Source: Radio New Zealand
Cabinet has signed off on what support the government will offer in the face of rising fuel costs. RNZ / Dan Cook
The Citizens Advice Bureau says people are going to need significant support as fuel prices continue to rise, and is hopeful whatever relief the government is set to offer will include support for those not in paid work.
Cabinet has signed off on what support the government will offer, with details to be released later on Tuesday.
The Finance Minister has hinted it would be targeted towards low and middle income families.
“It must be targeted, it must be timely, and it must be temporary and not drive inflation or debt higher, because as we steer New Zealand through this immediate challenge, we must also continue to look to the future and bend the debt curve down,” Nicola Willis said on Monday.
The fact the Inland Revenue Department and Treasury had been tasked with going over the options, and a previous admission from the government it would use existing mechanisms, indicated it could be looking at changes to Working for Families.
The In-Work Tax Credit (IWTC) was paid out depending on someone’s income, the weeks they worked, and how many children they had.
In April, the government would raise the abatement threshold (the income level at which the credit would reduce) from $42,700 to $44,900.
There was also the Independent Earner Tax Credit (IETC) for people earning between $24,000 and $70,000.
The IETC was designed to help people on lower to middle incomes that were not eligible for Working for Families.
People earning between $24,000 and $66,000 received a tax credit of $10 per week. It decreased by 13 cents for every dollar someone earned over $66,000.
Asked on Monday whether the abatement thresholds would be temporarily changed, Willis said she would wait to comment until the details of the package were announced.
Finance Minister Nicola Willis. RNZ / Samuel Rillstone
The Citizens Advice Bureau’s national policy advisor Louise May said there were already “high levels of stress” amongst the client base, and the latest hike in the cost of living could plunge people further into hardship.
“We’ve got a lot of clients coming in for help who are just unable to make ends meet. That includes clients with work and those without, and we are really concerned that those clients are going to be in even more dire financial and material hardship situations,” she said.
May hoped both people in work and people receiving income support who did not have paid work were offered relief, and also called for relief for support services such as food banks and emergency accommodation.
“Any measure to increase money coming into the pockets of people who are struggling should definitely be looked at. One thing we’re really concerned about is the fact that there hasn’t been mention of families who don’t have paid work,” she said.
“We think it’s really important that any relief package that’s introduced as a result of this latest crisis also includes families and people who don’t currently have paid employment. They are the ones who are going to be most affected.”
May said it was not just about what people were paying at the pump, but rent and food prices were also high, and people were struggling.
The Citizens Advice Bureau says people are going to need significant support as fuel prices continue to rise. RNZ / Mark Papalii
Infometrics chief executive and principal economist Brad Olsen said changes to the IWTC or IETC would be quick and effective.
He said the difficulty of using the tax system was it would not be as easy for households to see the money come into their back pockets compared to a helicopter payment such as the 2022 Cost of Living Payment, but it would mean the government could run it out quickly and then run it back quickly.
“It does seem like probably the best way to move things through is to use the tax system. Whether or not it’s enough, any little bit will help at the moment, given the sorts of pressures that some households are under. I guess the most workable thing using the tax system around the Independent Earner Tax Credit and the In Work Tax Credit is that they can be targeted to those on lower incomes already, and so you are getting the support there through to people who probably need it most.”
Olsen said the government would be trying to balance providing support and limiting the costs.
“There’s no extra money in the system, and to fund whatever package the government is coming out with either requires an increase in debt or something else in the government system to be cut back on,” he said.
“They want to provide as much support as possible, but keep the limitations tight so they’re not sort of spending a huge amount. And for some people, that does mean that they will feel that they’re not getting the support they might expect from government. But equally, the wider you go, the more money it costs, and therefore at some point, the more the country has to repay.”
Olsen said one of the risks of using tax system changes was they were sometimes “so fiendishly complex” that households may not know what they were entitled to, and sometimes neither did the government.
“They get too much or too little, and then you only find out after the fact that they actually either deserve more, or sometimes in the worst case, they have to start paying this money back, which would almost be the complete opposite of what the government wants to try and support at the moment.
“So you want to, from a government point of view, try and balance these changes, to make them as absolutely blunt and simple as possible, to get that money out the door, to support those who need it, but also have it go through enough of a workable system, which is a more complex tax system that we have to try and provide that sort of targeted focus.”
Infometrics chief executive and principal economist Brad Olsen. RNZ / Samuel Rillstone
Labour leader Chris Hipkins was reserving judgement on what the government would offer until he had seen the details, but said the “principle” was that it should be offered to all people on low and fixed incomes.
“Anyone on a fixed income or a low income is going to be suffering at the moment because of the high price of fuel. That includes superannuitants, it includes people living on benefits, it includes people caring for others and not currently earning an income, not just those who are on low incomes in the workforce.”
Hipkins would not, however, offer up what Labour would do differently if it was in power, saying it was up to the government to present a plan.
“At the moment, the onus has to be on the current government to lead the country through that,” Hipkins said.
Labour leader Chris Hipkins. RNZ / Mark Papalii
The Green Party has proposed an urgent support package including free public transport, relief payments for low income and rural people to help meet additional transport costs, temporarily expanding eligibility for school buses and reversing cuts to school bus routes, reversing planned cuts to the Total Mobility Scheme, increasing mileage rates to care and support workers who receive well below standard IRD mileage, and a windfall profits tax.
Asked why the Greens could propose policies but Labour could not, Hipkins said minor parties could “promise a lot of things” during election campaigns.
“They get a lot more luxury to promise whatever they want, compared to the bigger parties,” Hipkins said.
In a post on social media on Monday night, Prime Minister Christopher Luxon said he had spoken with Singapore Prime Minister Lawrence Wong about what more they could do to deal with difficulties in fuel and other supply chains.
Luxon said about a third of New Zealand’s fuel was refined in Singapore and the two leaders agreed it was important to keep the trade of essential goods flowing between the two countries.
“We’re working hard to ensure New Zealand’s fuel needs are met amidst the conflict in the Middle East, which is causing disruption to supply and higher prices at the pump,” he said.
“When I visit Singapore in May, we will sign the Agreement on Trade in Essential Supplies, a deal that will help keep supply chains flowing for fuel, food and other products.
“Building on the great platform we’ve built with one another, we also talked about what further work our Governments can do together as we navigate through these supply chain challenges.”
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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand
