New Zealand gives extra money to fight ‘inflationary storm’

New Zealand gives extra money to fight ‘inflationary storm’

WELLINGTON – The New Zealand government said Thursday it will give an extra few hundred dollars to more than 2 million low-income adults to help them navigate what it describes as “the peak of the global inflation storm”.

The payments are part of a package of new measures announced in the government’s annual budget. Other plans include increasing health spending by a record amount, putting more money toward reducing greenhouse gas emissions and increasing defense spending.

A Treasury report painted an optimistic picture of the nation’s economy through next year, but warned that growth would slow markedly from 2024 due to rising interest rates, a reduction in government spending due to the pandemic and supply problems made worse by Russia’s invasion of Ukraine.

A Treasury report forecast that unemployment would hit a low of 3.1% this year before rising to 4.7% by 2026. It predicted that inflation would fall from its current 30-year high of 6.9% to 2.2 % in the next four years.

Inflation payments of NZ$350 ($220) for three months start in August and target half of all adults earning less than NZ$70,000 ($44,000) a year. The government also decided to extend some other temporary measures aimed at combating rising costs of living, including a cut in gasoline taxes and half-price public transport fares.

“Our economy has weathered the impact of COVID-19 better than almost anywhere else in the world,” Prime Minister Jacinda Ardern said in a statement. “But as the pandemic subsides, other challenges have emerged, both long-term and more immediate.”

Ardern has been isolating at her Wellington residence this week after contracting the virus. His office said that he had experienced moderate symptoms and that he was improving, and at this point he still planned to travel to the US next week for a business trip and to give the commencement address at Harvard University.

The record NZ$1.8 billion ($1.1 billion) boost for health spending next year comes as New Zealand overhauls its publicly funded system by shedding a patchwork of 20 district health authorities in favor of a single system. The additional money will help pay off the debts of the district authorities, rebuild three hospitals and increase spending on medicines.

“This will make a huge difference to all New Zealanders, in terms of the healthcare they receive,” Finance Minister Grant Robertson said.

The Treasury predicted the government’s books would be back in the black by 2025 after it borrowed heavily during the pandemic. New Zealand’s net public debt is forecast to remain much lower than in most developed nations, peaking at 20% of GDP in 2024 before falling to 15% two years later.

Earlier this week, the government announced a new initiative to help pay low-income families to ditch their old gas-guzzling vehicles and replace them with cleaner hybrid or electric cars as part of a sweeping plan to reduce greenhouse gas emissions.

The budget plan also included a NZ$660 million increase in defense spending over four years to cover the cost of asset depreciation.

Conservative Opposition Leader Christopher Luxon said the ruling Liberal Labor Party had a spending addiction and the budget plans would put the economy into reverse gear, with New Zealanders experiencing the worst cost of living crisis in a generation.

The budget plan was expected to be approved quickly by lawmakers as the Labor Party holds the majority of seats in Parliament.
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Melissa Galbraith
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