Aimed at the ‘squeezed middle’, it will help 143,000 families, but beneficiaries miss out.
In responding to an energy crisis that has pulsed out around the world since the US and Israel began – per Donald Trump – “bomb[ing] our little hearts out”, New Zealand has had moments of Covid cosplay. We’ve had a four-stage alert level system explained to us, but this time it’s fuel. Instead of cases in the community, briefings have led with the number of days of petroleum in the community – and at sea. At least two news outlets yesterday ran the search-engine-optimised headline atop their sites for much of the morning, “How much fuel does NZ have left?” (49.9 petrol, 45.5 diesel, and 44.7 jet fuel, since you ask).
But as emergency mode is engaged with that fleet-of-five-million energy, and as the Strait of Hormuz shoots to the top of the list of Roads of National Significance, Nicola Willis – flanked variously by Christopher Luxon and Shane Jones – has been keen to emphasise the ways in which they’re doing things just as very un-Covidly as you can possibly imagine. After all, the Covid response and its cost-of-living exhaust fumes are blamed daily for the fiscal abominations the National-led government inherited. That stuff is high-octane kryptonite.
So as Willis and Luxon arrived today to the cluster of microphones assembled in the Beehive Banquet Hall (not, please note, the Beehive Theatrette) at 12.30pm (not, please note, 1pm), we could predict with some confidence what the fuel crisis support package would not be. The measures, trailed as “timely, targeted and temporary”, must not have the air of a nanny state, and must not have the shimmer of Labour packages past. It would not be a wage subsidy or a fuel excise cut; it would not be a winter energy payment, nor, god forbid, the much derided $350 cost of living payment.
Speaking with a sober brown curtain as backdrop and nary a New Zealand flag nor yellow stripe in frame, Willis and Luxon accordingly conjured about as many references to the perceived folly of the Covid response as they did to those T words. Timely, Temporary and Targeted were invoked so many times that I began to wonder if the trio might any minute walk out to join Willis and Luxon on the podium, anthropomorphised, perhaps, as giant melancholy kiwifruit.
In fact, the three Ts took the following form, as laid out by Willis: “From next month, 143,000 low- to middle-income working families with children will get an extra $50 a week in their bank accounts.”
Timely, of course, because petrol prices have surged in response to war in the Middle East.
Targeted? The government is using the in-work tax credit, which will increase by $50 a week to $147.50. That credit, currently paid by Inland Revenue to those 143,000 families, offered “a simple mechanism that will work”, said Willis. It goes to families with dependent children where at least one parent is in paid work but neither parent claims a benefit. The threshold for receiving the credit – which forms part of the Working for Families scheme introduced by the Helen Clark government – currently stands at about $89,000 combined income for families with one child, $112,000 for those with two children and $135,000 for those with three.
But that $50 boost won’t be forever – come in, Temporary! – and should 91 octane petrol drop below $3 for four consecutive weeks (or after a year), it’s gone.
Willis stressed that the package, costing $373 million, would be covered by the operating budget of the 2026 budget. “We will not be borrowing any more than was previously planned to deliver this,” she said. “Funding the policy this way will not add to forecast debt or inflationary pressures.” It is highly unusual for governments to trumpet a downgrade in national credit rating, but here, as in recent days, Willis pointed to the weekend’s grim outlook from Fitch as providing further fuel, as it were, to the fire for budgetary prudence.
Other measures were being considered, but the trouble was that “big increase of debt incurred in the aftermath of Covid”, she said, before taking a flick, one of many, at “reckless decisions that harm the future”.
Luxon warmed to the theme, pledging there would be no “untargeted, open-slather money bazooka fired around”. It was about achieving a balance between support for those who needed it and long-term fiscal responsibility, he said. “It’s a constant balance between those two things, where we’re pragmatic, practical, calm, doing the planning, doing the thinking in place, but we’ve got to have those river banks and those criteria in place.”
Asked why there would be no support offered to beneficiaries, Willis pointed to the 3.1% rise in welfare on April 1 – which amounts, for JobSeeker, to an extra $11.23 weekly. “I’d also note,” she said, “working families face the obligation to get to and from work each day. Beneficiaries do not face that obligation.”
Speaking of timely, another big speech today provides some context for the Willis-Luxon Not-Covid show. And I don’t mean the surprise press conference from the Act Party, the announcement of which sent its own energy shock through the parliamentary precinct as speculation circulated that David Seymour might be chucking it in. In fact, it was his deputy Brooke Van Velden announcing that she taken the very strange and admirable decision to end, for now at least, her parliamentary career. It’s a remarkable moment, but it didn’t affect Luxon and Willis much, apart from the shock of realising that National might after all win Tāmaki, leaving even fewer list seats available to the big beasts.
No, the companion piece was from Anna Breman, the new governor of the Reserve Bank. She spoke to CEOs in Auckland at 2pm, but her address had been published earlier in the day. Breman’s theme was the Iran war and the “global shockwaves to Kiwi shores”. She began by noting that “we are likely to see higher headline inflation over the near term, and somewhat weaker growth momentum”.
Those remarks, uncontroversial as they are, hint at the broader challenge for Willis and Luxon. It might be a fuel crisis, but the prices it impacts go far beyond fuel. In just about every part of the economy, fuel is a line in the budget. Litres of diesel are poured into farming and manufacture, in getting the stuff from the warehouse to the store. And that’s before you get to fertiliser, shiploads of which travels from Saudi Arabia to New Zealand through the Strait of Hormuz – or used to.
“Events in the Middle East,” said Breman, “will influence the New Zealand economy through disruptions to trade, financial markets, and elevated uncertainty.” She laid out three types of impact. There were “direct effects from an immediate change” – increase, that is – “in the prices of goods facing shortages of oil and gas, such as petrol and fertiliser” and “indirect effects from changes in the prices of other goods and services that use these directly affected goods as inputs.” And then there are “second round effects resulting from changes to medium-term inflation expectations and the growth outlook.”
“We should try to avoid reacting too early to near-term inflation pressures that monetary policy can do little about,” said Breman, but she and her monetary policy committee will be thinking hard about those second round effects as they eye up their independently determined interest rate decisions – decisions which, along with everything else, make this election year such a difficult one to navigate.
Breman further noted that “fiscal policy, not monetary policy, is best placed to provide targeted support to households who are the most vulnerable to price increases.” Willis laid out the first plank of that today, while acknowledging that there may need to be further measures in the months ahead. From a political standpoint, the challenge will be in persuading voters that the crisis is one made wholly abroad and the home-made response is enough.
