GCSB tried to stop Treasury hack claim

NZ Herald: GCSB tried to stop Treasury boss Gabriel Makhlouf from saying website, Budget had been ‘hacked’

Political reporter Derek Cheng has uncovered new details of the hours leading up to Treasury boss Gabriel Makhlouf’s claims that his department’s website had been hacked for Budget details.

The Government’s spy agency made urgent calls to the Beehive before Makhlouf’s public statement – we reveal today what they told at least one senior Government Minister.

The new details come as Makhlouf faces a State Services Commission investigation over the way he handled claims the website had been hacked. It later transpired that Budget details could be uncovered using the Treasury’s search engine.

Matthew Hooton:

Could it have been little more than Makhlouf’s understanding (or misunderstanding) of what ‘hack’ meant?

Hack: “gain unauthorized access to data in a system or computer.”

Was whoever searched like crazy through the weekend authorised to do that? Was Simon Bridges and National authorised to release budget details two days early?

Authorise: “give official permission for or approval to (an undertaking or agent)”

Hgas: “who gives a stuff?”

Bridges claims ‘deceit and dirty politics’ – but who did the dirty?

Simon Bridges and National continue to go hard out on the leak of budget information two days before Budget day.

But who is playing dirty here?

RNZ Week in politics: National set the trap and Robertson walked into it

National used the information it found on Treasury’s website to set a trap – and it worked far more effectively than Simon Bridges could have imagined after Gabriel Makhlouf made his “we have been hacked” announcement.

Finance Minister Grant Robertson walked into a trap set by National when he linked the Budget “leak” to illegal hacking.

It was no such thing, and National had known it all along. A simple website search had given the Opposition details of some of the spending in yesterday’s Budget.

At the same time, Mr Bridges was giving a hand-on-heart assurance that National had acted “entirely appropriately” while refusing to say how it had obtained the information.

At that point, National had probably expected the usual response to a leak – condemnation of such behaviour and the announcement of an inquiry.

What it could not have expected was Treasury Secretary Gabriel Makhlouf dramatically announcing that his department’s website had been systematically hacked, and that he had called in the police on the advice of the GCSB.

That was a game-changer, and Mr Robertson seized it. “We have contacted the National Party tonight to request that they do not release any further material, given that the Treasury said they have sufficient evidence that indicates the material is a result of a systematic hack and is now subject to a police investigation,” he said.

The implication was obvious – National had either hacked the website or received the information from someone who had. Whoever did it, their actions were illegal.

It turns out what National did wasn’t illegal – but I still think it was highly questionable. They were trying to do a dirty on the Government to grandstand prior to the budget going public.

Mr Bridges raged about unjust smears on his party and accused Mr Makhlouf and Mr Robertson of lying. The Treasury secretary’s position was untenable and Mr Robertson should resign.

He claimed Treasury had quickly discovered the huge chink in its security and had “sat on a lie” while his party was being accused of criminal behaviour.

This leaves some very big questions which have not yet been answered. If Treasury’s IT people knew what had happened, why did Mr Makhlouf go public with his hacking announcement?

Was he misled by his own department, by someone who didn’t want it known that a blunder had been made with the uploading? That’s hard to believe, because it must have been realised that National was going to blow the whistle on the website search.

Did Mr Makhlouf make the decision to call in the police on his own? Mr Robertson says he didn’t know until after the fact, but Mr Bridges rejects that. It’s unthinkable, he says, that a department head would make a call like that without first informing his minister.

The way Mr Bridges sees it, the hacking was a cooked up story to smear National and take the heat off the government and the Treasury.

But the whole thing was cooked up by National in the first place.

Bridges acted offended when accused of hacking, but he hasn’t hesitated accusing Robertson, without any evidence. And he is also accusing Treasury.

RNZ:  Treasury knew there had been no hack on Budget information – National Party leader

The National Party is confident the investigation into Treasury’s claim Budget information had been hacked will prove that Treasury “sat on a lie”.

National Party deputy leader Paula Bennett, who asked the SSC to investigate, said her party would let the inquiry play out but stands by its assertion that Mr Makhlouf mislead New Zealanders.

It has previously said Mr Makhlouf should resign.

Mr Makhlouf says he acted in good faith.

National Party leader Simon Bridges told Morning Report today there were two possible scenarios, and the situation was likely a bit of both.

“You’ve either got bungling incompetence, and I think we can all believe that could well be the situation, or you have some broad form of deceit and … dirty politics.

