Flying blind into the recession

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Prime Minster Chris Hipkins has acknowledged that working families are really struggling.  Cost of living issues are out of hand.  Minister of Finance Grant Robertson has signalled a recession is on the way. Worse still it is in a time of high inflation.

Working for Families (WFF) is the major way NZ children are supported to ensure there is sufficient income for children in low and middle income families to live free of poverty. 

But as a recent letter to the Herald suggested, it is time to name it more honestly.


Lets just call it NOT Working for Families (NWFF). The govt had nearly 6 years in which to reform NWFF.  All we have seen are some over-due and inadequate inflation adjustments and an unconscionable rise in the abatement rate to 27% from a fixed household income of $42,700.

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These tax credits need to be a secure cushion of income for families when hard times strike.  Instead, in this recession, after just a two week grace period, when a family loses paid work, the NWFF cushion will become a hard landing and will be cut by at least $72.50 a week—with an extra $15 cut for each child in larger families. This cut will occur even if no welfare benefit is accessed.

Since 1 April 2021, you can keep receiving the in-work tax credit for up to 2 weeks when taking an unpaid break from work. This could be either as you transition between jobs, are unpaid for a period, or leave employment. If you’re taking an unpaid break from work, you’ll need to notify IR to ensure your IWTC payments continue. The best way to do this is through myIR.(IRD website)

And woe and betide the family that doesn’t realise they no longer qualify. They will have to repay any over-paid payments. NWFF debt to IRD continues to rise.  

The payment of at least $72.50 is grossly misnamed the In Work Tax Credit. It should be called the Child Penalty for Poverty (CPP). It has nothing to do with being a work incentive. When low-income families in this recession find they need the support of a welfare benefit, it doesn’t matter if they obtain some part-time work and get only a part of a benefit, they still are denied this payment for their children.

How insulting to imply that families in this coming recession who lose work need a work incentive.

In this recession, if families, already overwhelmed in the aftermath of Covid and the cost of living crisis, have one parent lose their job, that parent may have no recourse to any welfare benefit. The crazy couples-based welfare system has also not been fixed in five and half years as the government toyed with an unworkable social insurance scheme.

Increasingly it is not just those on benefits who cram into social agencies seeking help.  Too many families in paid work face impossible clawbacks from low income levels.  How ironic is this for a scheme that purports to be about helping working families with work incentives? As Chris Brown says in his letter, they lose a very high percentage of income they earn over the low fixed household income level at which their family assistance reduces.  This is doubly cruel as any increases in income to compensate for inflation is simply taken back or creates debts that must be repaid. 

Urgent actions to prepare for the coming recession MUST include at bare minimum

  • Renaming NWFF to reflect the needs of children, not paid work. 
    • Until the needs of children are put at the centre the poorest children will continue to miss out
    • Add the offensive CPP to the first child entitlement so there is just one WFF payment. This would mean at least $72.50 weekly more for one to three children, and more for extra children in the worst-off families in the benefit system. The cost is around $500m pa, but would be highly cost effective in reducing poverty and remove discrimination on benefit/work status.
  • Index all aspects to wages annually (and to inflation where it exceeds wage growth) as is the case for NZ Super. 
    • Also increase the threshold at which WFF starts to reduce to restore the real value last set in 2018. In 2022/23 it should be at least $50,000.
    • Reduce the abatement rate from 27% to 20% as it used to be until it was ratcheted up by National.
  • Make welfare benefits accessible on an individual not a couple basis

Lets not hear that ‘we cant afford it’ or that it will add to inflationary pressures. New Zealand has a very low level of government debt. If we can siphon of $2 billion a year for the New Zealand Super Fund, we can support our low-income families in the recession. Please don’t fudge this issue by saying there is a review going on- after over five years it is wearing thin.




61 COMMENTS

  1. I think the biggest problem with WFF (or NWFF) is that it’s simply a subsidy for employers who can’t be arsed paying a decent wage. No need for social responsibility – just pay the peasants you hired the bare minimum and the government you constantly whine will top it up so you won’t have to suffer the indignity of shaving an additional 2% off your gross margin.

    I’d much rather see the government building on it’s good work (pun intended) with fair pay agreements to really raise the bar when it comes to setting a realistic, liveable minimum wage and a decent tax-free threshold.

