Future child poverty trends are driven by economic conditions and policy changes
2021/22 and 2022/23
We expect decreases in the moving-line BHC50 measure in 2022/23 as many low-income families and whānau gain from changes to benefits, Working for Families, and child support payments being passed on. In contrast, we expect that there will be an increase in fixed-line AHC50 poverty in 2021/22 because of increases in the cost of living. If the cost of living increases faster than incomes do, then this type of poverty increases.
The material hardship measure is affected by many factors, so it is hard to predict how rates will be affected by different policies. We expect that the Budget 2022 initiatives will help, but material hardship rates are also sensitive to wider economic conditions, including inflation. The net impact of these changes is likely to result in a flattening out of material hardship rates for households with children in the coming two to three years.
The Treasury's modelling predicts that fixed-line after-housing cost poverty will steadily decrease as incomes increase faster than the cost of living. Income increases are expected to come from a combination of policy changes and wage increases.
Despite these positive impacts, without further policy interventions, the Treasury projections from 2023/24 onwards estimate that incomes at the bottom will increase, but that they will not keep pace with middle-income households. This leads to an increase in the moving before-housing-costs poverty indicator, which tracks how many households have much lower incomes than middle-income households.
Source: The Treasury
In 2023/24, the incomes of most low-income households are expected to increase by around 7 percent because of wage and welfare increases, but many middle-income households will also have income from interest on savings. In 2023/24 and 2024/25, the Treasury is forecasting that interest rates will increase substantially leading to an increase in middle incomes that will increase the moving poverty threshold by around 8 percent in 2023/24, faster than low-income households. This means that the upwards trend will be driven by increases in the median, not by a lack of increase in the incomes of low-income households.
After-housing costs, fixed-line measure
How many households have very low incomes relative to previous years, after considering housing costs and increases to the cost of living?
Before-housing-cost, moving-line measure
How many households have much lower incomes than middle-income households?
Sources: Stats NZ, The Treasury
How many households do not have access to the essential items for living?
Source: Stats NZ