“And we need to see what’s going on here.”

He said the GCSB told Treasury and the Minister of Finance that there had been no systematic hack, but Treasury came out after this and said there had been.

“The reality of this situation is it’s pretty black and white isn’t it.

So as a result of a deliberate and concerted effort by National to exploit a data vulnerability at Treasury in an attempt to embarrass the Government we now have two inquiries, and National have called on the Minister of Finance and the head of Treasury to resign. It has also jeopardised Makhlouf’s new job in Ireland.

MSN:  Gabriel Makhlouf’s next job at Ireland’s top bank under threat

Irish politicians say they’re concerned New Zealand Treasury Secretary Gabriel Makhlouf will become the country’s next Central Bank governor amid the Budget “hack” scandal.

Pearse Doherty, finance spokesperson for left-wing Irish republican party Sinn Féin, told The Irish Times Maklouf should not start his role with the Central Bank until the investigation has concluded.

Doherty said it “wasn’t a small issue”.

“We need to make sure that someone in the highest position in the Central Bank has proper judgement,” he told The Irish Times.

Ireland’s Fianna Fáil party member Michael McGrath has also reportedly sent a letter to the Irish Finance Minister.

“The governor of the Central Bank is one of the most sensitive and important roles in our States,” the letter says.

“It is vital we have full confidence in the holder of the office.”

So National may succeed in ruining Makhlouf’s career. Robertson is unlikely to resign – and I think it would be a disturbing result if he is forced to.

Sure Makhlouf and the Government may not have handled the budget leak well. But this was a dirty politics style hit job by National, serving no positive purpose, and highly questionable as ‘holding the Government to account’.

They would have hoped to cause some embarrassment, and got lucky when it precipitated a shemozzle, leading to two inquiries and careers in jeopardy – not because of the initial problem, but because of how it was mishandled. This is classic negative politics.

For what? Some budget information was publicised two days before it was going to be made public anyway. National well know that budgets are kept secret until announced in Parliament, and there’s good reasons for this.

This sort of thing really puts me off politics – especially off politicians who try to engineer scandals that really has nothing to do with holding to account.

If there wasn’t other things keeping me going here I think I could happily pack up and go and do something else as far from politics as I can get.

This political debacle sets a very poor example. It is a form of bullying – political bullying, where dirty means are employed to cause problems that needn’t happen. Shouldn’t happen.

Another thing that may keep me involved is looking at ways of getting our politicians to set positive examples, and save the hard ball holding to account to when it really matters.

Is there any chance of that? I’m probably wasting my time here.

Second inquiry by State Services over budget leak

The State Services Commission has announced they investigate statements made and actions taken by the Secretary to the Treasury Gabriel Makhlouf following the leak of budget data two days before budget day last week.

This is in addition to an inquiry into the leak itself, announced last week.

Makhlouf seems to have handled things poorly, and the Government was messy with their handling as well.

But two inquiries as a result of the National Opposition ferreting for something so they could grandstand and embarrass the Government.

What has been achieved overall? More self inflicted discrediting of Parliament and politics in general. I don’t see anything positive from all of this.

There is no benefit to the public.

Last week:  Inquiry into unauthorised access to Budget material

The State Services Commission will undertake an inquiry into how Budget material was accessed at the Treasury.

The Secretary to the Treasury, Gabriel Makhlouf, asked the Commissioner to inquire into the adequacy of Treasury policies, systems and processes for managing Budget security.

“Unauthorised access to confidential budget material is a very serious matter,” said State Services Commissioner Peter Hughes.

“Mr Makhlouf has asked me to investigate and I am considering my options. This is a matter of considerable public interest and I will have more to say as soon as I am in a position do so.”

While there is no evidence of a system-wide issue, Mr Hughes has asked Andrew Hampton, the Government Chief Information Security Officer, to work with the Government Chief Digital Officer, Paul James, to provide assurance that information security across the Public Service is sound.

“This is an important issue because it goes to trust and confidence in the Public Service and in the security of government information,” said Mr Hughes.

“The inquiry will seek to understand exactly what has happened so that it doesn’t happen again.”

Today:  Investigation into statements made and actions taken by the Secretary to the Treasury

State Services Commissioner Peter Hughes has today announced an investigation into recent questions raised concerning the Chief Executive and Secretary to the Treasury, Gabriel Makhlouf, and his actions and public statements about the causes of the unauthorised access to Budget material. 

