Hon Dr Michael Cullen
Minister of Finance

Families package good for growth

"Working for Families is the centrepiece of this year's budget and will support the budget's strong pro-growth orientation," Finance Minister Michael Cullen said today.

"This is a large programme by anyone's definition and has been made possible by the government's cautious fiscal management over the last four years and by New Zealand's solid economic performance.

"It complements the business development initiatives in the budget in two important ways.

"It encourages beneficiaries into work, and it invests heavily in the workforce of the future - an investment which will benefit society at large, and particularly the baby boom generation whose quality of life in retirement will depend to a significant extent on the productivity, skills and innovation of the workers of the future.

"Half of all children aged 10 years and younger live in households on taxable incomes of less than $45,000 a year and these families stand to gain most from the package.

"Working for Families will also provide a modest fiscal stimulus to the domestic economy. The total cost at maturity will be $1.1 billion a year. This will be phased in, beginning in the coming 2004-05 year at $221 million and rising to $664 million in 2005-06 and to $900 million in 2006-07.

"These costs do not include the commitment, estimated at $60 million a year from 2008, to regularly review Family Support, Childcare Assistance, the new In-Work Payment and the Parental Tax Credit to ensure they maintain their value over time," Dr Cullen said.

Implementation of the programme would begin in October, this year and conclude on 1 April, 2007. The phasing would ease the administrative and fiscal impacts of the changes and reduce the risk of creating inflationary pressures.

Initiatives to increase the incentives and reduce the barriers to work include:

increasing the amount of income people can earn before their Family Support payments abate;

introducing a new In-Work Payment specifically for working parents;
raising the abatement threshold for the Accommodation Supplement;

increasing Childcare Assistance and;

changing the rules so that people on Invalids Benefit can trial working more than 15 hours a week for up to six months without losing benefit entitlement;

the level of payment may reduce according to earnings.

Dr Cullen said officials had been asked to report to Ministers by the end of next month on a comprehensive evaluation and monitoring framework to measure the effect of the changes.

ENDS

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