    • I am sorry Luke but this is the way that that the government gets let off the hook and nothing changes. Every developed country helps with the extra costs of children and low income wages would have to be impossibly high without NWFF to meet the needs of families, while being far too high for those without children. Australia is much more generous with family tax credits than NZ even though it has a tax free threshold and 10% GST not on basics

  2. Eyes wide open would be more correct. But then do the Haves – the ones that run our country in government, media and corporate actually care? Surely there will be coin to be made.

  3. I was stuck at the front of a road works queue a couple of weeks ago, so started chatting to the kid holding the stop/go sign. He said he was earning $37 an hour. He’d even been provided with a plastic chair so he didn’t have to stand up all day!
    I don’t know about the rest of the country, but there are lots of jobs like that around Auckland, so the minimum wage is largely irrelevant. Meanwhile nationally there are over 380,000 people of working age on the dole. We cannot carry on like this.

      • Great link! Thanks
        I read somewhere that the average pay in Aussie is 90K AUD. Way higher than in NZ. This is because Aussies, despite the many problems due to climate and geography, makes better decisions than us. They don’t have an RMA that prevents mining and process industries and these feed the nation. They are more positive about economic development.

        • They also have the minerals to mine in massive amounts. They also have controversy over coal so fossil fuel exports is not a sustainable way to earn income in the future so NZ has been an early adopter of that idea.

          • There would certainly be a lot more controversy, if the various Australian states had to replace the revenue that mining brings in. Increased taxes or decreased services? Or more likely both.

          • Well gagarin your choice to believe me or not.
            I think a minimum of $40 per hour merit’s advocacy not criticism.

            • bob the last your MO is to trumpet anecdotes you can’t back which demands other posters ask for the evidence…which you invariably cannot produce

        • One person who is in “association” with business. Whoopdefuckingdo! In my association with business they pay minimum wage or the least they possibly can!

          Can you enlighten us more by what type of business, or is this just more Bob the Last one liner bullshit?

      • WFF works pretty good once you are out of the big cities – the real question is why should the rest of the country subsidise Auckland – you chose to live there – as a south islander I’m fed up listening to whining Aucklanders who use their political clout to get us to subsidise light rail , bike ways , bridges and buildings . Independence for the South Island and make Wellington pay for the 600 mw of free power shipped there – perhaps they can pay the carbon equivalent of 3 million tons of coal to replace that power !

        • No it doesn’t work out of the big cities either and is not just an Auckland problem. Have you been following regional accounts of excess demands at foodbanks and for budgeting services ?

    • Oh yeah, there’s lots of jobs… in China!

      Auto industry gone, electronics industry gone, clothing industry gone, refineries gone, most toolmaking & machine building gone, half of the mining industry is gone, construction industry can barely get anything built, now the manufacturing grocers are leaving… it’s so easy to make money as a worker, isn’t it!

      Never mind that all the jobs were destroyed on purpose, so Wall Street could make a killing running foreign sweatshops. And the politicians take their cut.

        • Definitions…

          “We define an unemployed person as someone who:
          -Has no paid job
          -Is working age
          -Is available for work, and
          -Has looked for work in the past four weeks or has a new job to start within the next four weeks.”

          Keeps the numbers low, as 1 hour paid work counts as a job and many people just give up looking if they get too many knock-backs.

      • Yes, the auto industry is gone. But you want to bring it back again by giving China exclusive rights to manufacture and supply 100% of our new car requirements here in New Zealand by allowing them to set up a factory with them using their capital in return for, maybe, free land and tax breaks China for the 2022 year produced 7.058 million cars. Our new car registrations were 116,800 – sincerely, what makes you think they want to sink their capital here to build a minuscule amount of their production. Not only that, if the Chinese did accept your suggested offer, which car brand will they build the factory for – China apparently has hundreds of brands. Even Stephen Minto is not sure it is good to bring back heavy manufacturing to a country of 5 Million.

        • @Thomas:
          Mate, you’re trying to tell us no businessman in the entire world wants $3.2Bn per year in guaranteed sales, when all he is doing is taking over from the old factories we already had? And he now gets to sell over 4,000,000 vehicles, since the entire fleet must be electrified?

          Even little old Serbia and Croatia still have an auto industry. I suppose they should demolish them, and milk cows instead!

