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'Welfare system is just too stingy, too mean' - Experts say Budget must focus on redefining society, not just economy

A pair of economists say today's Budget from Finance Minister Grant Robertson needs to do more than just keep the country afloat in a post Covid-19 world.

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Economist Shamubeel Eaqub says welfare should be high on the Government's list today to help Kiwis operate post-Covid. Source: 1 NEWS

Shamubeel Eaqub and Andrea Black spoke to TVNZ1's Breakfast this morning about what they are looking for from today's Budget and said they want it to "rebuild us better than we started with".

Mr Eaqub believes today's Budget can't look to solve every problem but instead should focus on the welfare system and taking the first steps to redesign it.

He says it should not only accommodate the thousands of jobless Kiwis from the lockdown, but also those already on it who have struggled to make ends meet regardless.

"We haven't fixed our welfare system for nearly 40 years," Mr Eaqub said.

"When you lose your job today, your income is likely to fall by between 25 and 80 per cent - it's a huge financial shock for people.

"The lack of willingness to change the welfare systems has been because most people don't know what it feels like to be poor. Most people don't realise that the welfare is a really substandard way of living."

It is estimated New Zealand's unemployment rate could spike from four per cent pre-Covid to double-digits post-lockdown with approximately 1,000 new Kiwis applying for social welfare daily.

Mr Eaqub said that could lead to a big wake up call for both the Government and New Zealand in general.

"As more New Zealanders experience this poverty, I think our willingness to have a better welfare will come through, but will that happen in this Budget? I don't think so. I don't think the social license is there yet to make it nearly as generous as it needs to be to actually prevent the long-term poverty we have seen our welfare system create for the last many decades."

With that in mind, Mr Eaqub said the Government needs to make the tough call to sacrifice some sectors for the betterment of New Zealand.

"When it comes to the impact on the economy, it's not going to be just tourism - it is going to be felt in every part of the economy and that's why the Government can't save every job and every business.

"In the first flush, while we thought the virus could be controlled, the Government had to be generous and unconditional in trying to support businesses and jobs but in this next phase, this is where it gets tough.

"We're going to have to say, 'look, we can't give money to everybody, it's better that we let some businesses fail but look after the people because what matters ultimately is looking after the people who are involved in these things'."

Mr Eaqub said that required focus on people is why the welfare system must be addressed sooner than later.

"What the welfare advisory group and previous groups have said is that the welfare system is just too stingy and too mean. It needs to be much more generous.

"It needs to be more of an usher than a bouncer - we're trying to stop people from entering the system when we should be encouraging them in and helping them out."

Essential Workers need attention

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Andrea Black says today’s Budget needs to focus on overlooked essential workers without fair pay agreements Source: Breakfast

Ms Black, a Council of Trade Unions economist, also appeared on Breakfast and shared the same sentiments as Mr Eaqub, saying the Budget is a chance to reset New Zealand's economic outlook.

"The world we went into pre-Covid was low wage, low productivity, high rent and high carbon economy and society and we really want to see the plan to rebuild us. Not in the way that we we went into lockdown and Covid, but a better and improved society for everybody," she said.

"It's true we're about to go into quite awful levels of unemployment but we need to have an eye on any money that the Government spends. It's always, 'is it going to make us higher wages? Higher productivity? Are our rents going to go down and are we going to have lower emissions?

"Now we might have a transition path to get there, but we're really looking for the money that the Government spends has the eye on the future as well as the immediate term of keeping people in work."

Ms Black said an area the Government could target immediately that will help with that transition is fair pay for essential workers.

"It's fascinating that so many of the essential workers - supermarket people, the cleaners, the security guards, the courier drivers - they were all going strong under Level 4 and a lot of them are not earning a living wage and they don't have a fair pay agreement where they can look to negotiate and look to collectively organise their conditions.

"This also seems to be an opportunity to invest in the social infrastructure of this country - the people who feed us, nurture us and help us raise to our potential. That is our essential workers. It is our doctors and nurses. It is our teachers and carers. 

"We would like to see any rebuild has a focus on these groups in society because quite frankly, if we're not fed, if we're not nurtured, if we're not reaching to our potential, all the physical infrastructure or the general economic activity doesn't do as well as it could."

Ms Black added it's therefore vital the Government gets today's Budget right.

"If we want to move forward into a better New Zealand, this really needs to be the platform for it."