Five Million Voices

Should main benefits be indexed to inflation (the Consumers Price Index) instead of net average wage growth, with the minimum family tax credit adjusted accordingly?

The bill amends the Social Security Act 2018 to index main benefits to changes in the Consumers Price Index rather than net average wage growth, and amends the Income Tax Act 2007 to adjust the minimum family tax credit threshold in line with that change. The changes take effect from 1 April 2024.

⚡ Taken under urgency

Parliament advanced this bill under urgency (committee of whole house, first reading, second reading) — moving it through faster than usual, with less time than normal for public submissions.

MPs’ arguments for and against the bill

Why support it
  • Supporters argued that indexing benefits to the Consumers Price Index protects recipients' purchasing power while keeping benefit costs sustainable and manageable over the long term.
  • Supporters said the change returns to a method used for 31 of the last 35 years and balances the interests of working taxpayers who fund the system with those receiving support.
  • Supporters argued the bill aligns the minimum family tax credit so low-income working families remain financially better off in full-time work than on a benefit, reinforcing work incentives.
Why oppose it
  • Opponents argued that a supplementary analysis report indicated more children would be in poverty as a result, with beneficiaries ending up with less money over the forecast period.
  • Opponents said women, Māori, Pacific peoples, and disabled people are disproportionately represented in benefit households and would be disproportionately affected by the change.
  • Opponents argued that indexing to wage growth, as recommended by experts, is a more effective way to address child poverty than reverting to CPI indexation.

These are claims MPs made in Parliament’s debate — not verified facts.

Full bill summary & link to official bill page

This bill changes the way main welfare benefits are adjusted each year to keep pace with rising costs. It amends the Social Security Act 2018 so that the affected benefits are indexed to the Consumers Price Index (CPI) - the general measure of price inflation - rather than to growth in average wages. Under wage indexation, introduced in 2019, benefits rose in line with average ordinary-time earnings; this bill returns them to price-based increases by moving them between the relevant sections of the Act. It also amends the Income Tax Act 2007 to lift the threshold for the Minimum Family Tax Credit, a top-up that guarantees a minimum after-tax income for working families with children, so that it keeps step with the benefit changes. In effect, annual benefit rises are tied to prices, and a linked adjustment is made to support for low-income working families.

The measure is a government bill giving effect to a coalition decision, reversing the wage-indexation policy the previous Labour government adopted in 2019. Supporters argue that linking benefits to prices - the long-standing pre-2019 approach - protects recipients' purchasing power while saving the Crown significant money over time, and helps preserve the financial gap between being on a benefit and being in paid work, which they say strengthens incentives to take up jobs. Critics argue that because wages usually grow faster than prices, price indexation causes benefit incomes to fall behind the rest of society year after year, deepening relative poverty and inequality, and hitting some of the country's poorest households and their children hardest. They see it as a cut in all but name, made at a time when many beneficiaries were already struggling with high living costs.

See the Parliament.nz ↗ site for the full bill.

Oppose (No) Support (Yes)

Social Security (Benefits Adjustment) and Income Tax (Minimum Family Tax Credit) Amendment Bill · Third Reading, 20 Feb 2024
Parliament voted 68–55 — it passed.