Budget 2022: Token gesture or real help? How $27 a week compares to actual price rises


    The Government is pumping out $27 a week over three months to help those facing skyrocketing costs. But will it really do much? A Stuff analysis shows it could go quite a long way for a smaller renting household – but for those with a mortgage, cost hikes will easily outpace it.

    ANALYSIS: The Government has announced a cost of living payment in Budget 2022 worth $27 a week.

    It will be paid out from August for three months, coming in at $350 all up.

    Anyone who earned less than $70,001 in the last tax year will receive the payment automatically – unless they get the Winter Energy Payment, meaning beneficiaries are excluded.

    Finance Minister Grant Robertson delivers the Budget speech in front of media and analysts in the Budget lockup on Thursday.

    ROBERT KITCHIN/Stuff

    Finance Minister Grant Robertson delivers the Budget speech in front of media and analysts in the Budget lockup on Thursday.

    Finance Minister Grant Robertson made clear that he didn’t think the payment would cover all of the rising costs households were seeing – but would help.

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    Stuff has looked at exactly what it might do for a household on the average wage. Is it a token gesture, or could it really help?

    For simplicity’s sake, let’s assume this household features two adults who both make the 2021 median wage (around $58,000) and don’t have any kids. We’ll look at both their price hikes assuming they rent and then assuming they have a mortgage. And we’ll compare the payment with how much their costs have gone up in the past year.

    The Government has announced a cost of living payment in Budget 2022 worth $27 a week.

    John Kirk-Anderson/Stuff

    The Government has announced a cost of living payment in Budget 2022 worth $27 a week.

    The payment itself: $27 each, $54 together

    First up – the payment is individualised, which means our household will get a total of $700, or $54 a week. It’s not income so it’s not taxed. Basically, it is treated as a tax rebate.

    Food increases: $13 overall

    Let’s assume this hypothetical family spent $205 a week on food a year ago. That’s roughly what the average two-person household spent on food in 2019, when the data from the Household Economic Survey was last released. It includes both groceries and restaurant spending. This data is a touch out of date – but there’s also a possibility this family cut down on restaurant spending a bit.

    The food price index which Statistics New Zealand maintain shows overall food prices have gone up 6.4% in the year to April. That’s $13 more on their overall food bill. (We should note this inflation dropped a tad in April, if we were talking about March to March it would be a $15.60 bump.)

    Parliament TV

    Finance minister Grant Robertson delivers Budget 2022 in Parliament.

    Rent increase: Up $19.50

    The median rental cost in New Zealand $500 a week in April of 2021, about a year ago.

    Stats NZ says rentals have gone up between 3.9% and 6.9% in the year to April 2022. The higher figure comes from a volatile index they keep which looks at new tenancies being signed, but only focuses on that month. So it would be 6.9% if this couple signed up to a new tenancy in April, but a totally different figure if they signed in March.

    Since that figure is quite a lot more volatile, we can use the 3.9% increase, which is a more steady look at overall bond data. That puts rent up $19.50 a week – but we should note that if they did sign a new tenancy in April, it would be up a whopping $34.50.

    Mortgage increase: $101 a week

    Let’s change our assumption and assume our household has a mortgage instead. Stats NZ said halfway through 2021 the median mortgage size was $260,000.

    Back then the 1-year fixed rate was about 2.2%, meaning a minimum weekly repayment of $228. Now that rate is more like 5.2%, meaning a minimum repayment of $329 a week – a huge $101 a week change.

    And that’s the median mortgage amount. Some borrowers are far more highly leveraged, because they got into the market later, when house prices were higher.

    Ella Bates-Hermans/Stuff

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    Fuel: Up $20.25

    Back in 2019 we know the average household spent about $48.50 a week on fuel – roughly 25 litres a week, based on fuel prices back then.

    That may seem low, but we should remember that families without children often drive a lot less than those who do. And that’s not even counting people who do most of their transport without a car.

    Anyway, let’s use 25 litres of regular 91 as our starting point.

    Last year at about this time fuel was $2.11 a litre – so $52.75 a week for that 25 litres.

    Right now according to Gaspy fuel is $2.92 a litre – so $73 a week for that 25 litres, even taking into account the Government’s 25c fuel tax cut.

    That’s an overall change of $20.25 for fuel alone. There is a bit of an asterisk here though – often when prices change people also change their behaviour. Our two-person family may have started to drive a touch less.

    Then, we also know that this payment isn’t supposed to come in until August, when the Government is also taking away the 25c a litre fuel tax cut. That would put 25 litres of fuel up to $79.25.

    In summary: $27 a week could be quite a lot for some, not so much for others.

    If we add up all the costs for our rental household, they actually come out marginally ahead from this payment, with $54 coming in from the payment and $52.75 going out in price increases.

    But we should note here that it only lasts for three months – and these people would have been facing the price increases all year. Plus, they might have kids, which would easily send their prices skyrocketing – although it would also make them eligible for further Government support.

    STUFF

    New Zealanders tighten their belts as increasing grocery, petrol and housing costs create a perfect storm.

    When we switch to the mortgaged household the payment is more like a cup of water in a bucket – it’s something.

    The mortgaged household has seen costs go up $134.25, compared to that $54 boost.

    And these averages never catch every type of household.

    Lots of people aren’t in relationships, meaning they might rent a house by themselves, paying more in rent and only getting $27 a week for themselves. Many others might have kids who send costs way up, or make just above $70,000 – meaning they would get nothing.

    On the other hand, we assumed our couple didn’t get a pay rise in the last year. Stats NZ thinks it’s more likely they would have seen a pay increase of something like 3%.



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