Looming job and work hours crunch

The number of people in work recovered in June but there are still 20,000 fewer jobs than before the effects of Covid hit at the end of March, and earnings are down – many people have had wage rates cuts and ordinary and overtime hours cut.

While the New Zealand economy has weathered Covid reasonably well (due to a large amount of Government borrowing) a deep recession is predicted.

The Covid wage subsidy, which is propping up hours and jobs, ends next month so there is a looming job loss and wage cut crunch, unless there’s a sudden turnaround in business activity.

Stuff: Job numbers continue to recover after the Covid-19 slump, but wages still down

The number of jobs filled has continued to rise after the April lockdown, according to Stats NZ numbers out on Tuesday.

Filled jobs were up by 2053 in June, to 2.2 million. This followed a rise of 14,399 jobs in May.

Stats NZ economics statistics manager Sue Chapman said there had been month-on-month increases over the last two months after the sharp drop in April of more than 35,000 jobs.

So that’s about 18,000 down from March.

“We calculate filled jobs by averaging weekly jobs paid throughout the month, based on tax data. Filled jobs include jobs paid by employers who are being subsidised by the Covid-19 wage subsidy scheme.”

But many people who have kept their jobs have had pay cuts. The subsidy for people who had been full time requires them to be paid at least 80% of their previous wages – many have had their pay cut to 80%.

Gross earnings for the three months ending June were down $304 million (0.9 percent) on earnings in the March quarter.

This was the first time since the series began in 1999 that June quarter gross earnings were lower than March, Chapman said.

“While job numbers dropped and then started to recover, it is clear that salaries and wages received throughout the quarter have taken a hit,” Chapman said.

And it is predicted to get quite a bit worse.

Christina Leung, principal economist with the New Zealand Institute of Economic Research (NZEIR) said around 2 million people were either on the benefit or the wage subsidy scheme, which represented around 53 per cent of the working age population.

Around 65 per cent of people employed are on the wage subsidy scheme, she said.

“We forecast job losses of over 200,000 by June 2021,” Leung said.

“We expect unemployment rate to peak at around 8 per cent in late 2022. 

That’s over a year away.

The wage subsidy runs out next month, but I’m hearing employers already looking at what to do from September, and a number are talking about job losses or further pay cuts.

The actual impact of that in numbers will be felt straight away by many workers, but the total numbers probably won’t be apparent until after the election.

And some cuts will be delayed. Many companies are waiting and seeing while propped up by the subsidy. Some have already signalled closures later – a department store in Dunedin will close next January.

The economic news isn’t all bad. Grant Robertson in parliament yesterday – 1. Question No. 1—Finance:

On Friday, Statistics New Zealand released overseas merchandise trade statistics for June 2020. These showed total exports were up from the same time last year.

Goods exports in June were worth $5.1 billion—up $107 million from June 2019. The rise was led by dairy; with milk powder, butter, and cheese up $90 million, or 7.9 percent.

The value of log exports was also up by 7 percent since June 2019. This strong performance from our exporters contributed to a monthly trade surplus of $426 million in June.

The trade deficit for the year ending June was $1.2 billion—the smallest annual trade deficit since December 2014. All of this effort by our exporters demonstrates the continued strength of that part of our economy, despite the difficult prevailing conditions arising from the COVID-19 pandemic.

This is just some sectors. While the trade deficit is relatively small that will be affected by lower imports. And some sectors, particularly tourism and hospitality, have been badly affected, and the outlook for them over the next few months looks bleak.

And we are not over Covid yet, especially world-wide, but as some places have shown (like Victoria in Australia) it can easily come back.

Stuff: Mortgage holidays could be extended, wage subsidy back if needed

Minister of Finance Grant Robertson said the Reserve Bank of New Zealand extending mortgage holidays would be “justified” as he confirmed that the bank is considering elongating the scheme for Kiwi borrowers whose pay packets have taken a hit from Covid-19.

