Benefit number forecasts and scenarios - BEFU 2020

Forecast summary

The Treasury’s Budget Economic and Fiscal Update (BEFU) release on 14 May 2020 includes benefit number forecasts as part of the fiscal forecasts. This page illustrates key benefit number forecasts and the 2 scenarios presented in the BEFU.

There is a lot of uncertainty with these forecasts given the unprecedented nature of the economic shock and more reliance is placed on professional judgement than usual. The outlook is expected to be much worse than the Global Financial Crisis (GFC).

In February 2020, around 300,000 people were receiving benefits (latest actual at time forecast was finalised), at 10.0% of working-age population. In January 2021, we expect working-age benefits to peak at around 490,000. This is around 155,000 more people than at the peak of GFC, at 16.0% of the working-age population.

This growth is driven by Jobseeker Support and significant flow-on impacts are expected to supplementary assistance payments such as Accommodation Supplement and Special Needs Grants.

Forecast data

This is a high-level overview of the data used in the graphs for the benefit number forecasts and scenarios below.

Working age benefit numbers

Actual and forecast

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Jobseeker Support

Actual and forecast

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Sole Parent Support

Number of recipients

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Accommodation Supplement

Number of recipients

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Special Needs Grants

Number of grants

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Increase in expected spending driven by Jobseeker Support

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Scenarios

There are 2 economic scenarios produced by The Treasury which are based on how the economy may evolve differently from BEFU 2020. These scenarios are:

1. Slower recovery
2. Moderated impact

Both scenarios lead to similar growth in benefit numbers for the remainder of 2020.

For both scenarios there is an estimated divergence in trends in the first half of 2021, compared to BEFU 2020. The difference is more pronounced in the ‘Slower recovery’ scenario.

Benefit number scenarios

Working age benefit numbers

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Slower recovery

Slower economic recovery leads to higher benefit numbers from early 2021 (compared to BEFU 2020 forecast). The decline in benefit numbers would be slower as the economy recovers more gradually.

A slower recovery would be contributed from:

• a more gradual recovery in tourism
• materially weaker trading partner growth
• shifts in demand (domestically and abroad).

This would result in slower business investment and persistently higher unemployment.

Moderated recovery

More effective control of COVID-19 spread, domestically and abroad, leads to a more moderated impact on the economy.

This will lead to slightly less people on benefits, as the decline in benefit numbers will occur faster (compared to BEFU 2020).

The better economic outcome is due to:

• tourism recovering from late 2020
• improved business sentiment
• demand for New Zealand exports recovering at faster pace.

The numbers quoted in this table use the month-average figures used in producing the expenditure forecasts. They will differ slightly from the Official Benefit Counts as used in the Benefit Fact Sheets.