Poverty in New Zealand: even worse than we thought

The news today is that mistakes by the Treasury and Statistics New Zealand mean that poverty and inequality are even worse than we thought. By double counting the Accommodation Supplement and making some other errors, they accidentally inflated low incomes.

How big is the mistake? It’s significant. The headline number is that there are 285,000 children in poverty, not 265,000 as we previously thought – 27%, not 25%. That’s a big shift, and shows that we have returned to the bad old pre-Working for Families days, when child poverty figures were at a similar level. By 2007 they had fallen to 22%, but that progress has been thrown into reverse.

The revelation of the mistakes also helps explain something that had puzzled me. According to the old figures, incomes for the poorest New Zealanders had seen steady if unspectacular increases since 2009. That had seemed unlikely, but I’d rationalised it as the effects of tax cuts and other things.

Now, following the revision, the figures show that, once you take into account housing costs, disposable incomes for the whole bottom half of New Zealand have fallen since 2009 – which fits better with the picture that I pick up from speaking to people and agencies working on the front line.

What does this mean for inequality? Again, it’s higher than we thought. It’s not radically different, however – the trendline since the global financial crisis is still pretty flat, albeit it was falling before the crisis, so again, progress has gone into reverse.

When you compare us to other OECD countries, the revision means we slip from the 20th most unequal out of 34 countries down into 23rd spot, next to Australia. It’s not a huge change, but it makes it harder to argue, as the Treasury is inclined to do, that we are ‘in the middle of the pack’.