Social Development Minister Carmel Sepuloni is calling ACT's 'debt destroyer' proposals "an erroneous act of miscalculation" that does not factor in the human costs of vulnerable New Zealanders.
ACT leader David Seymour launched an online calculator earlier this month that lists several ways the Government could pay back debt by making sweeping cuts, which added up could save about $148 billion, according to the website.
It proposes using the COVID-19 fund to pay off debt, pausing Super Fund payments, returning benefits to pre-COVID-19 levels, ending the winter energy payment, reversing Working for Families increases, and ending BestStart payments, to name a few.
It also suggests 12-month GST holidays for small businesses needing a boost, and reducing the 30 percent tax rate to 17.5 percent to keep more money in people's pockets.
"When businesses and households tighten their belts, so should politicians. We need an honest conversation about our spending and debt problem," Seymour said.
"The Debt Destroyer asks New Zealanders to be part of an honest conversation. Users will be able to choose to reduce spending on certain items, and see how much can be saved and how much sooner we'll start to repay the debt."
But Sepuloni said ACT's proposals to return benefits to pre-COVID-19 levels, end the winter energy payment and reverse benefit changes in the Families Package would "plunge thousands of low and middle income Kiwis into serious hardship".
Sepuloni said the winter energy payment has helped over a million New Zealanders have more to spend on warmer homes. She said doubling the payment not only helped to keep people well but also was a "much needed economic stimulus" during a crucial time.
The Government's first $12 billion COVID-19 relief package in March included $2.8 billion for income support, including a $25 per week benefit increase starting from April and a doubling of the winter energy payment.
"Households and individuals could see a massive decrease to their weekly budgets under ACT's proposals - it's a short sighted set of policies with a callous singular focus on Crown debt reduction irrespective of the human cost," Sepuloni said.
Auckland Action Against Poverty coordinator Ricardo Menendez March, who is also standing in the Maungakiekie electorate for the Green Party, agreed with Sepuloni.
"The ACT Party's proposals show both a complete lack of empathy and understanding for the hardship faced by a growing number of people, as well as no literacy when it comes to Government fiscal policy," he said.
"Cutting the funding of already insufficient benefits would lead to a sharp increase in household debt for low-income communities, who would then be forced to take on more overdrafts, credit card debt and loans from Work and Income just to survive."
Economist Shamubeel Eaqub said the proposed cuts could lead to "significant hardship among the poor and lower income families, the ranks of which will be rising due to significant job losses in the current pandemic".
The Welfare Advisory Group work suggested in 2019 that the current level of welfare and support payments are already very low and entrench poverty.
"The evidence shows creating greater hardship for the poor does not incentivise them to 'pull themselves up by the bootstraps' rather it means they have no boots," Eaqub said.
The Government has opened up its books revealing net core Crown debt is forecast to increase to more than $200 billion by 2024, or 55.3 percent of GDP. New Zealand is now officially in recession, with GDP dropping 12.2 percent in the June quarter.
Seymour is concerned about future generations being burdened with debt.
"New Zealand's historic debt levels demand serious political leadership. Our current fiscal track is totally unsustainable. Party leaders need to front up with plans for getting on top of out-of-control spending and debt," he said.
"Every other political party is now in a race to spend even more taxpayer money. Every vote for ACT is a vote for lower debt, less tax and a faster recovery."
Finance Minister Grant Robertson told The AM Show on Thursday he has no plans to make sweeping cuts to pay off the billions of dollars in fiscal stimulus the Government has borrowed to ease the burden of COVID-19.
"Being careful with our spending, making sure that we do grow the economy sustainably and we have a plan for that, and as we have committed using the tax system to have those top two percent of earners pay a little bit more," he said.
"All of those things together will get us through this. A short, sharp shock approach - the austerity approach - doesn't work. It actually does more damage in the long-run in my view."
The National Party is concerned that under Robertson's plan New Zealand will be in deficit every year for at least the next 15 years and Treasury predicts 100,000 more Kiwis will lose their jobs in the next two years.
The National Party is still yet to release its fiscal plan.
