The Government is being urged to "urgently increase benefits to liveable levels" while ACT is warning job losses "will only get worse" as the unemployment rate rises to 5.3 percent.
Unemployment figures for the last quarter released on Wednesday show 37,000 people have lost their jobs due to COVID-19 and Auckland Action Against Poverty (AAAP) says the current welfare system needs to adapt.
"We are not surprised at the massive amount of people who are out of work due to this pandemic and were expecting this September quarter to be more reflective of what's actually happening on the ground," said AAAP coordinator Brooke Stanley Pao.
The latest increase to the unemployment rate comes after an unexpected drop to 4 percent for the June quarter announced in August, which quashed widespread expectations of a solid increase due to COVID-19.
National's finance spokesperson Paul Goldsmith brushed off the decrease at the time, saying it was "masked" by the wage subsidy scheme and other Government stimulus.
AAAP wants the Government to increase benefit levels across the board in light of growing job losses, pointing to the COVID Income Relief Payment which pays out $490 a week tax-free - around double what the jobseeker benefit pays.
The payment is only available for 12 weeks and is paid out to those who lost their job between March 1 and October 30 as a result of COVID-19. Applications for the payment will close next Friday on November 13.
"The Government needs to urgently increase benefits to liveable levels, which we saw happen when they responded with the COVID Income Relief Payment at almost double the rate of the jobseeker benefit," said Stanley Pao.
The Welfare Advisory Group suggested in 2019 that the current level of welfare and support payments are already very low and entrench poverty.
After the last surprise drop in unemployment, Finance Minister Grant Robertson acknowledged that labour market conditions were likely to deteriorate from there.
"We know there are still some tough times to come," he said in August. "The Treasury expects unemployment to rise further and peak in the September quarter as the impacts of the global recession caused by COVID-19 feed through to the domestic economy."
But the latest drop in unemployment is not as bad as had been predicted. It's well below Treasury's forecast of 9.8 percent in the Budget, and below the 6.4 percent forecast in the Pre-Election Update or PREFU.
"The unemployment data today shows the Government's decision to focus the COVID-19 recovery and rebuild plan on jobs is working," Robertson said. "This is still a difficult time for many New Zealanders, and we are working hard alongside them to create new work and training opportunities."
ACT leader David Seymour said despite the Government's "luck" with COVID-19 and "massive fiscal and monetary stimulus", it still hasn't prevented a "big rise" in unemployment.
"The Government's COVID Response and Recovery Fund pumped $49 billion of borrowed money into the economy at a rate of $11.7 million an hour for six months. Our unemployment numbers will only get worse as the stimulus wears off."
He said the Government needs to stop the "out-of-control spending" and get on top of debt.
The Government opened up its books in September revealing net core Crown debt is forecast to increase to more than $200 billion by 2024, or 55.3 percent of GDP. The country is in recession, with GDP dropping 12.2 percent in the June quarter.
Robertson says New Zealand won't be immune to COVID-19 but is still faring better than the nations we compare ourselves to.
"In Australia, the unemployment rate is 6.9 percent, in the US it's 8.8 percent and in Canada 10 percent," he said. "The world will continue to feel the ongoing impacts of the worst economic shock since the Great Depression, and we have a strong plan in place here in New Zealand to cushion the blow and invest in the recovery."
Robertson, who is the new Deputy Prime Minister, acknowledged the employment statistics show that the economic impact of COVID-19 is falling disproportionately on women, Māori and Pacific peoples.
"I will be working closely with the ministers in these areas to make sure there is an inclusive recovery and rebuild."
Labour won the election by a landslide in October which some commentators have attributed to the Government's COVID-response. But groups like AAAP will be watching for transformative policies now that Labour has a clear mandate.
"This Labour Government has the power to change our system from disempowering and dehumanising people to one that honours the right of everyone to have enough income for themselves and their families to live on, irrespective of their employment status."
