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Inflation stats should prompt meaningful action

Child Poverty Action Group (CPAG) says the latest figures from Statistics New Zealand show what low-income families know only too well.

The current measure of inflation - the Consumer Price Index (CPI) - does not reflect their lived experience of rising costs.

The latest figures are based on a new data series - the household living-costs price indexes (HLPIs). These use the same basket of goods and services as CPI to look at the inflation experienced by 13 different groups, including beneficiaries, Māori and superannuitants, based on their expenditures.

While the CPI for all households has risen by only 13% between June 2008 and September 2016, the new HLPI measures record that the lowest-expenditure household group has faced 18% inflation and beneficiaries 16%.

Reduced prices for high-end items means the CPI is lower than it would be if it reflected the actual spending for low-income groups.

"The major redistributive programme for the young, Working for Families (WFF), is not even adequately adjusted for CPI inflation. There is no adjustment until cumulative inflation reaches 5%, so the last adjustment was 2012, and the next maybe as far away as 2019,"says Associate Professor Susan St John, CPAG economics spokesperson.

"Other parts of the WFF programme like the In-Work Tax Credit (IWTC) are not indexed at all. For example, the income threshold over which WFF reduces is set to drop to $35,000 when it would now be around $44,000 if it had been linked to the CPI.

"Another example is the threshold for weekly earnings before the benefit is reduced - that has not been increased from $80 a week since the late 1980s for job seekers. If it had been CPI adjusted, it would now be about $147. This increase in allowable earnings would also make it easier for people to transition to full-time work.

"There is a huge problem with the CPI link for benefits, as benefits are seriously out of line with average wages. While superannuitants have experienced high price inflation (19%), they are being protected by annual increases to NZ Super in line with the average wage."

CPAG says that instead of having one-off, inadequate adjustments, such as the $25 a week increase for beneficiaries when there are children and the small adjustment to the IWTC this year, the system needs to be fully and automatically indexed to wages, just as we do for superannuitants.

"Let’s hope that the Government responds to the new HLPIs in a way that is constructive for children in poverty," says St John.