Budget Blues

Twenty five dollars a week can’t be bad, can it? For families on the breadline, it’s surely better than nothing and every little helps. And when the total spend is $790 million, that’s not peanuts, is it? – even if multiplying $25 up to this total should surely tell just how many qualifying families there are and just how widespread family poverty is in today’s New Zealand.

The increase in benefits has of course captured the headlines and is apparently a master-stroke of so-called “compassionate conservatism” in disarming those critics who have complained about widening inequality and deeply entrenched poverty. Most people will not notice or care that it is chickenfeed by comparison with the handouts made to the rich under the current government. It is easy, after all, to get one’s head around twenty five dollars a week – not so easy to comprehend the billions of dollars that have been siphoned off for the benefit of the government’s wealthy supporters.

And memories are short. Who now recalls the cuts in top-rate income tax that were worth billions to our top earners? Who remembers the hike in GST rates that transferred so much of the tax burden away from income tax and on to spending – ordinary everyday household spending, the kind of spending that accounts for every cent of a poor family’s income?

And who registers, even today, as the drums are beaten for the paltry benefits increase, that it will have been paid for, when it comes into effect next April, by tax rises such as the airports tax, by the removal of the $1000 incentive to join KiwiSaver, and by the heartless tightening of the benefit rules that will force solo mums back to work on their child’s third birthday?

And who understands just how much more significant than a few dollars a week per family in poverty are the powerful macro-economic forces at work – the forces that determine who gets the benefits and who pays the price for what happens in the wider economy? Let’s take as an example the rate of unemployment – still at nearly 6%, stuck there stubbornly because of the priority the government has given to getting its own books back in balance rather than getting the country back to work, and still understating the true rate of joblessness by counting every part-time one-hour-a-week employment as a job.

Who benefits and who loses from this historically high rate of unemployment? A pool of unemployed helps employers of course by keeping wages down since there will always be those ready to step into low-paid jobs if those in them ask for a wage increase. The low-paid, and those who are increasingly long-term unemployed, pay the price and have no chance of breaking out of the poverty trap – and twenty five dollars a week is a cynically contemptuous price-tag to place on their unwilling sacrifice

And who pays the rising rents generated by the housing affordability crisis? Or the soaring power bills as the result of privatisation? Are they to be met from twenty five dollars a week? Who benefits, on the other hand, from the extravagantly increased value of the equity in Auckland houses which rises on average by $80,000 a year – or nearly $1600 a week – without the owners doing anything?   That $1600 a week would certainly make a difference to families in poverty expected to be grateful for the $25 that will, we are told, give them a better life.

And where do the $4 billion of bank profits exported to Australia each year come from? Could they have something to do with the ever-increasing lending that drives the rise and rise in Auckland house prices? And we haven’t even begun to look at the huge tax breaks handed over to Rio Tinto Zinc or Warner Brothers, or even the comparatively trivial $6 million gifted to a Saudi businessman to keep him sweet. But the pattern is surely clear. The widening gap between rich and poor in New Zealand has not arisen by accident. It is not an objective moral judgment, handed down by the market gods, that rewards the hard-working and punishes the feckless. It is instead the direct result of the way our economy is deliberately run.

Some people, it seems, matter more than others. They deserve, we are told, to get richer. There are others – with low-paid jobs or no jobs at all, with poor health, unhealthy and overcrowded housing, low educational achievements – who slip under the radar, and have little chance of getting the economy to work for them. But when the polling shows at last a rising level of public concern about children growing up with blighted life chances, about families in poverty whose plight makes us all poorer, then $25 dollars will do the trick, won’t it? We can all relax.

Bryan Gould

22 May 2015.