16 Jan 2014

Economist dismisses welfare reforms

7:55 am on 16 January 2014

An economist says the Government has not yet proved its social welfare reforms are working, despite a new report which shows a significant drop in the forecast cost of beneficiaries.

The report says the welfare system's lifetime liability dropped by about $10 billion in the year to June 2013, a valuation which has been welcomed by Social Development Minister Paula Bennett.

Lifetime liability is the estimated cost of beneficiaries to the welfare system over their lifetime.

Ms Bennett says $4.4 billion of that reduction is because fewer people are going onto benefits and more are coming off them.

But an associate professor of economics at Auckland University, Susan St John, says lifetime liability is an estimated sum, and countless variables and assumptions have been made.

"We don't know how to assess that four-point-four billion because it's not an annual figure. It's a figure that reflects lifetime cost, and it sounds like a very large figure but we haven't got any context for it."

She said the figures don't prove welfare reforms are reducing lifetime liability.