'Tasman gap' getting bigger, group warns

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Low-income families with children will be able to almost double their weekly tax credits if they move to Australia by 2018, an analysis has found.

In a pre-election "state of our children" report, the Child Poverty Action Group says this year's Budget cuts in Working for Families tax credits will create a dire "Tasman gap" between family support in the two countries by 2018 when they will be fully phased in.

Auckland University economist Susan St John said the cuts were subtle and would take effect slowly until 2018.

"They don't appear to hurt much, but over the time the differences between us and Australia will become ever starker," she said.

Families on benefits can already roughly double their tax credits by crossing the Tasman, from $88 a week to A$170 ($217) for a one-child family. That relative gap will be unchanged in 2018, assuming that family support is adjusted for inflation in both countries.

The current gap for low-income working one-child families is less because they get a $60 in-work tax credit in New Zealand, taking their total tax credits to $148 a week - within striking distance of the A$170 tax credits in Australia.

But the Child Poverty Action Group says that will drop to $120 by 2018 for a family now earning $36,827 a year, because the Budget changes will cut the threshold at which tax credits start being reduced from $36,827 a year to $35,000 by 2018, and will raise the reduction for every extra dollar earned above that from 20c to 25c.

Allowing for inflation of 5 per cent every two years, the group estimates that a one-child family on $36,827 now will earn $44,763 by 2018, so the family tax credits will drop from $148 to $120 a week.

Australia's tax credits are fully inflation-indexed, so the credits for a one-child family will rise by 2018 to A$206 ($262) a week.

Dr St John said the widening gap was not simply because Australia was richer.

"Obviously they are more generous because they are richer, but the design of the policy reflects a different value structure," she said.

"They are far more into putting the needs of the child at the centre, rather than paid work. So our policies flow from trying to increase the incentive for paid work, whereas their policy design reflects much more the value of the child and the value of child-rearing."

The report says a focus on paid work denigrates unpaid caring, punishing children whose parents can't find work and often driving parents into "child-unfriendly" working hours.

The report says Australia is also much more generous to families with newborn babies, paying a "baby bonus" of A$5294 ($6740) to many families.

On the web

www.cpag.org.nz