Robertson, in an interview with Stuff, also said that if parts of New Zealand were to enter a new level 3 or level 4 lock down in the event of Covid-19 community transmission re-emerging, that the wage subsidy could be reinstated.

That’s if Covid comes back, but people are already significantly affected.

According to the New Zealand Bankers’ Association, at June 30, 7 per cent of consumer loans (almost 60,000 loans) had had all payments deferred, while another 8 per cent of consumer loans had reduced repayments.

That’s over 120,000 loans.

The next set of National Accounts are due to be released on September 17 two days before election day) and will show the extent of New Zealand’s recession. Those figures will include most of the level 4 lock down period.

Robertson said that $14 billion held back last week from the $50 billion fund the Government created to fight Covid was crucial to wheel out if the economy, which has turned up since lockdown, starts to wobble again. Such measures could be required if the global downturn starts dragging New Zealand down further, or if community transmission broke out, and new regional wage subsidies were required.

That won’t help the many workers likely to be affected when the subsidy comes off, presuming Covid stays away.

Dark economic outlook

Robertson also warned that although economic conditions in New Zealand are comparatively robust, the global economic outlook was looking darker by the day. Official figures come out with the Pre-Election Fiscal Update on August 20, but Robertson said that The Treasury has given him preliminary warnings.

“The New Zealand economy has definitely come out of this better and quicker than we thought albeit still tough circumstances. The global economic story is the opposite. It appears to be getting worse.”

So the New Zealand economy hasn’t ‘come out of this better’, the full impact of an international recession hasn’t hit here yet. And our current economic situation is propped up by billions of borrowed money.

And despite all the money being dished out many workers are likely to find things tougher still after the subsidy runs out next month.

My job is reliant on business getting going again in countries currently severely affected by Covid with no quick turn-around expected. My earnings are down to 80% and could easily drop to half time of not to zero if things don’t improve internationally over the next few months. I know of another local business cutting 50 jobs and cutting hours of remaining employees by 25%.

And with Covid cases rising world wide the worst may not be over.

Flaring virus threatens world economy’s sputtering recovery

The world economy’s fragile recovery is in danger of stalling.

A resurgence of coronavirus infections across the Asia-Pacific region, which was considered to have broadly curbed the virus more effectively than elsewhere, is being viewed as an early warning for the rest of the world.

The pandemic continues to rage in parts of the US, hot spots in Europe, and across big emerging economies including India and Brazil. With little prospect of a circuit breaker until a vaccine is discovered and distributed, governments are having to double down on the US$11 trillion worth of stimulus and unprecedented central-bank support unleashed since the crisis began.

The US Federal Reserve meets this week to decide on interest rates as US lawmakers debate another US$1 trillion fiscal stimulus package. The European Union has just signed off on a planned €750 billion crisis package and governments everywhere are having to extend support programmes.

While China’s economy returned to growth last quarter and readings on industrial output have shown a V-shaped rebound, both consumer demand and private investment remain weak.

The US rebound is stalling after coronavirus infections spiked in a host of states.

“The global economic recovery is at risk,” said Mark Zandi, chief economist at Moody’s Analytics. “Key to ensuring the global economy doesn’t slide back into recession in coming months is continued aggressive monetary and fiscal support.”

In New Zealand we may be heading for a job and earnings crunch in the next month or two, but that may just be a phase in amongst larger and longer financial turmoil.

Working for Families versus tax cuts

Essential income assistance? Or trapping low income workers in a ‘handout cycle?

Working For Families was introduced in New Zealand in the 2004 budget of the Clark/Cullen government. It has been both praised and criticised.

It provides tax credits for families with dependent children aged 18 or under who are not in full employment. There are four types of payments:

  • Family tax credit (FTC) is paid regardless of your source of income.
  • In-work tax credit (IWTC) is an additional payment for families who normally work a minimum number of hours each week for salary and wages.
  • Parental tax credit (PTC) helps with the costs of a new baby for the first ten weeks after your baby’s birth.
  • Minimum family tax credit (MFTC) is paid to families earning up to $26,156 (from 1 April 2018) or less after tax to ensure a minimum family income of $503 a week after tax. To get this payment, at least one parent must be working for salary or wages for a minimum number of hours each week.