          • It would appear your $3.2Bn of sales is to replace the entire NZ fleet of 4 million cars (?), which won’t happen overnight. Not everyone is going to replace their car with a new one. At new car sales of around 120,000 annually, it would take 33 years to fully replace the fleet with new vehicles. Meantime over 33 years, China will have produced another 233 million cars. Why bother with little old New Zealand when based on our stastistics, you’re only going to sell 120,00 annually out of production at home (China) of 7,000,000 annually. Serbia and Croatia may have an auto industry, but they produce for the European market on their doorstep and produce on behalf of European brands…

            • The almanac I consulted quoted $3.2Bn in total auto imports for 2019.

              In 2019 dollars, the sales of the new auto factory by 2050 would have reached $89.6Bn.

              Let’s say, like in the U.S. & Canada, every gasoline/diesel auto must be replaced by 2050. And that, like Norway, you ceased sale of non-electric autos in 2025.

              That requires EV production of about 143,000 per year. Total annual auto sales in 2019 were 149,600.

              This is the same level as the combined production of Ford Broadmeadows, Ford Geelong, Holden Elizabeth, Holden Port Melbourne, and Toyota Altona — 6,600 employees.

              • What proportion were new (this is what you want the Chinese to produce) and what proportion were used? And if every car on the road had to be electric by 2050, who is to say the majority won’t be used imports. After all, the majority of people cannot afford a NEW car. If you think this is such a great idea, why don’t you talk to the appropiate government minister, local distributor CEO of a Chinese brand or the executives at Todd Corporation – who were the last assembling CKD kits (Mitsubishi) I believe. Remember, it’s not the Chinese government per se that will be building your desired factory, but one brand – which of them want to take a punt. You are correct that government policy interferred so much with Australian car production that it ceased. Assembling cars here in New Zealand again will require protectionism that the New Zealand public may not accept (does everyone want to buy a Chinese brand) or government subsidies – do all taxpayers want to subsidise those that buy a NEW car? What is your response to Stephen Minto’s observation that he doesn’t think heavy manufacturing will work in a country of 5 million people…

                • It would be the Chinese government who would build and operate the factory — they have TWELVE state-owned automakers. These SOEs are producing vehicles for Mercedes, BMW, VW, Ford, GM, Renault, Toyota, Honda, Nissan, Hyundai and Mazda. One SOE now owns MG Rover, and every company has their own auto marques.

                  The local industry used to produce over thirty different auto marques under licence. Contract manufacturers usually produce multiple makes.

                  There were tarriffs which made used auto imports uncompetitive at that time.

                  It would be considered a major soft power victory for China. The Chinese government are already directly investing in a huge number of countries (even Tonga!), as she tries to build a large international alliance.

                  Donald Trump proved that Import Substitution has mass support and is a clear election winner. He ran on reintroducing tarriffs, and this was also popular.

                  • This thread could go on forever, Kristoff – as I say, why not reach out to someone that can make your thoughts happen. As a matter of interest, Porsche have opened up a “green’ (no emmissions) trial petrol plant as a trial in Punta Arenas, Argentina. ICE may not be dead yet. Cheers, Thomas

      • You only have to go out shopping and have a coffee at the mall to see the staff wanted signs .I am 75 and have been rung a few times to see if I can work in the kitchen as they have no one to back up when covid strikes
        Many of those roles you mentioned were not viable in this free trade market .Rocket lab is a great example of where we need to head well paid jobs and a growing market.

  4. Working for families was primarily intended to “encourage” parents into the workforce, and also provide a subsidy for low paying employers, it was never intended to be a family benefit.

    • Michael Robinson. You are so right. Misnamed from the beginning and clearly NOT a work incentive. CPAG spent ten years in the courts and one of the things that was established was that the IWTC is a payment for children as is the whole of WFF tax credits. It is time to see that WFF is actually about adequate support for children so they can be thriving members of society. Australia doesnt confuse the issue with its Family Tax Credits– no mention of work incentives or criticism that these child related payments allow employers to pay less.

      • Investing in children, is an investment for a more positive future & it is an investment that pays significant dividends. Sadly we as a country, seem to prefer investing in prisons and importing fully grown & “trained” work units to build our society.

  5. Well put as ever Susan. How to get cut through on this seems as elusive as ever. A class left focused NZCTU might help, so it was pleasing to see Secretary Melissa Ansell Bridges speak out this week.

