Budget: Lack of boost for 'stingy' benefits shows politicians 'pretty much' all the same - economist

The Government's failure to boost benefits by any significant amount is further evidence "all the politicians are pretty much the same", according to one economist.

Aside from the $25 boost which began at the start of April, when the country was in lockdown to stop the spread of COVID-19, there was nothing more directly in the hand for beneficiaries. The April boost was an increase of 12 percent, well below the recommendation of the Government's own Welfare Expert Advisory Group.

With unemployment quickly rising as a result of the pandemic, economist Shamubeel Eaqub says thousands of Kiwis are discovering how hard it is on the breadline. 

"What we've seen as middle New Zealand experiences poverty for the first time, they're realising our welfare system is just too mean and too stingy," he told The AM Show on Friday.

"We are going to see this story play out over the course of the coming weeks, where many people are going to have a lot of difficulty paying their rent, buying food and these kinds of things." 

Treasury is tipping unemployment to reach 9.8 percent later this year, levels unseen since the early 1990s - when the National-led Government slashed benefits in what became known as 'Ruthanasia', named for then-Finance Minister Ruth Richardson.

"That reform in the early 1990s was absolutely brutal in terms of just how difficult it made [life] for people on the benefit," said Eaqub. "You saw a massive decline in incomes. We've struggled regardless of who's in power to really get back to that. It tells us just how centrist our policies are in New Zealand - all the politicians pretty much are the same."

Mangere Budgeting Services CEO Darryl Evans, appearing with Eaqub on The AM Show, said they're seeing record demand for support.

"Our foodbank traditionally does around 250 food parcels a day - over the last several weeks we've been up to 3000 a week. So that's massive. 

"So looking at $32 million for foodbanks [in the Budget], that can only help those who are vulnerable, because the queues are not going away."

Child Poverty Action Group spokesperson Prof Peter O'Connor said the investment in food banks is "vital".

"We need to understand that we're just at the beginning of a long-term explosion of poverty in this country," he told Newshub.

"We know that there were existing gaps between those who have enough - lots of people in this country have more than enough - and those who don't. COVID is going to grow that gap."

But the only reason money for things like foodbanks and other top-ups like the Winter Energy Payment and Accommodation Supplement is because struggling people are expected to live on "miserable" incomes, Eaqub says.

"When you're needing all these additional things on top, it's telling you the basic welfare is not sufficient."

Darryl Evans.
Darryl Evans. Photo credit: The AM Show

Prof O'Connor agrees, saying this Budget simply papers over the cracks.

"There's a lot of what you might call amelioration work - dealing with the immediate. But in terms of the long-term, in terms of the vision for how we move towards a more equitable, a more just, a fairer New Zealand, isn't necessarily found within this Budget."

Auckland Action Against Poverty's Ricardo Menendez-March said while it was good to see the big focus on jobs, in the meantime there are going to be a lot of people relying on welfare. 

"Most people deserve to be able to live a life with dignity, and they shouldn't be put in severe financial hardship during the inevitable period some people will be unemployed."

Finance Minister Grant Robertson did hold back about $20 billion in planned spending, waiting to see how the pandemic plays out over the next few months. New Zealand is one of just a handful of countries with a chance to eliminate the virus, but our huge international tourism industry is likely to be out of action for a long time.

"I think it's wise to hold money back, to not have spent everything," said Prof O'Connor, who's also glad Robertson didn't opt for an austerity approach and slash spending.

"The impact of that on people's lives would have been disastrous. In many ways, whether this was a National Government or a Labour Government, that's what they would have had to have done." 

"We can all be critical in terms of how it wasn't ambitious enough," said Eaqub, "but in a crisis, this was a Budget fit for the times."

Shamubeel Eaqub.
Shamubeel Eaqub. Photo credit: The AM Show

Eaqub's holding out hope the next Budget, should Labour still be in power in a year's time, might look to fix some of the long-term inequities, rather than just look to offset them. 

"The welfare side was, in my view, the most disappointing part. We know there's going to be hundreds of thousands of Kiwis that are going to be without jobs - I'm surprised that a Labour Government wasn't able to be more generous on the welfare side... 

"I'm not surprised they didn't do a big reform in the midst of a pandemic. But as we come out of this inferno of the pandemic, I think we're going to have to think very seriously about how we balance these things, because the welfare system as it stands it not fit-for-purpose."

 

Contact Newshub with your story tips:
news@newshub.co.nz