Investment to benefit NZ

One of the most difficult areas to understand in the New Zealand economy comes from the numbers of people on benefits and what sort of benefits they are receiving.

New Zealand is going through a transitional period with the first stage of the Government's welfare reform programme being implemented and the second stage yet to begin. Social Development Minister Paula Bennett has attracted both praise and condemnation for the way she is actively working to make people less reliant on benefits in the long term. The minister has said the number of people on benefits in New Zealand is the lowest it has been at the end of a December quarter since 2008.

The number of beneficiaries fell by nearly 12,000 in the past 12 months. But with 339,095 people on benefits in New Zealand, there is much more work to do.

According to figures released by Ms Bennett, 13,600 fewer people are on benefits than two years ago, which means, on average, benefit numbers reduced by 131 every week for the past two years. At present, 53,747 people are on unemployment benefits but more than 10,000 people went off this benefit into work in the three months ending December. Large numbers of students finishing their studies just before summer add volatility to the unemployment numbers in December - 3000 in the current quarter in review.

The number of sole parents on the DPB dropped 1.6% in the quarter to 95,138 and 3221 sole parents went off this benefit into work in the same period. Changes to the benefit system implemented from October last year mean sole parents with children aged over 5 are expected to work part time and those with children aged 14 and over are expected to find full-time work. In October, Ms Bennett commented on a small rise in the number of people receiving benefits in the September quarter. At that stage, the number of beneficiaries had been holding between 319,000 and 321,000. Already, the disparity is obvious.

One of the concerns of Opposition parties is whether welfare changes are preventing New Zealanders getting the help they need. Green Party co-leader Metiria Turei says the latest benefit figures show that while there was a seasonal increase in unemployment, fewer people were on the unemployment benefit compared with last year. It is unusual, she says, that at the same time that the number of people who are out of work is rising, unemployment benefit numbers are falling.

The figures may also indicate more families are under stress as one partner loses a job but is ineligible for the benefit because the other is working.

Unemployment data has also been confusing politicians, economists, financial markets and analysts. When unemployment has been expected to go down, it goes up. When it is due to go up, it remains flat. Employers continue to talk about finding it hard to hire skilled labour, yet the unemployment rate hovers uncomfortably high.

Ms Bennett is adopting an investment approach to refocus the entire welfare system. In September, the lifetime cost of the current beneficiary population has been put at $78 billion. The highest lifetime costs on welfare are those who go on benefits before age 18. The reforms introduced are aimed at giving support to those who are capable of working but are most likely to become long-term welfare dependants without some help.

The old welfare system passively expanded to meet demand, with interventions aimed almost exclusively at those on unemployment benefits. Creating jobs in an economy is not the role of a government; but actively providing incentives to look for work created by businesses in expansionary mode is a path worth pursuing. Stronger work preparation provisions are being applied to the new benefit categories, requiring people to take reasonable steps to prepare for work and also be required to undertake specific work preparation activities. All beneficiaries can be required to participate in assessments related to their work ability.

Taxpayers spend $22 million a day on welfare payments and society needs to be reassured the Government is spending the money where it will have the biggest impact.