Henare Tau: Questions for Oral Answer — Questions to Ministers Questions to MembersText is incorporated into the Bound VolumeHenare Tau: Questions for Oral Answer — Questions to Ministers Questions to Members[Sitting date: 24 June 2014. Volume:699;Page:18770. Text is incorporated into the Bound Volume.]3.Hon TAU HENARE (National)to the Minister of Finance: What reports has he received on inequality in New Zealand and how do recent changes in trends compare to other countries?Hon BILL ENGLISH (Minister of Finance):Last week the OECD released an updated report on income inequality for the period 2007 to 2011. The OECD finds that New Zealand is one of six countries out of 33 in which both market income inequality and disposable income inequality were flat or slightly better between 2007 and 2011 a period when New Zealand experienced its own recession plus a deeper recession caused by the global financial crisis—that is the disposable income inequality and market inequality was flat or slightly better over that period. The report also finds that in New Zealand disposable incomes for the top 10 percent of income earners were hit harder in the global financial crisis than the bottom 10 percent of income earners. Across the whole OECD the opposite was true with the bottom 10 percent of disposable incomes falling by twice as much through the global financial crisis.Hon Tau Henare: What does the OECD report say about changes in relative poverty in New Zealand compared with other countries?Hon BILL ENGLISH: Well there are quite a lot of different measures of poverty. The OECD uses a measure called relative income poverty which shows that the share of New Zealand households in relative income poverty fell just marginally from 11 percent in 2007 to 9.8 percent in 2011. Relative poverty is the share of people with less than half of their country’s median income. The OECD also reports on something it calls anchored poverty which is defined using an income threshold fixed in real terms in 2005. Here there was a small increase with New Zealand around the middle of the OECD and below the average change across the OECD. These measures confirm that New Zealand has been able to find a balance in supporting the most vulnerable families through the global financial crisis setting a path back to surplus and getting the economy back to growth without increases in inequality of incomes.Hon David Parker: Does that OECD report on household income show that during the period from 2008 to 2011 the bottom 10 percent of New Zealand households got poorer on average?Hon BILL ENGLISH: It shows as I pointed out in my earlier answer that the bottom 10 percent of household incomes dropped marginally in that period and the top 10 percent of incomes dropped further in that period.Hon Tau Henare: How do the findings by the OECD compare with reports by the Ministry of Social Development on income inequality?Hon BILL ENGLISH: We will get an updated report from the Ministry of Social Development in the next month. It is generally considered the authoritative measure of income inequality and hardship in New Zealand. The most recently published full report in July 2013 found that income inequality in New Zealand has been flat or slightly declining in the mid-2000s and that the share of income going to the top 1 percent has been flat in New Zealand since the mid-1990s and well below that in the commonly quoted countries of the US and the UK. The OECD uses data from the Ministry of Social Development’s household incomes in New Zealand’s report and compares it with data from other developed economies.Hon David Parker: Has the data released by Statistics New Zealand from this year’s census shown a marked increase in the gap between average household incomes in wealthier Auckland suburbs compared with lower-income suburbs?Hon BILL ENGLISH: I think it does show something like that but the member is working pretty hard to find what you would expect to find and that is that if on average income inequality is about the same you will find subgroups and you will find communities where income inequality has increased and you will find others where income inequality has decreased. That is what you would expect to find when you decompose national averages. But the national picture is clear: although most people believe that the rich are getting richer and the poor are getting poorer that is in fact not the case in New Zealand despite the fact that we have had a major recession.Hon Tau Henare: What alternative approaches to poverty reduction has he seen and what lessons can we take from these approaches to achieve better outcomes for vulnerable families?Hon BILL ENGLISH: I think the situation is summed up by one authoritative source—the Salvation Army. In 2008 it pointed out that there had been a 70 percent increase in spending on welfare health and education under the previous Government but there was very little social progress. If I can quote it: “measures of progress … should not just be those of how much our economy has grown … more relevant measures could be those of how few people are locked up in prison how few violent crimes have been committed and how much better children in poorer schools are achieving.” We agree with those measures. That is why this Government has set results targets to report on regularly in each of those categories and we are generating better outcomes for New Zealanders as well as holding the rate of income inequality.