    In real terms it is the continuation of an almost 40 year “War on the Poor” started internationally by the Chicago School, Reagan & Thatcher, and soon enough picked up by Roger Douglas, Ruth Richardson and nearly every NZ State Sector top, official and academic since.

    There must be winners and losers in this monetarist neo liberal world–especially losers with bad, recalcitrant attitudes! The second tier COVID benefit was a classic example of this twisted thinking. Working class people approaching MSD for assistance with a partner in work would be shown the door promptly–but not the middle classes–oh no, these wee lambs did not have to endure nasty case managers and the rest of the sadistic WINZ regime.

    I have previously resisted the concept of middle and upper class MPs being part of the problem–multiple property owning professionals of some sort or another. I now think it is actually a factor in an obvious disconnect, our legislators largely live in a different world. Michael Wood and Willie Jackson are excused.

    • thaks for this comment. I am in despair that Labour cannot grasp what they should do in these fraught times for families. Charity is assumed to be able to pick up the pieces.

  6. This article is a stark reminder of how out of touch this Labour government is with
    what is supposed to be its core supporter base . I know of 2 people I used to work with who got a pay rise but finished up worst off as they lost the support they were getting from the state .
    This shows up a problem from 2 sides .On one side is the State is supporting business owners by way of a subsidiary to allow them to pay low wages on the other side it is hard for the worker to get out of their dependancy on the state .
    The only way I see out of this problem in the long term is improve education work harder at getting all young people to a higher level of education so they can earn more . This is what Singapore did and it could work just as well in this small country.

    • The answer me old Trev, is s-s-s-socialism–but…but…that is socialism! Well yeah, it is.

      Your beloved Natzos are only going to queer the pitch further for NZ working class people.

      • After the next election I hope to get the chance to see how National perform in the hot seat .I will be happy to agree with you if there is no improvement in the lot of the working class .

    • Trevor
      And families having enough money to feed their children is fundamental to better educaiton outcomes

      • Feed them at school then you know where the money goes . I am not a benefit basher as the majority do the right think by their children but not all and it is these that need the most help to escape the cycle of poverty.

    • Singapore has an ethnicity that values high education and there is encouragement at home – that’s why people here of such ethnicity outperform our own…

  7. While there is logic in what you write & I do want to see working New Zealanders (including beneficiaries) prosper all we are doing is rearranging the deck chairs as the saying goes. WFF & the Accommodation Supplement are just a subsidy for employers & landlords that keep unproductive jobs & overpriced homes solvent. We have a major problem with productivity per hour worked for many jobs & society does not value many of the care or service jobs that are classed as low-skilled (ie rest home workers & supermarket workers) yet is happy to well reward almost all with a bit of paper to say they are qualified even though the quality of their work can vary.
    While dairy owners/workers should be able to work safely & not be subject to criminal attacks the idea that a business should be mostly based on selling addictive products to sick people seems daft. The big food industry is just as bad as the most profitable products are usually all unhealthy the more people eat, this rewards increased selling of unhealthy food that makes the population sicker which increases the health cost where taxpayers pay the cost while owners of businesses get increased profit. A sugar tax should exist along with some sort of a vice tax to reverse that imbalance.
    Actually creating productive jobs that enable job satisfaction is a bigger problem but that is no reason not to start looking at the options.

  8. Using government funds to compensate for atrociously poor wages — the fault of crooked bosses — is completely ass-backwards.

    The way this was supposed to work is the Arbitration Court would rule on whether all wage rates in each Industrial Award were high enough to be a “basic wage”.

    As Justice Higgins put it, “fair and reasonable” meant a wage that can support a family of five in “frugal comfort”, and able to support daily life “in a civilised community”.

    Once union membership became compulsory, it also meant that an entire industry could walk out on strike, if that promise was ever broken.

    The Full Employment Policy, which had eradicated unemployment, meant that there were no people that could not access the basic wage. High wage, increasingly skilled jobs producing complex goods were widely available.

    • But this is not the approach what works in a modern economy where two parents working is the norm. A minimum that meets the needs of the family of five is too much for a single person no children and not enough for the a family of 7

      • @Susan:
        Thanks for the excellent information in your article.

        I certainly agree that we could do with many more families of 7 (or larger!).

        To maintain an equivalent living standard, the basic wage would need to incorporate the cost of childcare and other domestic help — if the homemaker is forced into wage labour all day, her living standard is collapsing if she is not compensated for the additional burden.

