Salvation Army State of the Nation report: Off the Track

The Salvation Army’s annual State of the Nation report reveals an alarming lack of improvement for children living in poverty in New Zealand despite a significant growth in the economy.

Child Poverty Action Group (CPAG) says that the report, “Off the Track” provides clear evidence that the benefits of a booming economy are not reaching those who need them most.

“Any plans to improve the outcomes for children, and reduce crime rates through the Government’s new ‘Social Investment’ approach are significantly thwarted by the lack of response to the serious levels of poverty experienced by families in New Zealand,” says Associate Professor Mike O’Brien, CPAG’s social security spokesperson.

While the housing market may be contributing to overall economic growth, it is rapidly reducing disposable income among those who are renting, as accommodation costs continue to rise faster than wages and salaries. The demand for and lack of affordable housing in many areas has resulted in unprecedented levels of homelessness in New Zealand. Among the homeless are families with young children, as well as youths aged between 19 and 24 who are struggling not only with the rising cost of living, but also to find gainful employment.

Despite an increase in jobs, a rise in the average hourly pay rate, and a reduction in the number of children dependent on welfare benefits, the number of children experiencing severe hardship and income poverty has not changed in the past ten years, and the Salvation Army continues to experience a steady increase in food parcel distribution. While there are fewer people supported by welfare, there is no evidence to suggest that families are any better off. According to the report, “A comparison of benefit numbers with unemployment numbers suggests these people have not necessarily moved into work and consequently lifted themselves out of poverty … although the Government has claimed its welfare reforms have contributed to the alleviation of poverty in New Zealand.”

The report suggests that entrenched poverty may be affected by failure of the Working for Families (WFF) tax credit scheme to alleviate hardship among the most needy.

“The worst-off families are excluded from the full package, which saves Government spending about $500m per year,” says Associate Professor Susan St John, economics spokesperson for CPAG.

But as the report shows WFF has also eroded for working families. Specifically, changes made to the scheme since 2010 saved Government about $700m in 2016.  

“The lack of indexation and increased claw-back impacts on low-income working families for whom every dollar earned over the low threshold reduces their entitlements.”

CPAG agrees that the savings achieved from this paring back could have been invested in a redesigned family support programme that does not discriminate, thereby reducing child poverty rates amongst the benefit poor. The obvious way to do this is to give the In-Work Tax Credit (IWTC) to all low-income families irrespective of their work hours.

Overall the report paints a bleak picture for children in poverty. CPAG has outlined a number of policy recommendations to reduce poverty in the 2014 series Our children, our choice which is available for download.

See more about recommendations to Fix Working for Families here.