Robertson defends handout

Finance Minister Grant Robertson has defended a $350 cost of living payment for people earning under a certain threshold after it was revealed officials warned the money could help drive up record inflation.

Robertson said the boost for adults earning up to $70,000 would not ‘‘unnecessarily’’ exacerbate inflation, but give more support to households through a challenging period.

‘‘There is a balance we were trying to strike – a recognition there was a wider group of New Zealanders who were facing the cost of living question,’’ Robertson said at a post-budget briefing in Wellington.

The Government didn’t want to ‘‘put in place something such as, I don’t know, untargeted tax cuts, that reach people who earn more than $180k’’, he said, referencing the National Party’s tax cut policy.

The Government announced on Thursday how it will spend $6 billion as part of Budget 2022, with $1.8b going to the new health system this year.

ANZ chief economist Sharon Zollner said whether the $350 payment was inflationary or not would depend on what people did with their money. Inflation occurs when there is too much money for too few goods, which drives up prices.

‘‘It depends whether households are going to say one thing and do another,’’ she said. ‘‘The consumption pulse is not going to be so strong if they do tighten the belt. It seems likely consumers are likely to pull heads in and whether they do that has big implications for economy as a whole.’’

Overall it was millennials – people born between 1981 and 1996 – who were ‘‘taking one for the team’’, she said. ‘‘Millennials are going to be carrying that load more than everybody else, both housing debt and government debt.’’ Inflation pressures were ‘‘intense’’ at the moment, but ANZ was optimistic it was at its peak.

‘‘The issue is how much longer it’s going to last,’’ she said. However there was an elevated risk for a recession because monetary policy can’t be nuanced as it seeks to drive down inflation.