Budget 2015: How can there be child poverty in a land of milk and honey?

Recent announcements by the Green Party and Prime Minister John Key on child poverty in New Zealand are still just tinkering around the edges and not targeting the core of the problem.

Education is key. It’s a simple solution that will open fresh opportunities for the next generation of New Zealanders. The current school system is failing New Zealand children:

• 25% of children leave school in New Zealand with no achievement standard – that’s 15,000 a year; and
• 52% of Maori leave school with achievement standards of level 2 or below.

Although the figures quoted about the levels of child poverty in this country wildly vary – from 60,000 to 260,000 in the last week – there is no doubt New Zealand has a child poverty problem that’s not getting any better. 

Unicef stated that, in 2014, 22% (or 230,000) Kiwi children under the age of 18 were living in poverty. The 2014 Child Poverty Monitor (a collaboration between the Children’s Commissioner, JR McKenzie Trust and Otago University) determined that 24% (or 260,000) Kiwi kids live in poverty.

The OECD child poverty rate is defined as the share of children living in households with equalised disposable income of less than 50% of the median for the total population. In 2014, the New Zealand gross disposable income for the year was $46,914. 

Are these figures hard to believe? Absolutely. Especially considering that 50 years ago we were rated as having one of the highest standards of living in the world. 

Prime Minister John Key has indicated there will be something in the Budget to address child poverty but admitted there is not a lot of scope due to the tight economy.

The Greens’ suggestion is to encourage young people to save by giving each newborn a $1000 account, then matching it up to $200 a year with money invested in that account. Yes, it will mean that when the child turns 18, the account could be in excess of $10,000, but how will that help long term? Very little – unless it is invested into some form of education or skills training. And we already have a student loan scheme so, realistically, the money will more often than not end up going toward a car, holiday, new phone and the like and not invested in KiwiSaver or property as the Greens would like.

For all of our wealth in natural resources, especially water, New Zealand is a low-income country. We may be the food bowl of the South Pacific but we are predominantly a primary producer that adds little value – milk powder and forestry being two particular examples.

What New Zealand needs is more high-paying jobs but, to achieve this, we need higher educational standards. There are too many families dependent on low-income jobs, if indeed they are working.  Fifty per cent of households in which no one works are poor. If one person is working, the poverty rate falls to 19% and to 4% if two or more people work. Research indicates that a parent obtaining fulltime paid employment with sufficient earnings is the most important contributor to lifting children out of poverty. 

And this shouldn’t be the responsibility of the government alone. There needs to be a co-ordinated approach between central government, local government, iwi, Pacifika, social service providers, businesses, industry training organisations and communities to deliver well-paying job opportunities, especially in the regions. 

This will not be a one-budget wonder. Not only is there the question of child poverty but there also needs to be a regional focus. What is required in Taranaki, given its oil industry and high paying jobs, will be totally different from Poverty Bay, where there are less than 100 jobs paying over $100,000 in the entire province – less than a large technology company, law firm or accountancy firm.

It is a problem and it’s not going to go away. So we need the government et al to step up and create some good plans to start New Zealand on its way back to the overall standards of the 1950s and 1960s.

Peter Sherwin is a partner, privately held business at Grant Thornton New Zealand