Budget 2022: Surprise cost of living payment into Kiwis' wallets, fuel tax and public transport fare cuts extended

Low and middle-income New Zealanders struggling with the skyrocketing cost of living will receive $350 over three months under Budget 2022.

From August 1, roughly $27 per week will be paid out to an estimated 2.1 million Kiwis who earned less than $70,000 in the last tax year and are not eligible for the Winter Energy Payment. 

It will cost $814 million and be enabled through legislation being introduced on Thursday. Inland Revenue is currently in the process of setting it up.

An overall cost of living package costing about $1 billion has been announced as part of Thursday's Budget 22, but that's not coming from the Government's $6 billion in new operating spending, but from reprioritising funding from the closure of the COVID-19 Response and Recovery Fund. 

"These initiatives come on top of the significant lifts to main benefits, student allowances, and family tax credits implemented on April 1 and the Winter Energy Payment from May 1," Prime Minister Jacinda Ardern said. 

"These are practical measures as families come through the hardest period post-COVID-19 and as the world responds to the war in Ukraine."

While acknowledging the Government's earlier actions to help low-income Kiwis, Finance Minister Grant Robertson said on Thursday "it is clear that a wider group of New Zealanders need targeted support".

"The Treasury suggests inflation will have more of an immediate impact on low and middle income households than on higher income households" he said. "That’s why this payment focuses on low and middle income earners who are not eligible for the Winter Energy Payment."

Inflation came in at 6.9 percent in the year to March, a 30-year high which the Government has blamed on global COVID-19 supply chain issues as well the war in Ukraine. It's led to a significant jump in food and petrol prices, hurting Kiwis in the wallet.

According to the Budget Economic and Finance Update (BEFU), released on Thursday, annual inflation will fall to 5.2 percent over 2023 and 2.2 percent by 2026. This is within the Reserve Bank's 1 to 3 percent target range.

"Budget 2022 is being delivered against the backdrop of a global inflation spike, with existing supply chain pressures being exacerbated by pressure on oil prices from the war in Ukraine. This will pass but we need to protect New Zealanders from the immediate impact," Robertson said.

Ahead of the Budget's release, the National Party said it would be a failure if it didn't provide relief to the "squeezed middle". The centre-right party has been advocating for income tax thresholds to be adjusted to inflation, which it says would save those on a salary of $55,000 about $800 over a year.

The Government's also extending the 25 cent per litre reduction in fuel excise duty, the cut to road user charges and half-price public transport fares it announced in March for a further two months.

"The ongoing global energy crisis continues to impact on Kiwi households and businesses," said Transport Minister Michael Wood. "Therefore, we’re extending our transport support package, including half price public transport fares, to help New Zealanders get where they need to go."

That's likely to be popular with Kiwis. After public transport fares were halved in March, usage jumped by a third in Wellington and 50 percent in Auckland. A Newshub-Reid Research poll earlier this month found around two-thirds of New Zealanders supported making it permanent. 

He said this will also assist food producers who need to transport their product across the country.

Speaking of food, the Government is introducing legislation into the House on Thursday night to respond to the Commerce Commission's inquiry into competition in the supermarket sector.

It will address the commission's recommendation to stop supermarkets from blocking competitors from accessing land to open new stores. The Government's also looking at a Code of Conduct between major retailers and suppliers and what role a regulator could play. A formal response to the commission's report will be released in the coming days.

An ongoing 50 percent discount in public transport fares is coming in mid-September for community service card holders, which is being funded through the Climate Emergency Respond Fund (CERF). That's made up of money from Emissions Trading Scheme (ETS) revenue. 

"That means about one million Kiwis will have access to cheaper transport which also helps us meet our climate change targets," Climate Change Minister James Shaw said.

The Warmer Kiwi Homes programme, which support New Zealanders with insulation and heating retrofits, will receive a $73 million extension to run until June 2024. That will see an additional 26,500 retrofits, which the Government says will help lower power bills.

"This funding extension provides certainty for service providers so they can plan for the future and continue to support jobs and the local economy. Funding this from our Climate Emergency Response Fund recognises that warm, dry and safe homes are important for families, important for the climate and important for the economy," Shaw said.