Struggling families need much more than an inflation top-up

Sky rocketing inflation is keeping families in poverty despite much-heralded inflation adjustments to benefit increases, according to new research on family budgets by Child Poverty Action Group (CPAG).

The research found most of the families on a core benefit had a significant shortfall for a very basic standard of living, and an even bigger gap if allowance for modest contingencies is included.

But, CPAG points out, that without inflation adjustments we would be seeing family poverty on an even greater scale.

"When families have a deficit in basic costs their choices are stark," said CPAG economic spokesperson Assoc Prof Hon Susan St John.

"They can go hungry, get help from a charity, get supplementary temporary help from Work and Income or borrow either from Work and Income and/or the private sector.

"When the gap is filled by borrowing, repayments have a cumulative effect, making future deficits even worse."

Building on the work done for the Welfare Expert Advisory Group for 2018 and Fairer Future for 2022, CPAG modelled six broad family types in a variety of living arrangements to check the gaps between incomes and expenditures.

CPAG’s preliminary release examines typical model families supported by benefits and models the gaps for mid-2023, after the 1 April inflation adjustments, and what the gaps are expected to look like by the end of March 2024.

Overall the picture is bleak but there is one bright light. The category bucking the trend is families who received indexed Best Start payments, now $69 a week, in the first three years of their child’s life, a scheme that began in July 2018.

"Best Start is an example of the transformative change needed to make a difference and has helped to plug the shortfalls for this limited number of families," said Hon Assoc Prof St John.

The initial release from CPAG research, based on very conservative assumptions estimated the gap by mid-2023 for the typical sole parent with three children in a private rental to be around $116 for basics and $250 for total costs.

For a couple with two children, the deficit is around $180 and $324 respectively. This is before any allowance for debt repayment. These gaps are slightly worse than a year ago despite the 1 April adjustments.

"Many families find themselves in a vicious downhill spiral. With no other changes in sight, and with significant inflation expected, families will find the gaps between expenditure and income even worse by 31 st March 2024," said Hon Assoc Prof St John.

"Even with no allowance for growing debt repayments, the gap for the typical sole parent with three children in a private rental by 2024 is estimated to be around $140 for basics and $275 for total costs. For a couple with two children, the deficit is around $200 and $350 respectively.

"This points to underlying structural problems that have not been addressed. These include: lack of basic housing; punitive married couple benefit rates; the inflexibility of the Accommodation Supplement to allow for large families; the failure to pay the full Working for Families for children to families on benefits; and slow adjustments for cost of living increases." 

CPAG echoes the concerns of Auckland City Missioner Helen Robinson speaking on TVNZ's Q+A programme on May 14, 2023 who said: "Hunger creates deep problems within our society ... the more hungry we are the more we will see unrest .. people need to be fed," she said. 

"Thousands and thousands of us just don't have enough money for food and I am genuinely worried as to what would happen if there is not a clear response to that in this budget."

The full analysis of the data modelling can be found here.