New Zealand hands out extra cash to combat the ‘inflation storm’
Wellington (Newzealand)- The government of New Zealand announced Thursday that it will give an extra few hundred dollars to more than 2 million low-income adults to help them navigate what it calls “the peak of the global inflation storm.”
The payments are part of a package of new government policies announced in the annual budget. Other plans include a record increase in health spending, increased investment in reducing greenhouse gas emissions, and increased defence spending.
A report by Treasury painted a rosy picture of the nation’s economy through next year but warned growth would slow markedly from 2024 due to rising interest rates, a reduction in the government’s pandemic spending, and supply issues made worse by Russia’s invasion of Ukraine.
A Treasury report forecast unemployment would hit a low of 3.1% this year before rising to 4.7% by 2026. It predicted inflation would fall from its current 30-year high of 6.9% to 2.2% over the next four years.
The 350 New Zealand dollar ($220) inflation payments begin in August and are aimed at the half of all adults earning less than 70,000 New Zealand dollars ($44,000) per year. The government also decided to extend some temporary measures to combat spiralling living costs, such as gas tax cuts and half-price public transportation fares.
“Our economy has come through the COVID-19 shock better than almost anywhere else in the world,” said Prime Minister Jacinda Ardern. “But as the pandemic subsides, other long-term and more immediate challenges have come to the fore.”
Ardern has been isolated at her Wellington residence this week after catching the virus. Her office said she’d experienced moderate symptoms and was improving, and at this point, she still planned to travel to the U.S. next week for a trade trip and to give the commencement speech at Harvard University.
The record 1.8 billion New Zealand dollar ($1.1 billion) boost in health spending next year comes as New Zealand overhauls its publicly funded system by getting rid of a patchwork of 20 district health authorities in favour of a single system. The extra money will help pay off the debts of the district authorities, rebuild three hospitals and boost medicine spending.
“This will make a massive difference to every New Zealander in terms of the health care,” said Finance Minister Grant Robertson.
Treasury predicted the government’s books would return to the black by 2025 after borrowing heavily during the pandemic. New Zealand’s net government debt is forecast to remain much lower than most developed nations, peaking at 20% of GDP in 2024 before dropping to 15% two years later.
Earlier this week, the government announced a new initiative to help pay lower-income families to scrap their old gas guzzlers and replace them with cleaner hybrid or electric cars as part of a sweeping plan to reduce greenhouse gas emissions.
The budget plan also included a boost of 660 million New Zealand dollars to defence spending over four years to cover the cost of depreciating assets.
Conservative opposition leader Christopher Luxon said the governing liberal Labour Party had an addiction to spending. The budget plans would put the economy into reverse, with New Zealanders experiencing the worst cost-of-living crisis in a generation.
The budget plan was expected to be quickly approved by lawmakers since the Labour Party holds most seats in Parliament.