other food relief agencies in Auckland can provide, will dramatically decrease.

“This leaves more of Auckland hungry and those already there become more desperate. It is the total antithesis of a thriving city.”

The theory held by this government is that by reducing the role of government and taxes, the private sector will flourish, and secure well-paid jobs will be created. Instead, as basic economic theory would predict, we have been handed a long and protracted recession with few signs of growth and prosperity.

Budget 2025 signals more of the same.

It would be a mistake to wait for simplistic official inequality statistics before we act. Our current destination is a sharply divided country of extreme wealth and extreme poverty with an insecure middle class.

Underfunded social agencies
Underfunded and swamped social agencies cannot remove the relentless stress on the people who are invisible in the ‘fiscally responsible’ economic narrative. The fabricated bogeyman of outsized net government debt is at the core, as the government pursues balanced budgets and small government-size targets.

A stage one economics student would know the deficit increases automatically in a recession to cushion the decline and stop the economy spiralling into something that looks more like a depression. But our safety nets of social welfare are performing very badly.

Rising unemployment has exposed the inadequacy of social protections. Working for Families, for instance, provides a very poor cushion for children. Many “working” families do not have enough hours of work and face crippling poverty traps.

Future security is undermined as more KiwiSavers cash in for hardship reasons. A record number of the talented young we need to drive the recovery and repair the frayed social fabric have already fled the country.

The government is fond of comparing its Budget to that of a household. But what prudent household would deliberately undermine the earning capacity of family members?

The primary task for the Budget should be to look after people first, to allow them to meet their food, dental and health needs, education, housing and travel costs, to have a buffer of savings to cushion unexpected shocks and to prepare for old age.

A sore thumb standing
In the social security part of the Budget, NZ Super for all at 65, no matter how rich or whether still in full-time well-paid work, dominates (gross $25 billion). It’s a sore thumb standing out alongside much less generous, highly targeted benefits and working for families, paid parental leave, family boost, hardship provisions, accommodation supplement, winter energy and other payments and subsidies.

Given the political will, research shows we can easily redirect at least $3 billion from very wealthy superannuitants to fixing other payments to greatly improve the wellbeing of the young. This will not be enough but it could be a first step to the wide rebalancing needed.

New Zealand has become a country of two halves whose paths rarely cross: a social time bomb with unimaginable consequences. It is a country beguiled by an egalitarian past that is no more.

Article by AsiaPacificReport.nz

How determined are Labour to take the necessary steps to fix inequality and poverty? Will electoral calculations triumph over their principles and stated ambitions?

These are some of the questions being asked on the political left, as Prime Minister Jacinda Ardern’s government looks determined to stand by while social problems continue to get worse under their watch.

During their last term in government, Ardern and colleagues failed to be transformational on their key promise of fixing inequality and poverty. And now they are choosing policies that massively increase inequality, while ignoring the plight of those at the bottom.

That’s why this week more than 60 charities and NGOs made an open plea to the government to increase welfare benefits before Christmas.

Despite the extraordinary conditions at the moment, Ardern response was a firm “no”. Poverty advocates say Labour should be “ashamed”, with many suggesting that the prime minister’s own advocacy of kindness and compassion is directly contradicted by her actual decisions.

Writing in The New Zealand Herald today, Matthew Hooton argues that the poverty advocates “have a point” in their dissatisfaction, as “Ardern’s response to these issues is unsatisfactory”. He argues that this week’s rejection of benefit increases “has prompted the first mini-rebellion on her left”.

Hooton is particularly dismissive of Ardern’s plea for more time to consider benefit levels: “she says more ‘work’ is needed but it is not clear what ‘work’ is required to make a basic decision on benefit levels.

Why is more ‘work’ needed?
Ruth Richardson, after all, took just 53 days after the October 27 1990 election to announce her benefit cuts. It is not obvious why any more “work” is needed to make the opposite decision.

In any case, the “work” was presumably already done in Ardern’s now eight and a half years in the children’s portfolio and by her [Welfare Expert Advisory Group].”

So should the left be rebelling? And is Labour putting hanging on to power above tackling poverty? Hooton seems to believe so: “The Prime Minister just emotes her usual concern.

“This is not economically or socially sustainable — and surely not politically sustainable either. There must come a time when Ardern’s own political base demands something more on such issues than her frowny-concerned face.

“It will be another 100 years before Labour again wins a mandate like the one Ardern secured last month. If she won’t act now on the issues she says concern her, left-wing activists will be entitled to ask whether hungry children and young couples struggling to buy a house really mean anything to her beyond being useful walk-on parts during election campaigns.”

Similarly, writing in the National Business Review yesterday, Brent Edwards says the debate “is a pointed rejoinder to Ardern from those who do not believe she is as committed to reducing child poverty as her rhetoric suggests”, and he argues that the decision to keep benefits down is unsurprising, given that Ardern’s decisions are guided by electoral considerations.

Brent Edwards contrasts the benefit decision with the first policy announcement of the Finance Minister: “Grant Robertson announced the Cabinet had decided to extend the small business cashflow loan scheme, which was due to end next month, for another three years and extend the interest-free period from one to two years.

Wooing the business community
“It is also looking at other changes to make the scheme more accessible for small businesses. It was the new government’s first decision of this term and is part of its attempt to woo the business community.”

So, just how long will beneficiaries and others in poverty have to wait until Labour delivers? Today’s Stuff newspaper editorial asks: “It takes more than one term to solve it, but will it take more than two?”

The editorial says Ardern is risking damage to her own brand by talking about kindness but doing the opposite: “Poverty advocates are used to hearing governments say one thing about poverty, especially the emotionally powerful issue of child poverty, but do another.”

