What does this mean for our goals of reducing child poverty?
To estimate what will happen in the next five years, the Treasury projects the most recently reported child poverty rates into the future based on key income support packages and forecasts of the economy. Future household incomes and poverty levels depend on expected changes in wages, self-employment, interest rates, the cost of living, and welfare payments, along with many other economic indicators such as the employment rate.
The modelling is best expressed as a range, based on a 95 percent margin of error. This range accounts for survey sample uncertainty but not uncertainties related to economic forecasts, the take-up of welfare payments, or lags in the administrative data used in Stats NZ's reported rates. As with all forecasts, uncertainty increases the further we look into the future. Relative poverty indicators, such as moving-line BHC50, are particularly sensitive to changes in the economic outlook.
Progress towards the second intermediate targets
The changes to Working for Families and child support, and the cost of living payment will help keep many families and whānau out of poverty and will increase the income available to all low-income households with children.
We estimate that the impact of current economic forecasts and recent policy changes will result in fixed AHC50 child poverty rates of 16.4 percent ± 1.5 percent in 2024. The target for 2023/24 is 15 percent, which will be met based on current data and forecasts as it falls within the margin of error.
The projections suggest that relative BHC50 child poverty rates will be 12.9 percent ± 1.4 percent in 2024. The target for 2023/24 is 10 percent, which will not be met based on current data and forecasts without further policy changes.
Looking forward, our plan for reducing child poverty and meeting our ten-year targets is based around making progress in three key areas: increasing incomes for families, reducing housing costs and other pressures on low-income households, and changes to support the wider wellbeing of families.
Work to overhaul the Welfare System is ongoing, along with addressing further recommendations from the Welfare Expert Advisory Group. As part of this, we're continuing to work on the Working for Families review to see how we can better support families and whānau on the lowest incomes through these payments.
The Treasury's model cannot estimate material hardship, which is affected by many factors, including income, household costs and other non-financial support. We do know that it can reduce with government policies directed at low-to-middle income households but increase with the cost of living. Material hardship has been trending downwards, but it is too soon to say if we will meet the 2023/24 target.