Govt explores linking annual benefit increases to higher of average wage or inflation – NZ Herald

The Government is “exploring” permanently pegging annual main benefit increases to the higher out of inflation or average wage growth.

Advocates have welcomed the move, which would bring main benefit increases – including the Jobseekers Benefit, Sole Parent Support and Supported Living Payments – in line with increases to Superannuation.

However, they say base benefit levels still need to be increased further to be at a livable level and similar annual increases need to be applied to family tax credits as well, with children currently “missing out” as a result.

The National Party meanwhile says it opposes such a move and would revert annual increases to inflation, as that reflected the costs beneficiaries faced.

In 2020 the Labour Government indexed main benefits to wage growth rather than inflation because in preceding years wages had risen at a much higher rate leaving those living on benefits further behind.

That situation reversed in the past two years amid record levels of inflation, and this week the Government announced the annual main benefit increases would increase in line with inflation at 7.22 per cent, rather than the average wage growth of 6.24 per cent.

Now, Social Development Minister Carmel Sepuloni says the Government is looking to ensure annual increases in future are based on the higher of the two, which was one of the recommendations by the Welfare Expert Advisory Group (WEAG) in its 2019 report.

Sepuloni said when it was indexed to average wage growth experts applauded the move, including the Children’s Commissioner, who said it would have a “huge impact” on child poverty.

“Then all of a sudden, we’ve had these global inflation issues,” she said.

“And it just happened to be the last two years where Consumer Price Index outstripped average wage growth.

“So we made the manual shift this year, to ensure that beneficiaries were not disadvantaged. But moving forward, I do want to look at either or, and that’s what’s in place for superannuitants currently. And so I think it’s worth exploring.”

Sepuloni said she could not put a timeframe on such a policy change saying it – like “everything” – was “Budget-dependent”.

“I’ve certainly asked for advice and for that work to begin.”

Green Party social development spokesman Ricardo Menendez-March said it was a “choice” to make it a one-off policy and called on the Government to “build it into the system”.

“We would be calling on the government on Budget Day [May 18] to introduce legislation to make this permanent.”

Menendez-March said any extra costs associated were already being paid out in hardship grants because benefit levels were too low.

“So if we have a formula that results in benefits falling behind cost-of-living pressures, all we are doing is pushing more people to Work and Income to apply for hardship grants.

“So actually, it’s a worthwhile investment and change to ensure that benefits aren’t falling behind inflation or wages and that we actually support our communities to thrive and not be pushed into hardship.”

Child Poverty Action Group’s Professor Emeritus Innes Asher, who served as a WEAG member, said it would be a “great” move but benefits were still not keeping up.

She pointed to a study by Fairer Futures last year that found a New Zealand family on a benefit needed an estimated $165 more a week just to get by. That study had adjusted the WEAG recommendations from mid-2018 for inflation and found despite increases some main benefits were still falling short along with other income supports.

This impact would be lower this year after this week’s inflation-adjustment announcement but Asher said there would still be a shortfall.

For example, Jobseeker Support after the April 1 changes this year for a single person will be about $337 compared to $373 as recommended in the WEAG report.

She also said the indexation should be applied to all income support, including family tax credits and for disabilities.

“It is shocking those are not indexed. They should all be the same as superannuation. Otherwise children and disabled in those situations are falling further behind.”

National Party social development spokeswoman Louise Upston said they did not support indexing benefit increases to average wage rises.

“Indexing benefits should be linked to inflation because that represents the change in costs beneficiaries face,” she said.