Prime Minister Jacinda Ardern hopes increases to the minimum wage and Family Tax Credits, and the upcoming Winter Energy Payment, will ease cost of living pressures.
Ardern has been under pressure this week to admit that three-decade-high consumer prices is a "cost of living crisis", with fruit and vegetables up 15 percent, rents up 6 percent and unleaded petrol now $3 per litre in some areas.
Adding to the pressure, the United States has banned Russian oil imports in response to the Ukraine invasion, prompting President Joe Biden to warn that gas prices are likely to rise.
"We import from Singapore, South Korea and Japan and we haven't imported from Russia since January 2021, so it's not something relevant to New Zealand," Ardern said on Wednesday.
"One thing that I will comment on though is that we are concerned that whilst all these moves are necessary to send a very strong message to Russia about their actions in Ukraine, it will inevitably have a knock-on effect around energy prices around the world and New Zealand will not be immune to that.
"We are deeply concerned about the impact. Already we're in a place where economic recovery from COVID, supply constraints and now the war, means that we have a perfect storm that everyone is experiencing and New Zealand is not alone in that.
"We are of course looking to the changes that are coming in April: the increase in the Family Tax Credit, the increase in the minimum wage, we've got the Winter Energy Payment coming. All of those will help with easing the pressure but we continue to think about what we can do to particularly support middle-income earners during this time."
From April, almost 350,000 families will get an extra $20 a week as part of increases to Family Tax Credits, aimed at families on the lowest incomes. Also in April, the minimum wage will rise from $20 per hour to $21.20. Then in May, the Winter Energy Payment returns.
Beneficiaries will also get another $20 boost in April, the second consecutive increase as part of a $3.3 billion package in Budget 2021. The Government already increased the benefit by $25 a week in 2020.
Ardern in Parliament on Wednesday argued that her approach to helping low and middle-income families was better than National's proposal to lift income tax brackets by just over 11.5 percent, to match the 11.5 percent increase in the cost of living over the last four years.
The most typical salary in New Zealand is about $55,000, according to the Average Salary Survey. Those earning $55,000 would save about $800 a year if National's tax changes were applied. But someone earning $45,000 would only get about $112.
National Party deputy leader Nicola Willis said on Wednesday she was "really concerned" about inflation and how much it's costing at the pump.
"This is a major cost of living crisis that New Zealanders are experiencing and we again call on the Government to show New Zealanders some relief."
ACT leader David Seymour said the Ukraine crisis will likely "cost a fortune".
"The question is how much is the Government going to take from the cost of living crisis? Every time the price of petrol goes up a dollar, the Government takes 15 cents extra in GST.
"The real question is, is the Government going to give tax relief or is it going to be happy to keep profiting off rising prices New Zealanders pay at the pump and checkout?"
Ardern said inflation was a symptom of global pressures.
"Right now, I absolutely accept that New Zealand alongside the UK, alongside the United States, Scotland, Ireland - all report the impact of the increasing cost of living as a result of an increase in inflation and add to that the war in Ukraine, which is putting pressure on energy prices," she said in Parliament.
"We're all experiencing that. The debate we're having in this House is whether or not a cut to the top tax rate as the member is proposing which would come at a cost of $600 million is the answer."
Ardern pointed out that, while inflation is currently higher than wage growth, since Q1 2018, wages have increased at an average annual rate of 3.5 percent and inflation has averaged 2.2 percent over the same period.
"What we're of course acknowledging is the experience we're having right now as a result of the simultaneous COVID recovery going on around the world, the extra demand and shortages in supply and add to that a war, is causing a range of pressure for households.
"We are committed to trying to ease that pressure."
But the worst could still be yet to come.
ASB Bank chief economist Nick Tuffley predicts that consumer price inflation will likely exceed 7 percent in the first half of this year.
"Rising fuel prices are already being felt around the world and are adding to transport costs and already pressuring stretched global supply chains."
Tuffley anticipates "a steady sequence" of interest rate hikes by the Reserve Bank as it tries to ease inflation, which will add additional financial pressure to homeowners with mortgages.
The Official Cash Rate (OCR) hit 1 percent last month, up from the historically low 0.25 percent setting imposed at the start of COVID-19 to stimulate the economy.
The 25-basis-point OCR hike would cost the average mortgage holder an extra $825 a year, or $16 a week, according to Reserve Bank Governor Adrian Orr.
ANZ and Westpac's economists pick the OCR to hit 3 percent around the middle of next year, while ASB is picking 2.75 percent in early 2023.