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Greens: Urgent action needed to soften inflation blow for low income NZers

Written By: - Date published: 1:32 pm, April 21st, 2022 - 68 comments
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Press release from Julie Anne Genter April 21, 2022 11:02 AM

The Green Party says urgent action is needed to soften the blow of inflation for New Zealanders on the lowest incomes.

“High inflation is not experienced equally, and for people on the lowest incomes this means struggling to pay the rent and put food on the table,” says Julie Anne Genter, Finance spokesperson for the Green Party.

“Those with the least experience inflation at a much higher rate than those with the most. The latest benefit stats, also out today, show the value of hardship assistance is rising, especially the value of special needs grants and benefit advance payments.”

The Green Party says that if the Government is concerned about fiscal stimulus, the best approach would be to broaden the tax base to cover untaxed capital gains or wealth of the richest New Zealanders.

“Not only would broadening our tax base help to dampen down aggregate demand and inflation in the short-term, it is essential to having a fairer, stronger tax system,” says Julie Anne Genter.

Alongside broadening our tax base, the Green Party proposes a suite of policies.

“The Green Party solution to cost-of-living pressures on low income households is to ensure everyone has a liveable income by lifting benefits and Working for Families, make rent increases reasonable by introducing rent controls, make public transport fares free, and breakup the supermarket duopoly to stop huge corporate profiteering from people buying the essentials to live,” Julie Anne Genter says.

The Green Party urges the Government not to buckle to pressure from National and ACT parties to cut taxes and reduce essential government spending.

“It would be a huge mistake to turn the short-run problem of global inflation into a long-term problem in New Zealand. The Government can, and must, continue to invest to tackle long-term challenges: taking effective climate action, reducing inequality, and making sure our health system can respond to the current and next pandemic. The austerity of the last National and ACT Government created an infrastructure deficit, and a social and environmental deficit.

“National and ACT’s promise to give tax cuts focussed on high income New Zealanders is a predictable appeal to their base, and would be entirely economically counterproductive because it would put more inflationary pressures in our system and create a less progressive, less fair tax system.”


68 comments on “Greens: Urgent action needed to soften inflation blow for low income NZers ”

  1. Corey Humm 1

    I agree my only concern with fiscal stimulus at the moment is with a supply shortage stimulating the economy with more cash injections may rise the prices of the short supply of goods even more.

    Things like public transport subsidy are really helping people, instead of spending $40-50 on transport people are spending $20-25 at the bottom and maybe should just be free.

    I think a gst drop to pre key levels would help those at the bottom too

    Perhaps doubling the winter energy payment.

    The best thing the govt could do is bring more competition into the supermarket sector and get new overseas players . Itd be wildly popular for the govt to pick a fight with them and potentially turn the tide.

    Every lever available to govt and rbnz needs to be pulled on inflation.

    Also the govt really often answers questions about inflation and the economy in academic wonk, they need to get back to simple plain language responses that people actually understand otherwise you lose the audience especially when the opposition is using short sharp attacks long winded intellectual responses are zzzzz and damnit just answer questions don't run around in circles.

    The inflation and cost of living crisis scares me. I hope it scares me and I hope they understand the ground level experiences not just data points.

    Good to see the greens pushing

  2. tsmithfield 2

    I would actually agree with the Greens, and the article above in terms of the desired outcome. I would describe myself as a right winger with a social conscience, and so am concerned about the issues raised in the article.

    Where I disagree is the proposed methods because these tend to lead to unintended consequences worse than the problem itself.

    So far as a capital gains tax goes, we effectively have that now with the extension to the bright line test, which effectively imposes a capital gains tax on substantial assets that are easy to quantify in terms of capital value increase at sale.

    The problems with a capital gains tax are:

    1. Now would be a terrible time to introduce one. That is because asset values are likely to decline in the near future. The effect of that would to create tax losses on assets that could be applied against future capital gains. The best time to introduce one is at the bottom of the market.
    2. The other problem I see with capital gains taxes over more general assets is that it becomes God's gift to valuers. The amount of extra non-productive time and effort in quantifying asset values would be huge.

    So far as price controls go, I have already commented several times that price controls cause shortages..

    So far as the housing crisis goes, I think it would be much more effective to find quick ways to increase the supply side of the equation. Because, the reason prices rise is due to shortages.