        So perhaps the solution is a combination of the two: 1. A reinstated Industrial Award System must include basic wage judgements that incorporate a detailed “better off overall test”; and 2. The government should raise the birth rate using financial incentives for large families.

  9. Yes, the auto industry is gone. But you want to bring it back again by giving China exclusive rights to manufacture and supply 100% of our new car requirements here in New Zealand by allowing them to set up a factory with them using their capital in return for, maybe, free land and tax breaks China for the 2022 year produced 7.058 million cars. Our new car registrations were 116,800 – sincerely, what makes you think they want to sink their capital here to build a minuscule amount of their production. Not only that, if the Chinese did accept your suggested offer, which car brand will they build the factory for – China apparently has hundreds of brands. Even Stephen Minto is not sure it is good to bring back heavy manufacturing to a country of 5 Million.

    • Gagarin, it’s all about economies of scale. China indeed does export CKD kits – for instance the Phillipines (113m people) and Russia (146m people). We only have 5m people. Further it’s not China per se that would build a car assembly plant here, but a Chinese manufacturing brand. For instance GWM/Haval or MG. While their sales are increasing, is it worth them building a factory here for a minuscule share of a market of 120,000 new cars a year?

  10. there’s the old toyota assemnbly plant in the hutt(well if it hasn’t been demolished) and we are talking assembly of kits.

    • You are not addressing the economy of scale issue and even if the old plant is there, it would need massive refurbishing. What one Chinese car maker wants to do that. If this is really such a great idea, why don’t you get in touch with either to appropiate government minister or talk to the executives in Todd Corporation, who were probably the last people assembling CKD kits – Mitsubishi’s I think – or talk to the local CEO distributor of one of the Chinese brands on sale here. Sincerely, it’s no use banging on about ideas unless they can be shown to be workable and worthwhile to those putting their capital up….

    • Did you read the article – explains why it’s probably not a worthwhile option anymore – for anyone, Chinese or not…

  11. we could be a gateway into the auz market (much as the UK used to be for carimports into the EU) that circumvents the aussies ingrained racism…hell we could stick an nz badge on them

    • Why would anyone build a car assembly plant here to also supply Australia, whereas they (say the Chinese) already supply Australia direct from their existing factories in China….

  12. Some will recall the yellow billboards at the Sydney Football Stadium and Sydney Cricket Ground in the 1980s: “The All-New Honda Civic by N.Z.M.C. — Out Now!”

    How did that happen? Both countries had tarriffs, import substitution, and a domestic auto industry. However, Australia never had a Honda factory, so Civics could be imported from Nelson (probably under a bilateral trade agreement).

    Who were the investors? A combination of the Japanese (who could either have some sales in Australasia from licenced manufacturing, or no sales at all), and local investors who built the factory.

    The economy of scale issue only matters for exports, not domestic production — because once the tariff wall is up, everyone must buy local (unless they want to pay a very high price). Of course, we know that local production is already possible at that scale, because it already existed before.

    The solution for exports is to produce high-end, complex goods in those same factories. If I buy a Rolls-Royce or a Ferrari, these are produced in high-wage countries, in very small production runs, usually in small facilities. I don’t care that the price is higher — people buy high-end goods because they are the best in the world, using the very latest technology.

  13. Kristoff – all points to be considered. But if you read this article also posted in response to Gagarin, you will note tariffs which protected CKD car assembly here were abolished in total by the late 1990’s making such uneconomic. For your idea to work, tariffs would have to be introduced again. Two points – would the public be happy with “protectionism” tariffs again and how would such tariffs affect any FTA’s we have. Your idea also required that one country be given total new car manufacturing rights in New Zealand. If China, do all New Zealander’s want to buy Chinese cars? Would new cars be able to be imported completely built from other countries (your Rolls Royce)? Would the Chinese want to invest in a factory if you were able to import new cars from other countries – sort of takes away the monopoly from them reducing the chance to make a killing. Who would want to invest in a new factory when the tariffs could be removed as before? Did you consider Stephen Minto’s observation that he doesn’t believe it’s worthwhile for this country to enter heavy manufacturing again – in a country of 5 million? That’s where this whole thread started off from. https://en.wikipedia.org/wiki/Automotive_industry_in_New_Zealand

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