Level of Social Assistance

IBISWorld forecasts the level of social assistance to fall by 0.2 percentage points in 2025-26 to 10.83% of GDP. New Zealand is looking to tighten spending in future budgets as the Government prioritises productivity and cost-saving measures. Although nominal spending on social assistance is increasing, it is unlikely to keep pace with GDP growth, causing the level of social assistance to fall over the year. Significant events like macroeconomic shocks and natural disasters can produce spikes in the level of social assistance. The Global Financial Crisis in 2008-09 resulted in a significant increase in social assistance due to a sudden rise in unemployment. This was further compounded by the 2010-11 Canterbury and Christchurch earthquakes, causing significant damage and loss of life, resulting in increased social assistance expenditure for those affected in the following year.

The COVID-19 outbreak was the latest large-scale economic shock to hit the New Zealand economy, and resulted in the highest single-year social assistance expenditure increase on record in 2019-20. This was largely due to the sharp economic downturn caused by the pandemic and the enormous fiscal response required to support individuals through the quarantine period. To restrict a rise in unemployment, the Central Government (Te Kawanatanga o Aotearoa) introduced the Wage Subsidy Scheme in March 2020 as a temporary measure to subsidise the employment of workers through the pandemic. The Central Government largely contained the virus and began scaling back support schemes as many businesses reopened. This reduction in government expenditure has been reflected in total spending on social assistance.