Data shows people on benefits aren't frittering away their money, budgeting service says

Friday, 10 January 2020

Once a pioneer of the social welfare state, New Zealand now has more than 40,000 people who are homeless, forced to live in their cars and in garages as a result of rapid house price and rent rises and a shortage of social housing.

Low benefit rates, not poor spending choices, are causing hardship for families, a financial mentor says.

People relying on a benefit spend 4.9 per cent of their income on eating out, takeaways and alcohol, according to analysis of the government's Household Living Cost Price Index.

That is compared with 8 per cent spent on those items by median-income earners, and 11 per cent for top earners.

'Nearly all of the people we see who are on benefits are spending as carefully as they can, but the truth is no matter how carefully you spend you can't make ends meet if you don't have enough income,' said financial mentor Rosalie Grant, of the Nelson Budgeting Service.

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Grant joined other calls for an increase in the amount paid in core benefits.

People relying on a benefit spend 4.9 per cent of their income on eating out, takeaways and alcohol.

Over the last decade, she had seen more people struggle as the cost of living rose while the rates of benefits 'stayed pretty much stagnant'.

'People are more desperate, especially in housing.'

The Jobseeker Support core rate is $218.98 a week for a single person without children, aged 25 or over, after tax. An accommodation supplement of up to $70 a week is also available depending on the area in which they live. A sole parent receives $339.69 a week plus up to $305 in accommodation supplement if they have two or more children.

Grant said people who received benefits spent an average of 59 per cent of their income on housing, electricity, and food, compared with 36 per cent of income spent on those items by median income households, and 26 per cent by the richest 20 per cent of Kiwis.

'There's this myth out there that people on benefits are frittering away their money, but the truth is that when kids in these families are going to school hungry or without decent shoes it's because there simply isn't enough money to start with.

'There is only one way to fix the poverty and the hardship it causes, that is to stop blaming people for not spending wisely when they quite clearly are making every cent count, and start increasing their incomes. We urgently need to see benefits increase.'

Last April, the Government's Expert Advisory Group recommended increasing main benefits between 12 per cent and 47 per cent.

The Government has announced that benefit rates will be linked with rises to the average income, but has given little other detail about plans for welfare reform.

Changes to the Credit Contracts and Consumer Finance Act taking effect his year would make it harder for people to access easy credit, but there were signs that the number of microcredit companies would increase to fill the niche, Grant said.