The Front Page: How the cost-of-living payment became a complicated mess

Some people earning under $70,000 in the last financial year are eligible for the cost of living payments. Photo / 123RF

The Government's cost-of-living payment had all the attributes of a political slam dunk.

The Budget 2022 announcement that it would give $350 to up to 2.1 million New Zealanders showed a willingness to act in the face of crisis.

But, Inland Revenue warned the Government distributing so many cash payments quickly wasn't going to be easy.

As payments started being made this week, headlines were quickly dominated by stories of citizens and former residents no longer living in New Zealand receiving the payment.

The Herald's Wellington business editor Jenée Tibshraeny tells the Front Page podcast the coverage is "definitely embarrassing" for the Government.

There was always a political element to the payment, driven by the Government's desire to be seen to be doing something to alleviate the pain of rising living costs.

While there is an argument to be made for the support being more targeted, the Government wanted to respond quickly.

Making the payment more targeted was possible. For example, the Government could've provided support using tax credits or tweaks to Working for Families.

But targeting had to be balanced against the costs and practicalities of providing support quickly.

"The amount of resource that is already going into administering this payment is huge," says Tibshraeny.

"The Inland Revenue Department has contracted 300 staff to help administer this payment for a period of five months and then it has around 400 of its existing workforce administering it. It's already a huge administrative task, and if you made it application-based, it would be even more expensive and time-consuming to administer."

The issue of the money being sent abroad is only one part of the criticism being levelled at the scheme.

Beyond the question of where the payment is going, there is debate over whether it's the right move at all during a period of high inflation.

"There is a school of thought, which some might see as brutal, saying that we shouldn't provide any support right now because of inflation, which is being caused because there's too much demand in the economy and not enough supply," says Tibshraeny.

"The argument is that we all just need to knuckle down and reduce expenditure whatever way we can, so that will contribute towards lowering inflation."

Tibshraeny recognises that on the other side of the debate, the Greens are critical of the Government for not making the payment more widely available.

"The Greens say that the people who really need the support most aren't getting the payment, so they believe the criteria should be broadened to include those on Super or on any type of benefit. They've also come out and said that the Ministry of Social Development should wipe the debt that people owe to it."

What the Greens are essentially asking for is the Government to do more to help the most vulnerable.

In addition to the opposing "don't fuel the fire with more spending", and "do more to help the most vulnerable" schools of thought, Tibshraeny says one could argue the need for the payment reveals structural public policy shortcomings that have caused high house prices and rents, for example.

"We should really question whether our welfare system as a whole is actually set up in a way that looks after our people," says Tibshraeny.

"You could actually look at this from the bigger perspective and say a country like New Zealand should be able to get through ups and downs in the economic cycle without needing ad-hoc policies to support people."

• The Front Page is a daily news podcast from the New Zealand Herald, available to listen to every weekday from 5am.

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