OECD report 'indicates better policy needed to reduce poverty'

Child Poverty Action Group is urging the government to rethink and improve its 2015 Budget announcements on benefit changes in light of the OECD's latest report on the New Zealand economy.

CPAG says the new report, OECD Economic Surveys NEW ZEALAND (PDF), has some compelling messages for the government on policy to reduce poverty.

The 2015 budget increases social welfare benefits by a flat $25 per family in 2016. CPAG economics spokesperson Susan St John says, "This will make the benefit structure less transparent by reintroducing a child-related element into the adult benefit. It is a very poor way to help children, as it takes no account of the number of children in a family or their ages. Furthermore, all beneficiaries need more income not just some. The disappointingly long lead-in time for this policy change gives an opportunity to improve it and make it more effective."

CPAG would like to see all benefits immediately lifted by 10% and then indexed to median wages and says this link to wages is crucial. The OECD makes a very strong recommendation:

"Increasing main (basic) benefits and indexing them to median wages would reduce poverty across all beneficiary classes, including single-person households (below age 65), who have the second-highest relative risk of poverty."

The OECD notes that the use of supplementary means-tested payments for the very worst off families has been part of why living standards of those on benefit have fallen so far behind:

"Poverty rates could be cut by increasing social benefits, which have been falling relative to wages as they are indexed to the Consumers Price Index In addition to these main benefits, most beneficiaries receive supplementary benefits (a variety of means-tested benefits available to both beneficiary and working households) targeted at vulnerable families. However, increases in supplementary benefit payments have been smaller for beneficiary households than for low-income working households owing to the introduction of Working for Families, which provides greater benefits to low-income working households than beneficiaries."

Once adult benefits are increased and indexed, Working for Families Tax credits are the best way to recognise the needs of children in low income households, says Susan St John. "These need to be given to all low income children on the same basis if we are serious about reducing child poverty. The changes to Working for Families announced in Budget 2015 only help those families who meet rigid work criteria and make very minor adjustments to the work-related tax credits. The Government needs to build on what has been started in this year's budget and develop a long-term, comprehensive plan to reduce poverty."