Sunday, May 22, 2022

Point of Order: Robertson tackles the cost-of-living crisis which the PM did not recognise – now let’s see if he can steer clear of recession

Prime Minister Jacinda Ardern early in March insisted there was no cost-of-living “crisis” in New Zealand. Now her right-hand man, Grant Robertson, has presented a budget which he proudly claims deals with that very same “crisis”, giving away $1 billion in an emergency cost-of-living package.

About 2.1 million New Zealanders will get a $350 payment spread over three months, while fuel tax cuts and half-price public transport continue for another two months.

Will that be enough to relieve those suffering in what Labour now accepts is a crisis? And will it halt Labour’s slide in the polls.

On that, opinions are mixed, with Labour’s partner in government being the most expressive in their doubts. Here’s what a Green Party press statement had to say on the subject:

“The $350 Cost of Living payment should be available to those who need it the most. Labour can do that today by including people on the benefit as well as under 18’s on Youth Payment and in work,” says Ricardo Menéndez March, Green Spokesperson for Social Welfare.

“Excluding people from the Cost of Living payment because they already receive government support means more families will be unable to make ends meet through the winter.”

The Green Party says:

“It is punitive and unfair”.

Oh dear. So what should be done?

Menéndez March offers a solution.

“The Green Party is calling on Labour to reconsider this poorly targeted approach. Additional temporary assistance should be provided to those who need it most. The legislation to introduce the Cost of Living Payment, which Parliament has debated today, doesn’t set out the eligibility requirements, so Labour can still decide to broaden it – and that’s what we’re asking them to do”.

Rubbing salt into Robertson’s (possibly bleeding) wound, Menendez March says

“… in 2020, the Government doubled the Winter Energy Payment to provide extra support. Now, they’re saying that people who get this payment shouldn’t have any top up – despite rising costs of living, and despite slow progress on child poverty targets.”

The Green Party is also calling for investment in what it says are long-term solutions, including increasing benefits to liveable levels, increasing and expanding Working for Families, and expanding the Income Related Rent Subsidy to local councils.

“Poverty is a political choice. No one should be struggling to pay the power bills or feed their kids in this country. People on the lowest incomes need a government that is committed to liveable incomes for everyone – and with more Green MPs we can make it happen,” says Menéndez March.

That statement might have been written by an Opposition politician.

Of course, as Brian Fallow put it in the NZ Herald, Robertson had to be careful not to fling additional fuel on the inflationary fire.

But the big question left unanswered by the budget is the continuing effect of falling real incomes for most wage and salary-earners.

Rising mortgage costs and falling house prices reinforce the destruction of the wealth effect which helped boost consumption.

That could herald the arrival of the recession, which is a dirty word in Robertson’s lexicon, just as the cost-of-living “crisis” was in Ardern’s back in March.

Even though it has been hailed as filling an important gap in NZ’s social insurance framework, the government’s decision to push through legislation on its income insurance scheme is problematic in its timing. Whether it deserves the towelling it got from the Taxpayers’ Union is less certain.

The union contends the government is using “dirty tactics” as it pushes through enabling legislation to increase PAYE revenue by 10% under the cover of the Budget.

Union spokesman Jordan Williams says,

“This is a tax branded ‘insurance’ by spin doctors to try and make it palatable. They are polishing a stinker. The ‘premium’ is not risk-based or reflective of individual circumstances. It is in practice a massive extension of PAYE, increasing revenue from the PAYE system by 10%.

“The audacity of the timing cannot be understated. Labour is pushing it through first reading in a special Friday session of Parliament, less than 24 hours after a massive Budget that taxpayers, the media, and the Opposition are still busy digesting. This is cynical politics – Labour is playing dirty to push through a tax it knows will not stand up to public scrutiny.

“Even worse, the Government is pushing this new tax as the costs of living spikes. The tax on workers will reduce take-home pay by up to $1,820 a year – far more than the temporary cost of living handouts announced yesterday. The additional tax on employers will in practice be passed on to workers, or translate to higher prices adding fuel to the inflation fire.

‘Unemployment insurance’ might be the name the PM’s media advisers have come up with, but Kiwis are smart enough to see right through it.

“It’s a nasty tax on employment, at the worst possible time. It’s also a recipe for rorting: family businesses will manufacture redundancies to take advantage of the generous handouts; and people on salaries as high as $131,000 will take six month sabbaticals between jobs, on 80 percent pay, courtesy of tax-paying workers.”

Clearly, Robertson, and the government, will have to work hard to convince sceptical New Zealanders it is steering the country out of the cost-of- living crisis.

Point of Order is a blog focused on politics and the economy run by veteran newspaper reporters Bob Edlin and Ian Templeton

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