Wed May 17

NZ is finally making progress on child poverty – but a ‘no frills’ budget puts that at risk

Written by: Kate C. Prickett, Director of the Roy McKenzie Centre for the Study of Families and Children, Te Herenga Waka — Victoria University of Wellington

Budget 2023 marks “half-time” for the Labour government’s long-term child poverty targets ^[1]. It’s an ideal point in the ten-year project to take stock and see what’s worked and what hasn’t.

In 2018, Jacinda Ardern’s Labour coalition government was handed a mandate to address Aotearoa New Zealand’s high child poverty rates. This culminated in legislation requiring the government of the day to set both short-term (three year) and long-term (ten year) targets for four key poverty measures.

Various factors have influenced the outcomes so far: on the upside, high employment, a COVID-19 response that saved lives and livelihoods, and expansions to the social safety net; on the downside, the lingering impact of the pandemic, high inflation and unaffordable housing.

We might add to that a seeming lack of political appetite for bold change – the signalling of a “no frills” budget included. Ultimately, however, the hope is that what we’ve learned so far can guide future policy to hit those targets.

A nuanced story

The short-term targets came due in 2021, with mixed results. One important measurement captures the percentage of children living in households with income less than the 50% of the median household income, after housing costs are accounted for. This declined from 22.8% in 2018-19 to 15.0% in 2020-21, beating the target of 18.8%.

However, targets for the other two measures – household income before housing costs, and material hardship — were not met, or sat on the edge of the margin of error.

But focusing on only these measures masks a more nuanced story about who was helped – and who was left behind. In addition to these three key poverty measures, six other indicators ^[2] are routinely reported each year.

Poverty declined across all indicators. Moreover, some of the largest drops, in terms of the percent change from their base levels in 2018, were in measures of more severe poverty, and those that accounted for differences in housing affordability.

For example, those living in severe material hardship (not being able to afford at least half of a list of 17 everyday items, such as fresh fruit and vegetables or home heating) went from 5.8% in 2018 to 3.9% in 2022. That’s a 33% decline from the base level.

A similar decline occurred among children who were in both material hardship and income poverty, as well as for the key after-housing-cost measure.

Uneven trends

This is good news. Those in the most severe hardship and in deeper forms of income poverty were more likely to have been helped in the past five years. And poverty seemed to drop even after considering differences in family housing costs.

Across many of these indicators, too, the percent change from 2019 base poverty levels (when ethnicity data were first reported) was larger among tamariki Māori and Asian children when compared with European children.

To be absolutely clear, there are still large and unconscionable inequities in poverty rates between European children and tamariki Māori. But the poverty declines have been larger in absolute terms for tamariki Māori and have helped modestly narrow inequities across many measures.

The declines were uneven across certain subgroups, however. While declines in some measures have been larger for tamariki Māori compared with European children, declines were statistically insignificant for two of the key poverty indicators.

In particular, Pacific children experienced the smallest declines, and in three of the nine measures reported increases in poverty rates (albeit within sampling error range). A similar trend was found among disabled children and children living with household members with disabilities, although data reporting only began in 2020.

Taking the targets seriously

We’re not going to make further dents in child poverty without implementing bold support for those families being left behind:

working families teetering on the poverty line
Pacific families who may be less likely to qualify for support because they don’t have residency status, despite contributing to the economy and their communities
and families who may not be able to work, or whose work may be limited due to care needs, such as those with whānau with disabilities.

Alas, a “no frills” budget ^[6] this week feels woefully out of line with what is needed to keep the pedal down and meet those long-term poverty targets.

While the prime minister has said there would be “targeted support for those that need it most with the rising cost of living”, this hardly points to broader systemic change. If a cost-of-living crisis is seen as a short-term economic condition, deeper problems aren’t addressed.

More fundamentally, it goes against a key purpose of these targets: to have the government set goals and make budget decisions that show it takes these targets seriously.

If this or any future budget fails to project any impact on child poverty, those targets risk becoming nothing more than a Treasury spreadsheet exercise.