Tobacco rise removed from benefit increase

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Welfare benefits will go up by just 0.61 per cent from April 1 because the Government has decided not to give beneficiaries any compensation for higher cigarette prices.

The increase is the lowest for many years and represents only an extra $1.25 a week for a single unemployed person aged 25 or over, or $2.08 a week for a couple.

But superannuation rates will go up by 2.44 per cent in line with the net average wage, providing an extra $8.50 a week for single superannuitants living alone and an extra $13.08 a week for a couple.

The diverging trends mean that the super rate for a couple will stay fixed at 66 per cent of the net average wage, while the benefit for a working-age unemployed couple will slip further from 42 per cent to 41.3 per cent of the net average wage, continuing a trend which has been steadily downwards since the late 1980s.

A Treasury paper prepared for the Long-Term Fiscal External Panel in January forecasts that benefits will roughly halve again as a proportion of wages as wages continue to increase faster than prices out to the year 2060.

A Social Development Ministry spokesman said this year's increase was based on a 0.9 per cent increase in consumer prices over the past year, but excluding "upward contributions made to the index by cigarettes and other tobacco products".

"Using this index prevents ongoing increases in tobacco excise tax, as well as other price changes for tobacco products, flowing through to increased benefit assistance," he said.

Sarah Thompson of Auckland Action Against Poverty, which has recently opened a beneficiary advice centre in Onehunga, said she was "confused and concerned" at the decision, given the rising costs of food and electricity.

Karen Pattie of the Glenfield-based Beneficiaries Advocacy and Information Service said many of her clients were struggling with a huge jump in water bills caused by an Auckland Council decision to bill households for wastewater as well as water supply. "Private landlords are passing on water bills to tenants, even low-income earners. It's a huge increase for clients to pick up, $75 a month at least," she said.

The consumers price index is averaged over the whole country and recorded only a 2.9 per cent increase in water prices last year.

Food prices actually fell by 0.5 per cent, but petrol rose by 0.9 per cent, rents by 2.4 per cent and power bills by 5.2 per cent.

Salvation Army analyst Alan Johnson said a "low-income consumers price index", based on typical spending by low-income families, rose by 1.4 per cent during the year, significantly above the 0.9 per cent official average.

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