The investigation will establish the facts in relation to Mr Makhlouf’s public statements about the causes of the unauthorised access; the advice he provided to his Minister at the time; his basis for making those statements and providing that advice; and the decision to refer the matter to the Police.

Mr Hughes said the questions that have been raised are a matter of considerable public interest and should be addressed.

“It’s my job to get to the bottom of this and that’s what I’m going to do,” said Mr Hughes.

Mr Hughes has asked Deputy State Services Commissioner, Mr John Ombler QSO, to lead the investigation. It will be done as quickly as practicable and the findings, and the Commissioner’s view of them, will be made public.

“Mr Makhlouf believes that at all times he acted in good faith,” said Mr Hughes. “Nonetheless, he and I agree that it is in everyone’s interests that the facts are established before he leaves his role on 27 June if possible. Mr Makhlouf is happy to cooperate fully to achieve that. I ask people to step back and let this process be completed.”

Neither Mr Hughes or Mr Makhlouf will be making any public comment until the investigation is finished. Mr Makhlouf will be working as usual during this period.

The investigation announced today is separate to the inquiry announced last week into the unauthorised access of Budget information. The Terms of Reference and who will lead this inquiry, which is expected to take some months, will be announced shortly.

What about an inquiry into why politicians waste so much time (and public service time) doing negative crap that has no real benefit to the country?

Police say that budget leaks not unlawful

Police have conformed what has been widely claimed already about the budget leak – they say the information was obtained by ‘exploiting a bug’.  What? Online viruses exploit bugs, but that doesn’t make them lawful.

Whatever the law says on this, questions about the ethics of National publicising the material they obtained remain. As has been pointed out, they could have highlighted the flaws in information security without abusing the budget process.

Stuff:  Budget leaks ‘not unlawful’, no further police action

In a statement ahead of Thursday’s budget and an expected press conference from the National Party where leader Simon Bridges was to explain how he got his hands on budget information early this week, the Treasury said that police had advised that “an unknown person or persons appear to have exploited a feature in the website search tool” – but that this “does not appear to be unlawful”.

Police are therefore not planning further action, but the State Services Commission will undertake an inquiry into the issue.

The Treasury said it and and the GCSB’s National Cyber Security Centre has been working on establishing the facts.

“As part of its preparation for Budget 2019, the Treasury developed a clone of its website. Budget information was added to the clone website as and when each Budget document was finalised,” it said in a statement.

“On Budget Day, the Treasury intended to swap the clone website to the live website so that the Budget 2019 information was available online. The clone website was not publically accessible.

“As part of the search function on the website, content is indexed to make the search faster. Search results can be presented with the text in the document that surrounds the search phrase.

“The clone also copies all settings for the website including where the index resides. This led to the index on the live site also containing entries for content that was published only on the clone site.

“As a result, a specifically-worded search would be able to surface small amounts of content from the 2019/20 Estimates documents.

“A large number (approx. 2000) of search terms were placed into the search bar looking for specific information on the 2019 Budget.

“The searches used phrases from the 2018 Budget that were followed by the ‘Summary’ of each Vote. This would return a few sentences – that included the headlines for each Vote paper – but the search would not return the whole document.

“At no point were any full 2019/20 documents accessible outside of the Treasury network.”

The Treasury said the evidence shows “deliberate, systematic and persistent searching of a website that was clearly not intended to be public”.

So there seem to be problems that need resolving.

But what about what National did with the information they obtained?

Lawyer Stephen Price yesterday – Budget leak: Nats’ behaviour “entirely appropriate”?

I’ve just been listening to Simon Bridges’ press conference at Parliament about the budget leak. His main point was to deny that the leaked budget material was a result of a hack. But he made the broader claim that the Nats’ behaviour throughout was “entirely appropriate”. He said there had been “nothing illegal or anything approaching that from the National Party.” He denied that their conduct was at any point unlawful.

I think he’s wrong. I think the Nats have probably engaged in  unlawful behaviour from the get-go. That’s regardless of whether the budget material they released was hacked. The Nats have broken the law relating to Breach of Confidence.

That’s not a crime. It’s a civil claim, like defamation or negligence. But it is the law.

If information is confidential in nature – that is, not in the public domain – and was created and shared in circumstances in which those possessing it knew is was supposed to be confidential, and was then disclosed without permission, that’s a breach of confidence. That obligation of confidence will usually bind anyone else who comes into possession of the information.