It is complex – see the Payment Table.

I’m not sure exactly what this means: “The amounts are based on your eldest child being aged 15 years or under and all other children being aged 12 years or under. If you have older children, you may be able to earn more and still be eligible.”

See also from IRD: Types of Working for Families Tax Credits

In opposition John Key referred to Working for Families as ‘communism by stealth’. However when National got into Government in 2008, faced with the Global Financial Crisis they left Working for Families in place and didn’t look like dumping it in their 9 year tenure. This effectively entrenched it.

A difficulty with stopping Working for Families is that it would substantially reduce the income of low income families, or an equivalent income would have to be provided via alternate benefits or tax cuts.

Talking of tax cuts, one person thinks that tax cuts would be a better solution in I’m trapped in a handout cycle, but I’m not a ‘bludger’.

People called me a ‘bludger’ when I spoke out about how a $16,000 pay rise only left me with $50 a week extra in hand, and how Working for Families has kept me in need of Government support. They were wrong, and most missed the point.

I am grateful for the support I get from the Government. I just wish I never received it in the first place.

The point I wanted to make was this: the Working for Families system is broken because it encourages people not to work or seek a higher income. Tax cuts for everyone in work is a better solution.

People missed the point that I am working more to reduce my reliance on Working for Families. If the system was geared towards incentivising working more, or going for that promotion, everyone would win. But it isn’t and this has the negative effect of subsidising wages for a group of people, holding them down for all workers.

Governments seem to prefer to take money off people via taxes, for most people income tax and consumption tax (GST), and then give money back to some.

Working for Families pays out to families in the middle- to high-income bracket. I will not escape the Working for Families trap until I earn around $120,000 a year, and that is not going to happen any time soon.

One significant criticism is that it gives tax credits to relatively high income earners who have children, while keeping income tax and GST high for other working people (employees or in business).

In the meantime, for every dollar I earn, I lose 70 to 85 cents at the other end.

This reduces incentives to work more or earn more.

With a different tax system and wages at the level they should be, I believe most families – including mine – could support themselves with no additional help from the taxpayer.

I don’t want handouts. They reduce the value of my own work and make me feel as though my family’s income is out of my hands. Unfortunately, I am caught in this cycle. Working for Families is such a large proportion of my income that declining the payouts is not an option.

I mentioned tax cuts as a better alternative as I believe allowing people to keep more of the money they earn will motivate them to improve their own situation rather than relying on the taxpayer.

But there seems little chance of any significant change to tax levels or Working for Families.

In the last election, both of the main parties’ answer to “children in poverty” was Working for Families.

The National Government had put tax cuts in place for this year but with no change to Working for Families, and in any case the Labour led government scrapped the tax cuts.

My vote in the next election will go to the party that is brave enough to say there is a better solution, that will also help people who are struggling but don’t have children.

The Government, following Labour policy, is doing a tax review but it doesn’t look like addressing tax levels and Working for Families credits.

There are some interesting comments too, SarahMC:

I am a single mother working all the hours my children are at school, working through some lunchtimes to do more hours, and also working a couple of evenings. When I’m not working, I am caring for my children. I receive a WFF payment. It bothers me that I work extremely hard but I still need a ‘handout’. I work all the available hours possible, but still feel like I’m a drain on society. It’s psychologically draining.

There is also a cost of adminstration – Jantar:

Redistributing income through supplements and handouts does not just penalise those who want to get ahead, it also wastes a lot of the additional tax take required in administration costs.

This comment doesn’t make sense – NewsRanger:

Ahhhh I think you’ll find your $16,000 pay rise left you $16k better off. It also means the taxpayers of New Zealand are $13,400 better off in not having to subsidise you. That money can now be invested in other New Zealanders in need. You didn’t lose anything, it wasn’t yours to start with.

Pre-tax income was their’s to start with, before the Government took most of it.


