Documents proactively released by the Treasury have confirmed the government was made aware back in March that a cost of living payment was a risky move and unlikely to counter the impacts of inflation.
The $350 cash sweetener was the headline policy of the May budget and designed to help middle income earners impacted by growing living costs.
But officials warned that the untargeted payment would do little to help struggling households and could contribute to inflation.
“The Treasury recommends caution with progressing such a significant policy in accelerated timeframes, as there are significant risks associated with designing this proposal at speed,” the March 25 document, addressed to revenue minister David Parker and finance minister Grant Robertson, stated.
“While the current acceleration in cost of living is certainly resulting in an increase in hardship for a large number of lower-income households, a broad-based payment targeted based on individual income is unlikely to be the best way to provide of support to those who are struggling the most.”
Concerning factors cited by the Treasury included that inflation was expected to be widespread and persistent. “This makes a one-off payment a poor mechanism for supporting households with a longer-term problem,” the document said.
The possibility of using the money allocated for the payment on other government priorities, such as child poverty, was also suggested by Treasury.
The document concluded by saying that neither Treasury nor the Inland Revenue recommended a cost of living payment, and signalled that more targeted options had already been raised by the Ministry of Social Development.