They also ask: “What is the political cost of kindness? Or conversely, what is the political cost of doing nothing?”

Poverty advocates are understandably upset by Ardern’s rejection of action on poverty, and some are starting to speak out strongly against her and the government. Auckland Action Against Poverty’s coordinator Brooke Stanley Pao has said that Ardern is “choosing to keep people and families in poverty”.

According to this article, Pao “challenged the prime minister and other politicians to try and live on the current benefit for a month and ‘see how they find themselves’.”

Brooke Stanley Pao also wrote about this just prior to the election, saying, “You can’t eat kindness“. Responding to Ardern’s mantra, she says “We want more than kindness. We want the political bravery necessary to lift people out of poverty. Anything else is lip service.”

Leftwing bloggers losing faith
Other leftwing bloggers are losing their faith that Labour and Ardern really believe in progressive politics. For example, No Right Turn says: “The message is clear: their ‘kindness’ extends only to rich people, who will be exempted from paying their fair share of the costs of the pandemic (or society in general).

“As for poor kids, they can keep on starving. Which once again invites the question: what is Labour for, exactly, if they’re not going to ever deliver anything?”

The Child Poverty Action Group reports “the dismayed, disappointed and, in some cases, furious response to its dismissal” of benefit increases by Ardern and asks of the Government, “What, exactly, are they waiting for?”

She argues that increased payments would have an immediate impact on alleviating poverty.

McAllister also draws attention to the Government making decisions in the Covid environment that are likely to worsen inequality while ignoring the needs of those at the bottom: “Using children as economic shock absorbers – that’s unreasonable.

“Covid-response policies that stretch inequity even further – that’s unreasonable. Child Poverty Action Group research this year has shown that core entitlements for those receiving benefits are mostly far below key poverty lines, and in some cases will be tipping people into severest poverty.

“We modelled a scenario that shows 70,000 additional children are at risk of poverty due to Covid-19 on current policy settings.”

Why Labour is ‘tinkering’
For more on what Janet McAllister thinks is wrong with the current government policies, see Why Labour’s tinkering of our welfare system just isn’t enough.

Looking back at what Labour have implemented over the last term, she concludes: “By themselves, these policies are disappointing. It’s still just tinkering around the edges and far from big, bold moves to cut the mustard.

“They’re of no use to many of our poorest families.”

Another poverty advocate, Max Rashbrooke of Victoria University of Wellington, has written in The Guardian about how disappointed he is with progress on child poverty under the government, and how things look set to get worse unless policies are implemented that live up to the lofty targets set by Ardern.

The problem according to Rashbrooke is that Ardern “has relied largely on the ‘third way’ policies of her Labour predecessor, Helen Clark, in her fight against child poverty.”

And so although there has been some “modest progress” on some poverty measures, these are essentially the result of picking the low-hanging fruit. He points to Treasury modelling showing that “the number of families in ‘material hardship’ – those reporting they are unable to afford basic items – will ‘rise sharply’.”

Is it true that the government can’t afford to increase benefits? Not according to business journalist Bernard Hickey, whose must-read column this week argues that Ardern and Robertson seem determined to massively increase inequality by following outdated economic philosophies.

Making homeowners richer
He asks: “Is it more important that homeowners are $100 billion richer? Or that hundreds of thousands of children are left unnecessarily in poverty?”

Here’s Hickey’s main point: “It is bizarre that a Labour government and a Reserve Bank that talk a big game on their social responsibilities and sustainability are choosing to pump up to $150 billion into increasing housing market valuations for the richest half of New Zealanders who own homes, but don’t think they can afford increasing benefits at a cost of $5.2 billion for the hundreds of thousands of kids and their parents living in poverty.”

He points out that “economists as conservative as those at the OECD, the IMF and the World Bank are now begging Governments to do things differently by spending money on the poor and on infrastructure, rather than just pumping up asset prices to make the rich even richer.”

Hickey also refers to a report out this week with findings from the Growing Up in New Zealand longitudinal study. You can read the report here: Now we are eight: Life in middle childhood.

Hickey sums up the inequality findings: “Nearly 40 per cent are living in cold, mouldy and damp homes. About a third are obese. About 20 per cent of the families surveyed did not have enough money to eat properly.

“Nearly 15 per cent of the eight-year-olds had already moved school twice, largely because of having to move from one rental property to the next.”

Not everyone is criticising Labour’s rejection of benefit increases. Newstalk ZB’s Mike Hosking says that giving into such a demand would take the government down a “slippery slope”, and be too expensive for little real gain.

Urgent need for relief
There is no doubt there is urgent need for relief for those at the bottom. And this week the Auckland City Mission launched a campaign to replenish their run-down stocks of food, noting that prior to covid they estimated “10 percent of Kiwis experienced food insecurity on a regular basis.

“Due to covid-19, it believes the figure is now closer to 20 percent – or one million people – who do not have enough good food to eat on a weekly basis.”

And today it’s being reported that the government’s two-tier welfare payments have come to an end.

Finally, what’s to be done about poverty and inequality, given this government has no great interest in being transformational on this issue? According to veteran leftwing commentator Chris Trotter, “it’s time for some ‘earnest struggle’”. He argues that Labour will only ever carry out leftwing reforms if they are forced to.

Trotter wants to see less reliance on appeals to Ardern and Robertson to “be kind”, and more mass marches down Auckland’s Queen St.

Dr Bryce Edwards is a New Zealand-based political scientist of reliability and prominence. His analysis and commentary is regularly published on EveningReport.nz. This article is republished by the Pacific Media Centre with permission.

Article by AsiaPacificReport.nz