Surely Working for families is just a subsidy to the employer. Without it businesses would have to either pay a reasonable wage or succumb to the market forces they always bleat about.

Or ask for more low skilled immigration to work below minimum on the promise of residency. All our leaders seem happy with this answer.

BobbyM repeats a commonly made point about ‘corporate welfare’:

These wage top ups are nothing more than corporate welfare, or a taxpayer subsidy in recognition of minimum pay wage rates, It.s the employers that should be ashamed not the recipients of these payments.

It isn’t just ‘corporates’ that benefit from Government income assistance, many people are employed by small businesses.

I think there’s no doubt that Working for Families takes pressure off low wage employers.

However it makes things difficult for workers stuck in low wage jobs who don’t have children,

Greens launch electricity policy

The Greens launched their electricity policy today. Most of it is wordy and not easy to get a quick understanding of it.

The Empowering New Zealand comprehensive plan for the electricity sector includes:

  • $112 million for winter warm-up payments to help low-income households cover their power bills
  • setting a goal for 100 percent renewable electricity by 2030 (in average hydrological conditions)
  • an investigation into the electricity wholesale market
  • encouraging lines companies to work together and embrace new technology to bring down costs
  • modernising industry rules to encourage competition, transparency and use of data.

“Our plan will see more than half a million Kiwi households pay less to heat their homes every winter,” Green Party energy and resources spokesperson Gareth Hughes said.

“Setting a goal for 100 percent renewable electricity generation is bold, achievable, and the right thing to do for our planet.

“New Zealand can help lead the global clean energy revolution, creating jobs and exporting our clean energy expertise to the world, but we need Government leadership to make it happen.

“We have consulted the electricity industry to design a future-focused system and I’m confident the plan we announced today is ready to be acted on by the next government,” Mr Hughes said.

Of course it is subject to the Greens becoming a part of the next Government and getting Labour and perhaps the Maori Party or NZ First to agree to this policy.

A key feature is a handout to families with a joint income of less than $50,000 p.a. of varying amounts depending on where they live. You have to dig in to their documentation to find the nitty gritty:


These seems to be an odd way to help out poorer families, with a substantial administration overhead.

Why is the West Coast payment so low? Is power that cheap on the Coast? Or do they use a lot of coal and not so much electricity?

It’s not clear exactly how it would work but it appears to be a cash handout able to be used for anything, it just happens to be calculated on average power price increases for the winter. Which makes the power aspect more marketing than anything, and more complicated than it needs to be.

I don’t think this will be a ‘priority policy’ in Green campaigning. There’s a lot of other details that will sound fine to some but most won’t care if the understand.

Read it all if you like:

Cut health spend on smokers?

I had to read this headline several and opinion piece several times to figure out what Barry Soper was trying to say.

The Soap Box: Govt should put money where its mouth is and cut health spend on smokers

The drive is now on to have this country smoke free by 2025 – fat chance, but nevertheless it’s better to have a target to increase awareness than none at all. The smoking trend in this country is fortunately on the downward slope, even for the most prolific smokers, 18 to 24 year olds, who’ve kicked the habit with 24 percent of them still smoking, down 4 percent on 10 years ago.

Government subsidised quit smoking aids are plentiful, from nicorette chewing gum to patches and are available for a nominal fee for up to two months.    They’re now legalising E-cigarettes, and not before time, but for some unknown reason they’re resisting a subsidy at this stage for the nicotine liquid that goes in them.

If the Government’s really serious about making us healthier and cutting the health spend on smokers then it should put our money where its mouth is.

Soper is actually calling for a subsidy on E-cigarettes (that would be probably be controversial) presumably to help reduce tobacco smoking, which would reduce health costs, therefore the Government spend on health. That would take time.

Would a Government subsidy on E-cigarettes be a good social investment?

One possible ill-effect could be encouraging non-smokers to use subsidised vaping.

Labour: average worker $100k Kiwisaver cut

Andrew Little and the Labour party is claiming that the National Government “will reduce the average worker’s retirement savings by $100,000 over their working life”. They don’t seem to have thought this attack through very well and offer no solutions.

The claimed loss is due to reduced Government handouts for Kiwisaver. What the Government has been doing since Helen Clark and Michael Cullen were in power is tax workers, and then give some workers some of that back in a subsidy that the was tied up until they reached retirement age (currently 65).

New analysis shows National’s constant cuts to KiwiSaver will reduce the average worker’s retirement savings by $100,000 over their working life, Leader of the Opposition Andrew Little says

“The former Labour Government launched KiwiSaver nine years ago today to boost the country’s savings and ensure all New Zealanders have a nest egg in their retirement.

“National has gutted KiwiSaver.

They haven’t taken any money off workers or their Kiwisaver accounts.

Since coming to office it has made five separate cuts to the scheme:

• Taxed employer contributions

• Halved the maximum Member Tax Credit from $1042 to $521

• Halved the Member Tax Credit rate from $1 for every dollar saved to 50c

• Reduced employee/employer contributions from 4 per cent to 3 per cent

• Abolished the kick-start payment

So everyone in Kiwisaver is still getting handouts, they have just been reduced. In part this is because the uptake of Kiwisaver was well ahead of predictions and the cost to the Government was much greater than expected.

“Analysis by the Parliamentary Library (attached) shows a worker on the average wage joining the scheme today will have total contributions of $3500 after their first year. That would have been $6700 without these cuts.

According to that under the original terms of Kiwisaver they would have been given back $3200 in the first year. That would be tied up until their retirement.

“After their first year, the average worker misses out on $2,200 a year in contributions. That adds up to $100,000 the average worker will miss out on if they retire after 45 years’ work. That’s a big slice of their nest egg.

And it amounts to a big slice of taxpayer money when totalled up over all those getting Kiwisaver subsidies.

This press release from Little is only criticism of National, it doesn’t offer any alternative policy from Labour.

There is a post on this at The Standard – National costs you $100,000 from your retirement fund. Wayne comments:

Lets assume the calculations are correct. It is obviously true that if the taxpayer subsidy for each Kiwisaver account is reduced, the final amount saved in each account will be less.

I recall the reason why the changes were made, which was primarily because the uptake rate was much higher then anticipated by Treasury in part due to the size of the taxpayer subsidy. It also meant the cost to the govt finances was much higher then Treasury estimated, and at a time when we were in the middle of the GFC. This meant money being extracted from the economy and put into long term savings at the very time when current consumption was the need, or in other words the requirement was economic stimulus.

So Labour has now done the calculations of the impact of the changes for an account that lasts 49 years, fair enough. But it does raise the obvious question, will Labour restore all the subsidies for KiwiSaver, at a cost to govt expenditure of probably around $500 million, maybe more?

Ropata responded:

Is that what you tell yourself when cheering on the theft of billions from hard working kiwis?

FFS you RWNJs are short sighted idiots and have fucked over NZ time and time again


Theft of billions? All workers are taxed. Those who can afford Kiwisaver deductions get handouts from the Government – they get some taxpayer’s money back.


It’s funny how all the Nat Party policies have a short term benefit to the wealthiest 1% and a long term cost to the long suffering NZ taxpayer.

Kiwisaver handouts benefit probably the wealthiest 50% the most. Reducing the subsidies reduces that.

National must answer for their regressive policies that have worsened inequality in New Zealand and thrown thousands into poverty. that is the “real question” IM(NS)HO

Kiwisaver subsidies have nothing to do with the poverty issue, except that money that could potentially be spent on the poorest is benefiting middle and upper income earners – and Little and Ropata are complaining that this has been reduced!

Andrew Little:

“Figures released this week show growing inequality under this Government. National’s KiwSaver cuts are making inequality worse by making it harder for middle New Zealand to save.”

Kiwisaver does nothing to address the poorest – including those who are already retired and ineligible, those not working and ineligible, and the poorest workers who can’t afford to tie some of their earnings up for decades in Kiwisaver.

This is a poorly thought through attack by Little that offers no solutions.