Increasing benefits will boost economy - report

Photo: File/SunLive.

Boosting benefits could help the economy, a new report by the NZ Institute of Economic Research (NZIER) says.

Increasing benefits could create a short-term fiscal stimulus, in turn increasing productivity and GDP, the report said.

The Government permanently increased benefits by $25 a week in March as a response to COVID-19, and doubled the winter energy payment for 2020.

Welfare advocate Kay Brereton, a member of the Government’s Welfare Expert Advisory Group, says the report showed there was no reason to keep benefits at “sub-poverty rates”.

“There’s no rational economic argument for keeping benefit rates low, especially when we’re facing a Covid recession,” Kay says. 

“And by raising benefits the Government can ensure more money goes into local communities and local businesses because our people spend any extra money on the necessities of life they can’t otherwise afford.

“All that is holding us back is an almost willful prejudice against people who have had the misfortune to end up on a benefit.”

Infometrics chief forecaster Gareth Kiernan says while the report emphasised the positive effects at the household level if benefits were to increase, it also pointed out research on the long-term effects on the economy was not available.

The report is very much about the short-term effects on the economy, the evidence is inconclusive about the medium to long-term. You can’t just keep increasing the benefit and expect it to positively impact GDP, someone has to pay the tax dollars to fund those benefits.

“The issues are more nuanced. There is a big ideological gap between people who want to ensure the benefit is comfortable to live on but that incentive for people to actually get back out and look for work.”

In June Work and Income made 71,137​ benefits advances to people experiencing hardship, up from 57,479​ in May.

At the end of June 190,456​ people were getting Jobseeker Support, up from 136,233​ at the end of June last year, figures released by the Ministry of Social Development show.

But there were also 10,579​ people receiving the COVID-19 Income Support benefit, which was introduced on June 8​ for people who lost their job after March 1, getting them higher weekly support payments than people who joined the unemployment queue at an earlier date.

The number of people surviving on main benefits was 353,440​ at the end of June, up 21.1 per cent compared to this time last year.


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Tom Ranger

Posted on 12-08-2020 08:09 | By

Bang on the money Nuts. Tautoko. She’s just doing her job though.


Posted on 11-08-2020 13:56 | By

We cannot keep encouraging people to sit about being idle and knocking out kids. And it is certainly a way to more economic ruin. This woman is clearly not an economist. Her basis is purely emotive and ideological based on resent and jealously. She has tried to make an economic argument out of it by saying more will be spent. Of course it will. If it were as simple as that why stop with benefit rates? Just give everyone more money. Reduce taxes. Print some more money so we can all spend up. Dead simple for simple minds.