Wellbeing Budget 2021

Securing
Our Recovery

What does this mean for our goals of reducing child poverty?

The benefit increases are expected to reduce child poverty rates over the projection period, as shown below. The modelling on pages 30 to 32 are a projection only and the impacts of these initiatives are expressed as a range, based on a 95 percent confidence interval.[28] This range accounts for uncertainty due to the survey sample error but not the uncertainty related to the economic forecasts. Modelling is not available for the material hardship measure.

Income measure: After-housing-costs, fixed-line measure, AHC50

Figure 4 - Proportion of children in households below the AHC50 poverty threshold (Stats NZ, Treasury projections)

What does this show?

Stats NZ figures show a significant drop in AHC50 poverty for 2018/19 because of the Families Package, which is in broad alignment with previous forecasts. This shows that we have already exceeded the 2021 AHC50 target in 2019/20. 

Without the benefit increases in Budget 2021, Treasury projections estimate that AHC50 poverty would have increased in 2022 due to economic conditions (particularly inflation, rent and unemployment). The benefit increases announced in Budget 2021 offset this and will further lower poverty in 2022/23.

The projections then return to a trend that is mainly driven by current economic forecasts, which suggests COVID-19 will have less of a short term impact than previously expected but a longer recovery period. This leads to relatively flat AHC50 poverty rates towards the end of the forecast period, without further investment.

What do we expect to happen?

We estimate that with these changes, by 2022/23 the number of children in poverty will have reduced by between 31,000 and 85,000 children (a 3.4 to 8.2 ppt reduction) compared to the 2017/18 baseline year. 

We estimate that due to the reductions since the 2017/18 baseline year, the 2021 AHC50 target of 18.8 percent will be met. The projections suggest a fixed-line AHC50 child poverty rate of 18.2 percent ± 1.4 percent in 2021.

These projections assume no other policy changes.

Income measure: Before-housing-costs, moving-line measure, BHC50

Figure 5 - Proportion of children in households below the BHC50 poverty threshold (Stats NZ, Treasury projections)

What does this show?

Stats NZ figures show a significant drop from 2017/18 to 2019/20 because of the Families Package. This is a smaller drop than forecast in last year's Child Poverty Report, in part due to higher than expected increases to median incomes compared to those on lower incomes (increases BHC50).

Treasury projects a further drop in 2020/21. This reflects:

  • economic forecasts that show slower growth in median household incomes than previous years and an associated reduction in the poverty threshold (decreases BHC50)
  • previous policy changes, which increased benefit rates in April 2020 (decreases BHC50), and
  • an increase in unemployment and the number of households reliant on benefits (increases BHC50).

The benefit increases announced in Budget 2021 are expected to reduce BHC50 poverty in 2021/22 and 2022/23. After this, median incomes are projected to rise faster than incomes at the bottom of the distribution. Without further Government intervention, this would result in an upward trend.

What do we expect to happen?

We estimate that with these changes, by 2022/23 the number of children in poverty will have reduced by between 34,000 and 72,000 children (a 3.4 to 6.8 ppt reduction) compared to the 2017/18 baseline year. 

We estimate that although the measure is trending downwards towards 2021, the 2021 BHC50 target of 10.5 percent will not be met. The projections suggest a BHC50 child poverty rate of 12.6 percent ± 1.3 percent in 2020/21.

These projections assume no other policy changes.

Non-Income measure: Material hardship

Figure 6 - Proportion of children in households experiencing material hardship
(Stats NZ)

What does this show?

Stats NZ figures show that, since 2017/18, this measure has decreased by 2 ppt, likely in part because of the Families Package.

What do we expect to happen?

The 2019/20 rate for material hardship is 11.3 percent ± 1.1 percent. This rate is close to the 2021 material hardship target of 10.3 percent but it is difficult to estimate what will happen for 2020/21 rates.

Material hardship is affected by many factors, including income, household costs and other non-financial support. This means it is hard to predict how rates will be affected by different policies. Therefore projections are not possible using the Treasury's model.

Notes

  • [28]Access to the data used in this study was provided by Stats NZ under the conditions of the security and confidentiality provisions of the Statistics Act 1975. The results presented labelled as Projections are the work of the Treasury, not Stats NZ.
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