Budget 2014 – what impact will it have on inequality & poverty?
How well has the 2014 Budget done in lifting the lowest incomes and reigning in the run-away growth of higher incomes? Very little, is our answer. The dynamics of 30 years of high levels of inequality and poverty embedded in our social and economic system will not change as a result of this budget. The hundreds of thousands of people and their families that rely on welfare benefits come away empty-handed. With unemployment set to remain over 5% until at least 2016, there will continue to be a huge proportion of our people living in poverty.
The promise of rising average wages for those fortunate enough to actually get a job disguises the fact that two-thirds of workers earn less than the average wage. Increased wages have mainly gone to higher income earners. This means that the average wage goes up but because of the increasing gap between middle and low wage earners, lower wage earners benefit less or not at all.
Hints about tax cuts in the future offer little hope for those who rely on income support that is funded through tax income. Their incomes are too low now and most people on a welfare benefit (including more than 200,000 children) live in poverty. The 2010 tax cuts that cost $1.1 billion per year benefitted the highest income earners the most, and future tax cuts would have to be very strongly targeted to those on the lowest incomes to do anything to address this.
The lack of investment in raising the supply of low-cost rental housing for people on low incomes means that even the limited relief that income-related rents contribute to reducing inequality and poverty is not going to grow in any significant way.
Paul Barber is a Policy Advisor at the New Zealand Council of Christian Social Services and leads the Council’s flagship programme, Closer Together Whakatata Mai.