The targeted fuel relief plan signals a government determined to spend carefully. But is $50 a week for 143,000 families enough, asks Catherine McGregor in today’s excerpt from The Bulletin.
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Relief for ‘the squeezed middle’
From next month, 143,000 low-to-middle-income working families with children will receive an extra $50 a week via a boost to the in-work tax credit, offsetting the financial impact of skyrocketing petrol prices. Finance minister Nicola Willis described the package as “carefully targeted to families in the squeezed middle – parents who are working hard for a living, are not eligible for main benefits, and yet have modest household incomes.” The income threshold currently stands at around $89,000 for a family with one child, $112,000 for two children and $135,000 for three.
As RNZ reports, the package excludes beneficiaries and superannuitants. To households that miss out, Willis offered a consolation: “If it’s not you getting the support today, just know it might be your friend, it might be your family member, it might be the person serving you at the cafe today.” The opposition says that’s not good enough, 1News reports. Those missing out “will be asking ‘What about us? What’s coming for us?’” Chris Hipkins said, while the Greens said the package “fails to meet the crisis”.
Three Ts and zero Covid
Writing in The Spinoff, Toby Manhire notes the elaborate care with which Willis and Luxon distanced themselves from memories of Jacinda Ardern’s daily 1pm Covid briefings: the press conference was held in the Beehive Banquet Hall (not the Theatrette), at 12.30pm (not 1pm), “with a sober brown curtain as backdrop and nary a New Zealand flag nor yellow stripe in frame”. The reason for the anxiety, Manhire writes, is clear enough: “After all, the Covid response and its cost-of-living exhaust fumes are blamed daily for the fiscal abominations the National-led government inherited.”
What was invoked, and often, were the three Ts – timely, targeted, temporary – that the government is relying on to describe its fuel crisis intervention. The Ts were referenced so often that Manhire began to wonder whether the trio might “walk out to join Willis and Luxon on the podium, anthropomorphised, perhaps, as giant melancholy kiwifruit.”
The Fitch sting
At the press conference, Christopher Luxon pledged there would be no “untargeted, open-slather money bazooka fired around” while Willis stressed the package added no debt, pointing to credit agency Fitch’s recent assessment as one reason for restraint. As Jonathan Milne writes in Newsroom, Fitch kept New Zealand’s rating at AA+ but shifted the outlook from stable to negative, putting us in “unfortunate company”, says Milne: In the past 12 months, only Indonesia, Hungary, Thailand and Poland have been placed on negative outlooks. Willis framed the assessment as a “reminder” of why fiscal discipline matters; Milne’s reading is that it is “arguably … actually a direct criticism of her lack of fiscal discipline.”
Tuesday also saw a much-anticipated speech by Reserve Bank governor Anna Breman. Milne says she changed her planned speech in order to address the Iran crisis directly – a signal of how seriously the bank is taking this moment. In a rare incursion into politics, she aimed a pointed message at the government: “fiscal policy, not monetary policy, is best placed to provide targeted support to households who are the most vulnerable to price increases.” Willis has now made a step in that direction.
What it means for interest rates
Writing in The Spinoff this morning, Joel MacManus looks at how the crisis may affect the broader economy, and mortgage-holders in particular. Since the war began on February 28, the three-year swap rate has jumped from 3.19% to 3.93% – a sign that the market has effectively priced in three OCR increases in under a month. If the market is right and interest rates do rise sharply, NZ’s nascent economic recovery will be quickly snuffed out.
Not everyone agrees the OCR needs to move: Kiwibank’s chief economist Jarrod Kerr has written that he “completely disagree[s] with market sentiment,” seeing hikes as “infeasible” given the “immense demand shock” the oil crisis is bringing to the NZ economy. Breman appears to share that reluctance, at least for now: “tightening monetary policy in response to a short-lived disruption would only dampen growth without materially improving near-term inflation outcomes,” she said on Tuesday.
“In other words,” writes MacManus, “if we cross our fingers maybe the war will resolve itself and the petrol price spike will just be a blip.”
