Govt's cost of living payment 'necessary and sensible' - expert

A temporary $350 payment for two million Kiwis struggling amid the cost of living crisis is "necessary and sensible", one political commentator says.

The scheme, announced by Finance Minister Grant Robertson during Budget 2022 on Thursday, will see people earning up to $70,000 and who aren't eligible for the winter energy payment receive a 'cost of living payment' for three months from August, totalling $350.

It comes as inflation rose to 6.9% - the largest movement since June 1990.

ANZ chief economist Sharon Zollner told 1News the Budget "does try and address some of the symptoms of inflation while not really getting to the core", but added, "that’s because there aren’t really any silver bullets here".

"Of course, anything that actually increases households’ ability to spend - whether that’s a one-off grant or a tax cut or anything else does actually worsen the aggregate inflation problem, potentially, but it is targeted towards those people who have the lowest incomes and therefore, really bearing the brunt of the cost of living and so it's defensible in that sort of aspect."

National Party finance spokesperson Nicola Willis branded the payment as an “inadequate band-aid for a cost of living crisis". She instead called for more long-term tax cuts which would also benefit "squeezed middle" New Zealanders earning average wages.

But Zollner said good fiscal policy "should be targeted and temporary and these cost of living pressures are, we’re all hoping, going to ease, whereas a tax cut is, of course, for the long run".

"This is a one-off payment that can be repeated if necessary and it’s actually more flexible, in that regard, than a tax cut would be," she said.

Political commentator Morgan Godfery called the Government's cost of living payment "a necessary recognition that a large number of New Zealanders are doing it tough".

"Targeting that payment to the two million New Zealanders who are likely struggling with all kinds of rising costs - whether it’s fuel, whether it’s housing costs - I think is both necessary and sensible."

He said they payment could be extended should the cost of living pressures continue "or it may just remain a one-off payment".

“I think Grant Robertson has performed a very delicate tightrope act here and he’s done very well."

Godfery also pointed to the pressures both domestically and overseas, adding that there's "only so much that Grant Robertson and Prime Minister Jacinda Ardern can do when a lot of these costs are due to supply chain disruptions overseas, even geopolitical tensions and conflicts".

"This is possibly the most that they could do in this period of time so they have to be recognised for that while acknowledging that there are factors outside of their control that are driving up costs."

Zollner added, “I don’t think it’s going to make such a difference that people won’t be continuing to do it tough but every little bit helps.”