20 May 2021

Budget 2021: Benefits to increase by up to $55 a week

5:43 pm on 20 May 2021

Benefits will be boosted by up to $55 a week, potentially lifting tens of thousands more children out of poverty.

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Photo: RNZ / Samuel Rillstone

The government will implement the increase in two stages, with the first being a $20-a-week increase from 1 July this year.

A second increase will occur on 1 April next year, bringing benefits up to the levels recommended by the Welfare Expert Advisory Group.

Whānau with children will be topped up an extra $15 per adult, per week.

It is projected the changes will lift between 19,000 and 33,000 children out of poverty on the after-housing costs measure in 2022/23.

On the before-housings costs measure, that figure is between 12,000 and 28,000 children.

All up, the increases to main benefits will cost $3.3 billion over four years.

Once the changes come fully into effect in 2022, Social Development Minister Carmel Sepuloni said 109,000 families with children would be, on average, better off by $40 a week and 263,000 individuals and couples without children would be better off by $42 a week.

Prime Minister Jacinda Ardern said the government was targeting investment where the need was greatest - putting food on the table and helping people pay their bills.

"This is not only the right thing to do, it is also good for the economy. In the short term, these changes will help stimulate growth and in the longer term they will help break the cycle of poverty," she said.

"These increases set up families, whānau and children for a better future. For too long, our child poverty statistics have run counter to our values as a country.

"The extra income, which will be done in two stages to ensure sustainability, will make a real difference."

Student allowance and student loan for living costs will also increase by $25-a-week from next April.

Once fully implemented, base rates for someone on sole parent support will hit $434 a week and a sole parent on the supported living payment will be getting $485.

The jobseeker support rate for a couple with children will be $283 a week, while the couple rate for the supported living payment will be $320.

For beneficiaries without children, the jobseeker single rate will be $315 a week, the supported living payment single rate will be $359, the jobseeker couple rate will be $268 and the supported living payment couple rate will be $305.

Benefits were increased by $25-a-week last year, in response to Covid-19.

Since 2017, the government has made other changes, including the introduction of the Families Package and initiatives, like the Winter Energy Payment and the Best Start payment. Benefits have also been indexed to wage growth and abatement thresholds have been lifted.

Meanwhile, the government is also making changes so income thresholds for childcare assistance are indexed to wage growth.

Sepuloni said this could benefit about 1000 families and 1500 children.

There will also be 3300 extra places in the out of school care and recreation service (OSCAR), which Sepuloni said would help about 900 low income parents to remain, or transition, into employment, training and education.

The government is also fulfilling a pre-election promise to reinstate the training incentive allowance for higher level study, which means sole parents, carers and disabled people on some benefits can access help to pay upfront and ongoing costs associated with study, such as fees, books, transport and childcare.

The Child Poverty Report

Each budget, the government is required to report on progress made in reducing child poverty.

It said it is still too soon to estimate precisely what Covid-19 will mean for child poverty measures.

The most recent forecasts indicate the economic outlook has improved considerably from what it was at last year's budget, but it still expects the pandemic will put financial pressure on families - though it will be less than previously estimated.

It is expected the changes announced in this year's budget will have a larger impact on Māori children than for the population as a whole.

Without the benefit increases, Treasury projections estimated that the after-housing costs child poverty measure would have increased in 2022.

The child poverty report said this was offset by the Budget changes and would further lower poverty in 2022/23.

The before-housing costs child poverty measure is also expected to reduce, but beyond the 2022/23 year, it could start trending upwards again without further government intervention.

Official statistics out earlier this year showed significant downward trends over two years across five of the nine child poverty measures.

However, that data was collected before Covid-19 hit.

In a post-election briefing to Jacinda Ardern, as Minister for Child Poverty Reduction, officials said before the pandemic, the government was broadly on track to meet its three- and 10-year child poverty reduction targets.

But Ardern was warned child poverty was likely to increase because of Covid-19, with material hardship was likely to rise strongly.

Social Unemployment Insurance

Finance Minister Grant Robertson said the government, Business NZ and the Council of Trade Unions will jointly design a social unemployment insurance scheme.

This was signalled by Labour during the election campaign.

The ACC-style scheme would support workers to retain about 80 percent of their income for a period after they lose their jobs, with minimum and maximum caps.

Robertson said this would strengthen the safety net for people who find themselves out of work.

Over the coming months, the Social Insurance Tripartite Working Group would be consulting with targeted stakeholders about what the right settings would be.

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