Prime Minister Jacinda Ardern unveils new cost of living measure

Prime Minister Jacinda Ardern has announced a substantial $189 million boost to the Government’s childcare subsidies scheme in changes that will see more than half of families qualify for subsidies on their children’s pre and after-school care.

The changes were outlined by Ardern in her speech to the Labour Party conference today as a way to ease the cost-of-living pressure on families on low to middle incomes.

Ardern also announced what the increases to Working for Families tax credits will be from April next year, after they are adjusted for inflation. - increases expected to cost about $26 million.

The childcare subsidy changes will significantly boost the income thresholds for eligibility for childcare subsidies, worth more than $200 a week for some families.

It starts in April next year and cost an extra $189.391 million over four years.

It will mean about 10,000 more children are eligible and the subsidies will increase for many of those who already qualify. More than half of all families with children will be eligible for the subsidies which cover childcare, and before and after-school care.

The Working for Families family tax credit will increase from April next year – it is pegged to inflation and high inflation has meant a bigger increase than usual. That increase will benefit about 60 per cent of families who get it. The Best Start payment for those with new babies will also lift by $4 a week.

Ardern said childcare was one of the most significant costs families faced.

“At a time when families are feeling the cost-of-living spike, we’re investing in what matters most by making sure childcare is within reach for parents and they have more support to cover other costs.”

Jacinda Ardern speaks at the Labour Party conference in Auckland. Photo / Alex Burton

In her speech, Ardern said National’s freezing of the subsidy in 2010 had meant that the number of children supported had dropped from 50,000 in 2010 to fewer than 25,000 this year.

She said that left mothers in particular facing an “economic dilemma”.

”Conservative estimates show it is New Zealand women in particular who cannot afford to work if they want to – because of childcare costs – and they are forgoing $116 million or more in wages each and every year.

”I want families to have choices. I want them to stay home and be a primary caregiver if they choose to. Or work, if they choose to. But increasingly those choices have been removed. And if you are a sole parent, you have even fewer.”

In her speech, Ardern also made a pitch to be chosen to lead the country again after 2023 – listing Labour’s achievements outside of Covid-19 – and pointing to her own experience leading through tough times.

She also sang the praises of her finance minister, Grant Robertson – highlighting his experience. She ended with a “bring it on”.

Labour has been critical of National’s promise of tax cuts as a cost of living solution – especially its plan to cut the top tax rate.

Ardern also said the support through childcare subsidies and Working for Families was a way to target those who needed it most, without having a significant impact on inflation.

The measures use existing programmes – unlike the temporary cost-of-living payment, which was administered by Inland Revenue and criticised because of people overseas receiving it if they had not changed their address with Inland Revenue.

At a press conference after her speech, Ardern said cost of living was “front of mind for Kiwis”, and one of the biggest costs they faced was childcare.

It was better than a tax cut because it was not inflationary, Ardern said of the new childcare payment announcement.

“Childcare is one of the biggest costs that families face, particulary when they have young children,” Ardern said.

For those who were still strugling but didn’t have kids, Ardern said this was one of a suite of measures rolled out to ease the burden of cost of living, such as half-price public transport.

A childcare review was already underway and this part, this measure, had been pulled out from the review, she said.

Ardern said making childcare free across the board would cost billions of dollars. She said the focus was on those families that needed it the most.

It was estimated that the measure would reach 93-97 per cent of sole-parent families, she said.

The PM also said: “I stand by our approach we’ve taken to politics over the last five years,” in response to a question about a “Liz Luxon” comment at the conference.

Asked if the fuel tax, which was scheduled to go back on in January, would be reimplemented, Ardern said Cabinet had made no decisions on those policies.

The measures:

The childcare subsidy change will increase the income thresholds to qualify for the subsidies change, effectively catching up on a “freeze” which was put on the subsidy in 2010 until Labour indexed it to wage growth in 2021.

For example, the changes will mean a family with two children will get some subsidies if their income is lower than $116,117 to $124,644. Currently, only those who earn less than $84,345 to $90,584 get them.

All families with incomes up to about $100,000 will now get some form of subsidy – the size of subsidy depends on income and the number of children a family has.

It will increase the number of children eligible for support by about 10,000 and give more to families already on it. Almost every sole parent would now be eligible for it – and 54 per cent of all New Zealand families with children.

It would mean a family with two parents who work 40 hours per week on $26 per hour with two children under five who will not have been eligible for childcare assistance, now will be eligible for $252 per week from April 1, 2023.

The Working for Families adjustments will see increases of about $9 a week in the family tax credit for the eldest child to $136 a week, and by $7 a week for subsequent children to $111 a week. The Best Start for parents with new babies – Ardern’s policy - will also lift by $4 a week to $69 a week.

Those payments were already linked to inflation and scheduled to increase next year. They are expected to cost about $26 million, which was already budgeted for.

Ardern’s deputy leader Kelvin Davis spoke to the conference, delivering a defence of the Government’s action on climate change. He added his own criticisms of the National Party – following on from those of Ardern and Grant Robertson the day before.

In a speech with dollops of humour, Davis accused National of “suffering from small-mindedness” and questioned what the Opposition’s policy was on climate change.

“It’s called pothole of the week,” he said, having a poke at National’s social media campaign encouraging people to send in photos of bad potholes. “Taking a photo of a pothole out by your mailbox is their answer.”

Labour deputy leader Kelvin Davis. Photo / Mark Mitchell

He recalled his younger days, when he worked tar-sealing roads.

“People think politicians have power, but I never experienced as much power as when I held a stop/ go sign. I know a little bit about potholes. In fact I used to fix potholes.

“The more severe the weather, the more traffic, the more potholes.

“The first cause of potholes is ignored by the opposition, the second cause of potholes is encouraged by the opposition.”

Davis took aim at National’s opposition to a methane emissions tax on farmers, and its opposition to the clean car feebates scheme. He argued that while farmers objected to the costs of the plan for a methane emissions tax, the bigger cost to them was from climate change and its effects such as floods.

“The Government budgets $530,000 a year to help farmers affected by extreme weather events. However, the average annual spend over the last five years has been just shy of $5 million.”

Davis said it would be easy to give in on taking action for electoral gain.

But he did not believe Labour had done that. “This Government will always face criticism for our decisions.

We must not be worn down by those who try to chip away at us with their insults … their misinformation - their pettiness, and their lack of courage.”

The conference began on Friday and wraps up this afternoon, when new party President Jill Day will take over the reins from the outgoing Claire Szabo.