Benefit Forecasts for the Half Year Economic and Fiscal Update 2021

The Treasury’s Half Year Economic and Fiscal Update (HYEFU) released on 15 December 2021 includes benefit number forecasts as part of the fiscal forecasts.

The benefit forecasts were finalised using benefit data up to October 2021. This publication illustrates key benefit number forecasts presented in the HYEFU 2021.

The last forecast was Budget 2021 which was published in May. These forecasts are important because the New Zealand Government spends a large portion of the Budget on Benefit or Related Expenses ($28.5 billion over the 2020/21 financial year) and the forecasts are used to inform Budget decisions.

In October 2021 there were 356,500 people on a working-age benefit, which was around 27,000 (7.1%) fewer people than we expected at Budget 2021. Working-age benefits defined here as Jobseeker Support, Sole Parent Support and Supported Living Payment.

This is mostly because:

• MSD has maintained and continues to maintain a strong focus on supporting people into work
• the economy has been stronger than expected, making it easier for people to find work.

The number of people on benefit is expected to decline until 2023, in line with economic conditions

We see fewer people on benefit when economic conditions are good. The number of people on benefit is expected to continue to decline until 2023, before flattening in line with lower rates of economic growth over the remaining period. This slowing decline in working-age beneficiaries is shown in Figure 1.

There were 24,000 fewer people on Jobseeker Support (JS) at October 2021 than expected at the last forecast. The number of people on JS follows a similar trend to working-age benefits and is expected to decline until about the end of 2023 (see Figure 2).

MSD forecasts are subject to uncertainty

There is always a level of uncertainty with these forecasts because of the complex relationships between benefits, the economy, and government intervention. The current COVID-19 pandemic further heightens the level of uncertainty. For these reasons our forecasts may differ to the actual numbers of people on benefit.

Figure 1: Working-age benefit numbers

This graph shows the actual and forecast number of people on working age benefits from June 2014 to June 2026. Comparing the actual number of people on working age benefits (grey line) as at October 2021 to the forecast at Budget 2021 (green line), there are 27,000 fewer people than expected. The blue line shows the expected number of people on working age benefits over the next five years.

Figure 2: Jobseeker Support

This graph shows the actual and forecast number of people on Jobseeker Support from June 2014 to June 2026. Comparing the actual number of people on Jobseeker Support (grey line) as at October 2021 to the forecast at Budget 2021 (green line), there are 24,000 fewer people than expected. The blue line shows the general trend expected over the next five years, with the number of people on Jobseeker Support declining until around 2023.