Supporting New Zealanders with the cost of living
Constrained supply chains as a result of the COVID-19 pandemic and geopolitical tensions, including the ongoing war in Ukraine, continue to affect the day-to-day lives of many New Zealanders due to their effect on prices in our economy on essentials like fuel and food. Persistent high inflation means low- and middle-income households have been under pressure, and although wage growth is forecast to outstrip inflation in coming years, ongoing targeted support is required.
The Government has already delivered significant support through the rise and peak of inflation, including via the Cost of Living Payment, reductions to fuel excise duty and road user charges, and half-price public transport. In addition, since 1 April 2023 more than 1.4 million New Zealanders have benefited from increased assistance to help with the cost of living – including families, people receiving main benefits, students and superannuitants.
For Budget 2023, we have focused on targeted cost of living support that will not unnecessarily exacerbate inflation pressures, and which will take pressures off Kiwis in their everyday lives.
Backing parents with young children
The early years are a very important time for children’s brain development, providing the foundations for positive life outcomes, including lifelong learning and wellbeing. Cost should not be a barrier to parents wishing to enrol their kids in Early Childhood Education (ECE). Supporting parents to do this is not only good for their children, but positive for the economy as well, by providing parents the ability to enter or re-enter the workforce. Budget 2023 provides greater support for parents to access ECE, and support for the education sector to provide quality services to the children they teach and care for.
Extending the 20 Hours ECE Subsidy to two-year-olds ($1.2 billion total operating). Access to quality ECE is important for education and wellbeing outcomes for children, while also representing a significant cost on households. Through Budget 2023, the 20 Hours ECE Subsidy is being extended to two-year-olds (from the current three- to five-year-olds). Based on average costs in 2023, families who were not previously receiving childcare subsidies would save an estimated $133.20 a week in childcare costs if a 2-year-old child attended ECE for at least 20 hours a week.
This funding will also reduce the ECE service fees that parents and caregivers pay by increasing the subsidy rate by 4.6 percent. These measures will help parents, caregivers and families to manage their living costs, while also enabling greater access to ECE where cost has previously been a barrier.
Working towards pay parity for teachers in education and care services ($339.3 million total operating). There is currently a pay gap between certificated teachers working in education and care services and their counterparts working in kindergartens. This is the third tranche of funding to deliver pay parity to help attract and maintain high-quality teachers in education and care services.
- Cost adjustment for ECE services and a sustainability grant for Playcentre Aotearoa ($260 million total operating). Similar to other sectors, the ECE sector is dealing with increased costs to provide current services. This funding will provide an average increase of 5.3 percent to a mix of full and partial early learning subsidy rates, which will help providers to manage the increasing provision costs and maintain quality and affordable early learning for children, parents and whānau. This funding will also provide a one-off $3 million grant to support the sustainability of Playcentre Aotearoa, an ECE service provided across New Zealand.
Access to childcare is an important factor for parents and caregivers to be able to enter or remain in employment, education or training. The Government funds targeted childcare assistance for low‑ to middle-income working families and whānau. From 1 April 2023, more families have been able to access Childcare Assistance due to a $189.4 million total operating investment to increase income thresholds for the Childcare Subsidy and Out of School Care and Recreation Subsidy.
The current childcare assistance system is administratively burdensome for both parents and providers as applications have to be submitted manually, and this is affecting the uptake of this support. In Budget 2023, we are investing $21.9 million total operating and $13.3 million total capital to improve access to and the take up of childcare assistance by delivering a new online application process for parents and making administrative changes to create a more efficient service for parents and providers. We are also expanding the eligibility criteria for Flexible Childcare Assistance (FCA), which supports parents with the costs of informal childcare outside of business hours, where formal care is not available. Changes also include extending the number of weeks people can use the FCA and indexing rates to the consumers price index.
On average, women have lower KiwiSaver balances and retirement income than men – with parenting representing one of the main reasons. In Budget 2023, the Government is enhancing the KiwiSaver scheme for parents ($19.6 million total operating). Through this funding the Government will pay a matching KiwiSaver ‘employer’ contribution to paid parental leave recipients. This recognises the unpaid nature of childcare and incentivises recipients of paid parental leave to save for their retirement. This is further support for parents wishing to take time off work during the first critical months of their baby’s life following the 2018 increase of paid parental leave to 26 weeks. Since 2016/17, paid parental leave maximum rates for employed and self-employed people have increased by 25 percent.