    Therefore, applying that principle, ways to solve the actual problem of shortages could involve incentives for people to rent out unused housing, more supply of modular type housing that can be erected quickly, and reducing compliance costs and delays in consenting for new builds which seem to be a huge handbrake on houses being built at the moment.

    So far as food goes, global agriculture is on the verge of collapse. Therefore world food prices are going to keep increasing, and as an exporting nation, we will have to pay the going rate internally otherwise exporters will simply send their products to where they can get the best price, thus again, causing shortages within NZ.

    This is a really thorny problem from any perspective. But one thing going for New Zealand is that our ground is great for growing food. One option could be to develop a lot more community gardens. I am on the board of several trusts doing just that. And in Christchurch we have huge amounts of red zone land that is perfect for growing food. I understand some of that is being developed for community garden purposes at the moment.

    One thing that would need to work hand in hand with that is lessons on how to cook utilising fresh ingredients. This is a skill that seems to have been lost in many areas these days.

    Another option could be to establish more trusts that produce producers are able to donate produce to, as a social service.

    I don't think any of this is the total answer. But I think it is the type of thinking we need in order to find creative solutions to some of the enourmous problems facing us today.

    • Foreign waka 2.1

      And yet, NZ is building houses on their best land for agriculture and artificially watering the dry plains of Otago. The mind bogles by so much stupidity.

  3. pat 3

    The single biggest reduction to living costs can be implemented by reducing the largest single cost….housing.

    Remove (gradually) the supports for the housing sector…i.e Accomodation supplement, tax advantage, offshore ownership, and provide expanded state housing in major centres, loosen regulation on owner occupied accomodation while the RBNZ. implements a sinking DTI to no more than 5.

    Unfortunately none of this will help in the immediate term but then nothing will….as an Australian politician once remarked, this is the recession we have to have, hopefully it will only be a recession.

    • tsmithfield 3.1

      So far as housing goes, I am all for anything that increases the supply quickly. Because, that is really the only longterm answer to the housing problem.

      I think there will likely be a world recession. But I think the effects will be uneven.

      Our food producers are going to do really well for the reasons mentioned in my post above.

      Also, local manufacturing may pick up due to manufacturers returning their manufacturing bases to New Zealand due to China becoming so unreliable (due to endless Covid lockdowns), and being a potential geopolitical risk in the future.

      On this point, my wife's sister, who is over from Australia atm, mentioned that a lot of manufacturing is returning to Australia a the moment for these reasons. We may start to see similar happening here.

      A recession is something our tourism sector needs like a hole in the head though. Especially after all the damage due to Covid.

      • pat 3.1.1

        Supply is not the issue…there is adequate housing in NZ…affordable availability however IS an issue.

        Our food producers may not do as well as you think, especially if their input costs continue to rise and their debt levels remain high (over valued real estate is not only a housing problem)….and we are as susceptible to 'weather' as everyone else.

        As stated earlier I view tourism as a net zero game….we lose as much from outward tourism as we gain from inward, as covid more or less proved….meanwhile we waste needed investment and labour to a low productivity sector.

        • Poission

          primary producers debt levels are well down on their tops,Dairy has reduced around 4b$ in the last 2 years on high export prices.Feed will be an issue in some locations in livestock farming.Most farming debt increases are in horticulture.

          Weather is always an issue.Tourism is over rated in the data,over covid a significant proportion of the compulsary household saving was in NZ's not travelling o/s.

          • pat

            You would hope that with record dairy payouts debt levels are decreasing….however, the inflated cost of land forces unsustainable practices to service the high debt levels…especially when you have unnatural interest rates.

            • Poission

              Unnatural prices are still very helpful.

              Rural land prices I agree with you.There should be a constraint on foreign ownership of rural land,they can never make it more efficient,then current practices,and a lower capital value means returns can be less per hec.

        • tsmithfield

          “Supply is not the issue…there is adequate housing in NZ…affordable availability however IS an issue.”

          You are making a bit of a contradictory statement there.

          There might be enough housing for everyone. I am not sure about that. But what I am sure of is that rising rent prices is a symptom of insufficient rental housing.

