1 Jul 2018

Govt's families package takes effect: 'Step in the right direction'

9:30 am on 1 July 2018

From today, thousands of low and middle-income families will have extra money in their pocket from the government's families package.

A calculator, a model of a house, a pen and a notebook - to illustrate financial planning and household budgets.

Photo: 123RF

It's estimated 384,000 families will be better off by an average of $75 a week, once the package is fully implemented in 2020.

Among the changes taking effect today is an extra tax credit for all families with a baby born from 1 July this year.

They will receive up to $60 more each week for the baby's first year, and after that, support will continue for lower and middle-income families, up till the child's third year.

One of those to benefit from the package is 30-year-old teacher, Alice McCullagh, who is expecting her first child in November.

"It will make a huge difference, if you think about going down to one income, that could be the groceries, fruit and vegetables and also you want to be able to buy everything you can to make your baby healthy," she said.

And 26,000 more families will be eligible for the Working for Families tax credits.

Finance Minister Grant Robertson said the rate they received would increase, too.

"For a family earning around $70,000, who have two children, they could be looking being $2,500 or more a year better off, as a result of this package," he said.

The package will cost $5.53 billion over the next five years.

To pay for the package, the government scrapped the National government's promised tax cuts, but National's finance spokesperson Amy Adams said that would have helped more people than the families package.

"National's philosophy is people who work hard should get to keep more of their money.

"It shouldn't be taken off of them by government, filtered out to a few and pay a whole lot of extra tax that the economy doesn't need imposed on it," she said.

Child Poverty Action Group's Susan St John said the changes were long overdue, but did not go far enough.

"The rates of the tax credits for children are increased, [that's] fine, but there is no commitment to a regular adjustment for wage growth or inflation for wage growth, so over time, just as we've seen in the last six years, the value will decline," she said.

Overall, the package was a step in the right direction, she said, but it would not be enough to lift the poorest families out of poverty.

What's included in the package:

  • Paid parental leave will jump from 18 to 22 weeks and to 26 weeks from July 2020
  • The Winter Energy Payment will be introduced giving most beneficiaries and all pensioners an additional $15-$20 a week during the colder months
  • Parents of babies born from 1 July will receive up to $60 more a week after the first year, for the second and third years, support will continue for middle and low-income families
  • Reinstatement of the Independent Earner Tax Credit, which provides income support for low and middle-income earners who do not benefit from Working for Families tax credits
  • The rates of Orphan's Benefit, Unsupported Child's Benefit and Foster Care Allowance will increase by $20.31 a week

Find out more here.