There is a public interest defence. That’s what usually protects the media when they receive leaks. Otherwise, as you might have noticed, almost all leaks to the media (especially from employees with clear obligations of confidentiality) fall foul of this law. But usually, there will be some substantial justification the media can use. They will be able to point to some significant way the public is being served by the release of the information that would otherwise be protected by the obligation of confidence.

Is there public interest here? I can’t see it. The information was to be publicly released in two days. The National Party could freely criticise it then. How are the public really made better off by learning of these criticisms two days in advance? Is there really any benefit to a matter of legitimate public concern that overrides the obvious – and perhaps even constitutional – confidentiality that attaches to budget papers?

Nor can National argue that it needed to release the information to hold the government to account for its bungling in allowing the leak. It could have made that case without actually releasing the data.

I think there is a better argument that it was against the public interest for National to have publicised the budget information they obtained.

What could National argue? The best I can come up with is: “We felt it was in the public interest to prick the balloon of spin that the government was floating about the budget being a ‘wellbeing’ budget, and itself revealing bits of it in advance, by providing the public with information that revealed these claims to be misleading. In this we were fulfilling our constitutional duty to hold the government to account. And we didn’t release any market sensitive information.”

I don’t think that works. They could make those arguments in two days time and the public would be no worse off. I also note that it turns on the accuracy of the criticism. If the numbers are wrong, or taken out of context, or do not really reveal any misleading government behaviour, that would undermine any attempt to say that the releases were in the public interest. Finally, the fact that the National Party was drip-feeding the leaks tells against any claim that the public needed to have the information urgently and couldn’t wait two days for the budget.

Treasury has been embarrassed by the leak of budget information, whether it was obtained legally or not.

I think that National could have acted with integrity in pointing out the flaw, but they went much further than this by playing politics – they acted on heir own interests rather than public interests. Except that if the public doesn’t like the way they have done things it may not be in their own interests.

I don’t think it enhances Simon Bridges’ leadership credentials. If he wanted to prove himself as a responsible leader he would have highlighted the bug without exploiting it for some short term (two day) political gain.

 

 

 

Treasury refer claimed hacking to police following budget leak

The budget leak publicised by National yesterday has got a lot murkier, with Treasury now saying they have been hacked. The matter has been referred to the police, but Leader of the Opposition Simon Bridges is unrepentant for trying to hijack Thursday’s budget announcement.

The leak looks embarrassing for the Government, and also for Treasury, but I think the leak stunt also reflects very poorly on Bridges and National. Bridges has demanded that Minister of Finance Grant Robertson resign over the leak.

1 News: Budget 2019 leaks by National came after Treasury was ‘deliberately and systematically hacked’

Earlier today the National Party leaked what it claimed were highly secretive details of the Government’s wellbeing Budget, due to be delivered on Thursday.

Treasury has confirmed in a statement it was the source of National’s Budget 2019 leaks today after its “systems were deliberately and systematically hacked”.

Confirming the hack this evening Treasury released the following statement:

“Following this morning’s media reports of a potential leak of Budget information, the Treasury has gathered sufficient evidence to indicate that its systems have been deliberately and systematically hacked.

“The Treasury has referred the matter to the Police on the advice of the National Cyber Security Centre.

“The Treasury takes the security of all the information it holds extremely seriously. It has taken immediate steps today to increase the security of all Budget-related information and will be undertaking a full review of information security processes.

“There is no evidence that any personal information held by the Treasury has been subject to this hacking.”

Responding to confirmation of the the hack, Finance Minister Grant Robertson said is a statement:

“This is extremely serious and is now a matter for the Police. We have contacted the National Party tonight to request that they do not release any further material, given that the Treasury said they have sufficient evidence that indicates the material is a result of a systematic hack and is now subject to a Police investigation.”

But Bridges continued on the attack:

If it turns out that budget documents were hacked from Treasury will Bridges resign for using hacked material to try to undermine the Government?

 

Reforming public finance beyond the ‘wellbeing budget’

The Government has been consulting with ‘a group of experts’ – including Michael Cullen – on a new approach to managing the government’s finances, which could have a massive impact on future budgets.

Newsroom:  Cullen consults on massive Budget shake up

Treasury has brought in former Finance Minister Michael Cullen to consult on government budgeting as it tries to shift the focus away from surpluses

Dubbed a “stewardship” approach, it aims to take a more long-term view of public finance. A paper released to Newsroom under the Official Information Act shows Treasury has already begun work on reforming the public finance beyond the ‘Wellbeing Budget’ which will be delivered on Thursday.