          If rental housing supply equals demand, the prices will be stable. If the amount of available rental housing exceeds demand, then rental prices will drop.

          This is basic supply and demand economics. We also saw this play out quite rapidly in Christchurch after the earthquake. There was huge demand for rental housing straight after the earthquake when a lot of houses were damaged or destroyed. There was huge competition for available houses and rental prices rose rapidly.

          As the city was rebuilt, housing supply swung the other way to the extent that the housing market was over supplied. The pressure on both house and rent prices fell right away after that, and it stayed that way for probably 8 years or so.

          I agree with you about farming input prices. But I am expecting that the inflation of food prices is going to more than make up for that.

    • weka 3.2

      I haven't seen a plan for how beneficiares would be ok with the removal of AS. Any ideas?

      • pat 3.2.1

        If rents decrease where is the need for AS?….subsidies distort the market, the reason for AS is not to assist low income earners into housing but to support inflated values that CANNOT be supported by wages.

        • weka

          well yes, but I can't see rents dropping enough to make up the difference. Or at least, the full range of tools are used and then they look at lowering AS over time, just hard to see this given how much people are living below the poverty line already.

          • pat

            You may note the use of the word 'gradually'

            • weka

              I did. Do you think that rents can drop far enough to be affordable for beneficiaries without AS, and without the economy dipping majorly? If rents are to drop that far, how will that work for the property market and mortgages?

              • pat

                The funny thing about economics is that only the possible occurs….yes, if the subsidies were removed then the rents will drop. however as always it is the transition that is the problem, hence the 'gradual'

                The ‘property market’ will suffer a devaluation…as it should….mortgages will be problematic, as they already are.

    • Blazer 3.3

      Dead right Pat.

      End landbanking an empty house debacle…quicksmart.

  4. Patricia Bremner 4

    Remove GST off food.

    That would help the poor the most as such a large proportion of their money goes on food.

    It would not be inflationary.

    Discussing "cutting spending" we need to tax high earners more. It will lower the inflation and allow neutral fiscal application to areas of need.

    But hey!! Let’s discuss cutting holidays “cause they cost” Hidden inference, “Have they earned that holiday?” ( But don’t ask whether I earned the rental income from my seven properties.)

    • Grafton Gully 4.1

      Turn parks, reserves and berms into food forests and community gardens.

    • Graeme 4.2

      Would be better to reduce GST to 10%. For people who's living costs exceed their income that would cover most of the next years inflation, provided it's all passed on to the consumer.

      The problem with exempting some items from GST is that the compliance costs often exceed the GST. Food gets tricky as there will be a lot of argument about what is, and isn't food for tax purposes. Our GST regime is very cheap as it's comprehensive with no exemptions at the retail level, the only ones being financial services and exported goods. Ask retailers who were trading before GST about the costs of accounting for the old sales tax regime, most retailers had 4 or more different tax rates across their stock, which became a nightmare at tax time. Retail offerings became a lot broader and more interesting once it was the same tax rate on everything.

      • pat 4.2.1

        An across the board reduction in GST is itself inflationary…..if you increase the available income to support higher prices then you will retain higher prices….the trick is to support those that need the support while either maintaining or decreasing the aggregate demand.

        Hence interest rate increases.

        The RBNZ has (again) stated that monetary policy needs to be supported by fiscal policy…..that means we need to transfer, not increase.

        • Graeme

          So that's implying going back to something like the old Sales Tax regime with pretty steep taxes on 'luxury' items and little or no tax on 'essentials' That would certainly decrease aggregate demand, at least in dollar terms, not so much units, and construction costs would plummet, at the expense of quality.

          But the 60's and 70's weren't free of inflation either, what we're seeing now was typical then.

          • pat

            It implies nothing other than the need for using taxation as it should be….how it is applied can take many forms.

            No modern period has been 'free of inflation' however some have been more problematic than others….the seventies was one such period when the contemporary settings had run their course just as the current settings had run theirs by around 2008.

            Michal Kalecki predicted it well.


            • arkie

              'Full employment capitalism' will, of course, have to develop new social and political institutions which will reflect the increased power of the working class. If capitalism can adjust itself to full employment, a fundamental reform will have been incorporated in it. If not, it will show itself an outmoded system which must be scrapped.

              Didn't Labour drop their commitment to pursuing 'full employment capitalism' in the 80s? So much for the increased power of the working class, they're the precariat now, suffering through a K-shaped 'recovery'.

              • pat

                Yes Labour did drop that commitment then…..and fractured because of it.

                As said the model had run its course, just as the pendulum has now swung too far in the opposite direction….it is a never ending power struggle and the role of government is to ensure a balance….sadly under neoliberalism governments have abandoned that role.

          • Foreign waka

            Interest rates in double digits anyone?

        • Patricia Bremner

          Pat, their income is the same. so how is removing GST from food inflationary?

          It means they would have 15% off their bill, which would counter food inflation.

          The Government has limited rent rises to once a year.

          Those who run airnibs should have to pay a licence to offset public housing/rental losses. Airnibs should be treated as a commercial enterprise.

          I believe all rentals shorter than 6 months are treated as commercial rentals in Queensland.

          That money going to an infrastructure fund for future developments.

          • pat

            It is inflationary in the same way as Nationals proposed tax cuts are inflationary….if the government leaves more money in the economy and dosnt extract from somewhere else (increased income tax or corporate taxes) then you have more money chasing the same goods….meanwhile if the government is to reduce its revenue it must either cut services (already inadequate) or borrow to make up the shortfall….if they borrow then there is an increase in the money available for the same goods….inflationary.

            GST is around 40% of gov revenue, and it is neutral in the supply chain (only the end consumer pays it)…..and you are also assuming that in an environment of rising input costs to business that the full reduction will be passed on.

            We have an output of a certain size, the problem is how that output is distributed….we allow too much of it to accumulate in certain pockets (and worse, many of those pockets are offshore).

            • Patricia Bremner

              Thank you for your economic lesson.

              I still believe that it could be passed on as it is in Australia. All unprocessed food there has no GST. added. The till is set to read the bar code for that type of food.

              If you buy a cooked chicken you pay GST. If you buy an uncooked chicken you pay none. All fruit and vegetables and all whole foods are GST free.

              To alter it is stealing from the state. So mechanisms are in place. I am not advocating removal of all GST. It is the poor who are most impacted by inflation.

              I was advocating licence fees on the excess wealth of airnibs, which would be the extraction aimed at one of the contributing factors.

              What do you suggest?

              • pat

                The suggestion was a reduction in GST across the board….not just food.

                "The problem with exempting some items from GST is that the compliance costs often exceed the GST. Food gets tricky as there will be a lot of argument about what is, and isn't food for tax purposes. Our GST regime is very cheap as it's comprehensive with no exemptions at the retail level, the only ones being financial services and exported goods. Ask retailers who were trading before GST about the costs of accounting for the old sales tax regime, most retailers had 4 or more different tax rates across their stock, which became a nightmare at tax time. Retail offerings became a lot broader and more interesting once it was the same tax rate on everything."

                The reasons Graeme has given for not exempting some items are valid but the wholesale reduction is problematic for the reasons i have already given….you are feeding an inflationary spiral.

                The painful but effective method is the one the RBNZ is embarking upon….it forces both capital and labour into the most productive activity.

                It is undermined however if the government persists in supporting non productive sectors through the likes of importing low cost labour while placing our core assets on the international market….all while ignoring the needed redistribution through progressive taxation.

                The disconnect between the output of the NZ economy and its presumed value needs to be bought back to reality, our assets are grossly overvalued and the main beneficiaries are the offshore owned banks…..we as a country are (attempting) living a champagne lifestyle on a beer income.

  5. Christopher Randal 5

    A CGT would be great, if only it disadvantaged the multi dwelling owners like the Opposition members

    • AB 5.1

      Brightline test to 30 years and excluding the family home. The positive effects would be very slow though, unless you backdate the start point, which would cause apoplexy.

      • Belladonna 5.1.1

        If excluding the family home, you have a loophole you can drive a truck through.
        The typical path for the 'flippers' gaining capital gains at each step is to 'do up' the family home; sell, 'do up' the family home again. Rinse and repeat. Pocketing the capital gain each time.

        • pat

          The 'family home' is a marginal issue….the wilful blindness to offshore ownership through trusts and companies is a much bigger issue…..these outside market investors have a detrimental impact due to the fact they are outside the local economy….a major distortion that needs to be removed completely.

          • Belladonna

            Not when it comes to the Bright Line test (effectively the only CGT on property).

            Offshore owners (by definition not-resident) pay. NZ 'flippers' (a much bigger problem – if you're looking at house price inflation) don't.

            You can't regard the family home as a 'marginal issue' in this context. It's the majority of sales.

            • pat

              Those who buy dungers and do them up for a profit are not the cause of inflated house prices AND they provide improvement to the stock and are taxed if it is a regular occurence….and the property has to be their residence.

              Offshore ownership is not even identified if in the form of a company or trust.

              • Belladonna

                Since the law change in 2018 – you have to be a NZ or Australian permanent resident (or Singaporean – for some strange reason) to buy property in NZ. If a trust situation, the principal trustee has to qualify.


                Of course, existing ownership is 'grandfathered' in. But I really don't think this is as big an issue as you're making out.

                Yes – new builds were specifically exempt from this – because a lot of the new build apartments and townhouses are built with overseas money – and they need a guaranteed buyer before they go ahead. However, all of these *add to* the existing housing stock in NZ (i.e. rentals). The vast majority of the 'profit' from renting these out goes to the banks in mortgage repayments. And, if sold within 10 years, they are subject to the Bright Line capital gains tax. I don't see a flood of money leaving the country over them.

                Unless you want to only have the government as landlord (which you may, some here on TS certainly do) – I don't really see a huge difference between resident and non-resident landlords (in the financial sense)

                Remembering the dogwhistle politics over people with 'Chinese sounding names' ….

                • pat

                  "The ban on foreign home buyers was imposed by the Labour Government in 2018, but due to the continued opaqueness of trusts and companies, the Overseas Investment Office (OIO) relies on the honesty of lawyers setting up such entities and those facilitating transactions to detect rule breakers."


                  • Belladonna

                    So — given all this 'opaqueness' – you actually have no evidence at all that there are significant numbers of people using trusts to break the law. You're just speculating.

                    Based on my friends/acquaintances living in Auckland – and renting from overseas owners, all of the landlords (i.e. the name on the bank account where rent is paid is for an individual) – indicating that they are NZ citizens or PR – and therefore entitled to own NZ property. The only one I know of who deals with a trust (i.e. rent payments go into the Trust bank account) – it's a Kiwi Mum and Dad trust (and they are actually resident in NZ)

              • Belladonna

                Everyone who buys and sells on a rising market is contributing to property inflation.
                And I know of one set of acquaintances who've bought, done-up (while living there) and sold 4 houses in 7 years. None of the renovations have been very substantial (painting, putting in a new kitchen, bathroom, landscaping, etc.). Making a very healthy capital gain each time (even after the costs of renovation)

                Completely exempt from the Bright Line test – as each of them have been their 'residence'.

                • pat

                  "Your history of buying and selling counts

                  If you have a regular pattern of buying and selling property, then you may be considered a property dealer and may have to pay tax when you sell property.

                  This may apply even to your main home, if you have a pattern of buying and selling the home you live in.

                  There is no set number of properties you can buy and sell before you may need to pay tax on profit from sales."


                  • Belladonna

                    IRD aren't applying this at all. The wording of 'may' in the policy – leaves a lovely large loophole that upwardly-mobile renovators are merrily driving trucks through on a regular basis.

                    • pat

                      You miss the point….whether they pay tax or not (the risk is retrospective) is not an issue impacting supply.

                      The doer uppers are using the property while working on it and then make it available to the market for purchase, whereas property purchased for capital gain (in a rising artificially low interest rate market), or money laundering purposes is not necessarily available for use adding to increased demand for the remaining property.

        • Craig H

          The current rule allows the bright line exemption for the primary residence to only be used once every two years – perhaps tweak that rule e.g. to 3 or 5 years.

  6. tsmithfield 6

    I think the long term, but most difficult solution to the problem is to inspire youth in some of the very poorest demographics that they can aspire to something much better than what they have now, and can achieve far higher than what they believe of themselves.

    One of the trusts I am on the board of is Cross Roads Youth with a Future.

    Crossroads operates on Hampshire Street in Aranui, which is one of the poorest areas in Christchurch, and a street that is infamous for gang activity and crime.

    Crossroads is very well respected and supported in the area which is great. We run a youth drop in centre that a lot of youth in the area come to.

    But the main thing we do is to work with some of the most difficult youth in the city in small groups (Our "Stay Real" programme). Youth who come to us are normally on the verge of being expelled and have a lot of behavioural issues.

    We run small groups based around total acceptance, and being totally non-judgemental. They tend to feel very safe in confiding with our team around the various issues they have in their lives which are at a level I never have had to personally experience.

    We have had some great success. Several youth workers with us have actually come through the program, and have attained tertiary qualifications. I have nothing but absolute respect for them knowing the issues in their backgrounds they have had to overcome.

    So, I think this sort of approach is part of the answer. The big problem is that it takes a lot of time and developing long term relationships for things to change for people. It isn't a quick fix.

    I think that is probably one of the big problems with a lot of "solutions" that get put out there, in that they are very short term interventions that don't do much in the long term.

    • Patricia Bremner 6.1

      That is great, and yes getting a funding base and continuity is key. If these teens can form a good trust relationship with at least one adult in their lives, they often blossom.

      A safe zone in their lives, things to do and share, learning to help others and developing goals. Crossroads and Get real sound great. Good on you tsmithfield.

      • tsmithfield 6.1.1

        Thanks for that Patricia. I think my experience with Crossroads and the other trust I am on the board for has softened a lot of my attitudes over recent years.

        A lot of us who are relatively well off have no idea of the circumstances and history that shape the lives of many. So, that tends to lead to knee-jerk and simplistic reactions from many of us unfortunately.

        • Craig H

          I grew up around there – the Hampshire Street shops were our local shops (Peter's Fish and Chips is still going strong I see!), we were (and Mum still is) enrolled at the GP (the doctor is an absolute champion committed to affordable medical care), and kudos to the Council and Kainga Ora for improving the area dramatically – rebuilding a lot of the state housing and building a new library and community centre have gone a long way.

          All that said, still a tough neighbourhood with a lot of poverty and deprivation, so it's good to see people still doing good work in the area.

          Edit for mods – could you please fix my name to Craig H. Apologies and many thanks.

  7. DukeEll 7

    They had me until rent controls. Even then, an overall good platform that acknowledges the problems low income and middle income New Zealanders now face as a result of a combination of poor fiscal and monetary policy and overseas supply chain pressures.

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  • Budget 2022 supports resilient and sustainable cultural sector
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  • Minister of Finance: Wellbeing Budget 2022 Speech
    It is my great pleasure to present New Zealand’s fourth Wellbeing Budget. In each of this Government’s three previous Wellbeing Budgets we have not only considered the performance of our economy and finances, but also the wellbeing of our people, the health of our environment and the strength of our communities. In Budget ...
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  • Wellbeing Budget 2022 Speech
    It is my great pleasure to present New Zealand’s fourth Wellbeing Budget. In each of this Government’s three previous Wellbeing Budgets we have not only considered the performance of our economy and finances, but also the wellbeing of our people, the health of our environment and the strength of our communities. In Budget ...
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  • Coronial delays addressed by Budget 2022
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  • Paving the way for better outcomes for disabled people
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  • Investing in education so all Kiwis can succeed
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  • Primary sector backed to grow and innovate
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  • Budget lifts up to 14,000 children out of poverty
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  • A booster for RNA research and development
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  • Unleashing business potential across NZ
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  • Securing the wellbeing of Pacific communities
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  • Government delivers timely support for whānau
    Boost for Māori economic and employment initiatives. More funding for Māori health and wellbeing initiatives Further support towards growing language, culture and identity initiatives to deliver on our commitment to Te Reo Māori in Education  Funding for natural environment and climate change initiatives to help farmers, growers and whenua ...
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  • Government delivers critical infrastructure
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  • A health system that takes care of Māori
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  • Investing in better health services
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  • Budget highlights underlying strength of economy in face of global headwinds
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  • Health Minister to attend World Health Assembly in Geneva
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  • New efforts to counter illegal timber trade
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  • Deaths in New Zealand lower than expected so far during the pandemic
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  • New law helps secure New Zealand’s maritime domain
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  • Trade and Export Growth Minister to travel to Bangkok for APEC
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