The briefing notes that the current public finance system is 30 years old and may not adequately serve the needs of today’s governments. It said that the current work on the Wellbeing Budget and the Living Standards Framework will “only take us so far”, and further work was needed to fix “underlying issues with our public finance settings”.

Treasury says the approach is about moving from a “management” to a “system stewardship” approach to the public finance system. This could involve further changes to the Public Finance Act, a piece of legislation drawn up in 1989 that forms the cornerstone of public finance in New Zealand.

Finance Minister Grant Robertson told Newsroom the Government was “certainly moving forward” with the ideas in the paper.

Treasury believes the public sector is “not working well for everyone”. It singles out struggles in responding to “complex needs and issues” as well as “longer-term opportunities and risks”. It lays the blame, in part, on “a range of underlying issues with our public finance settings”.

It says the current settings encourage “silos” and a short-term focus. These settings mean it can be difficult to move funding across several years when it makes sense.

The reporting requirements placed on the Government focus on “outputs not outcomes,” and it incentivises “compliance and risk aversion,” rather than “innovation”.

Treasury said the new approach would “support better collaboration”, and place “more emphasis on the long-term to support innovation, asset management and capacity-building”.

One change being discussed would substantially alter how baseline funding is appropriated. Currently, bids for cost pressure funding is bid for on an annual basis, which Treasury says is “resource intensive”. This could change to a multi-year “defined period” bid, which would be more flexible.

Government budgets should have medium and long term considerations. I don’t think this is particularly new – the Cullen Fund was designed as a long term  means of financing superannuation as the population grew older. And many budget items are for multiple years (four years is common).

Last September, Treasury officials met informally with a panel which included former Finance Minister Michael Cullen, former ACT candidate and ex-Treasury Secretary Graham Scott, Victoria University Professor Jonathan Boston, and former State Services Commissioner Iain Rennie.

The group urged caution before changing “what is internationally a very good public finance system”.

Speaking to Newsroom, Cullen said there was merit in looking at long-term risks so long as a balanced approach was taken.

“So long as focus on the long-term doesn’t become an excuse for doing stupid things in the short-term then there’s a great deal of sense in getting that long-term focus,” Cullen said.

He said long-term risks like the costs of super and health care, combined with unexpected risks like earthquakes meant a prudent approach should still be taken.

“We are a country which faces quite significant risks that will suddenly descend upon us. We don’t have the slightest clue they’re going to happen,” he said.

Jonathan Boston told Newsroom that moving away from a narrow focus on GDP as a measure of the economy was wise.

“GDP is a flow measure; it measures the value of goods and services but it doesn’t tell you what’s happening to income distribution and to other financial measures, more particularly it doesn’t tell you what’s happening to the stocks of capital in a society or your human capital stock,” Boston said.

Reassessing how budgeting is done is a good thing. We will have to wait and see whether changes that happen as a result of this consultation turn out to be a good thing – and that could take many years to determine.

 

Government announces strong surplus

The Government has announced a surplus nearly twice what was in the Treasury’s Budge 2018 surplus – this is good news for spending plans or debt reduction, but may also increase demands from state servants seeking large pay rises.

This gives the Government an opportunity to make some bold moves on things like child poverty, prisoner rehabilitation to reduce prison numbers, reducing violence, addressing drug abuse and related problems, and climate change.


Government books show surplus, falling net debt

A strong surplus and falling net debt reflect a growing economy and show the Coalition Government is managing the books responsibly, Finance Minister Grant Robertson says.

The Crown financial statements for the year to 30 June 2018 are the first official check in on the Government’s commitment to run surpluses, pay down net debt and keep expenses under control.

“It’s important we run surpluses and pay down debt to make sure we are in a good position to deal with any rainy day. Economists have been warning about growing risks in the international economy, particularly due to rising trade protectionism, which we need to be well-placed to face in case this flows through to the New Zealand economy,” Grant Robertson said.

“The headline results today are ahead of the Treasury’s forecasts in Budget 2018. This was largely due to timing issues with Crown expenses, which will reverse out as that planned spending occurs early in the 2018/19 year. This means Budget 2018 spending and investment plans are on track.

“The books show we are meeting the Budget Responsibility Rules. A headline $5.5 billion surplus operating balance before gains and losses (OBEGAL) is $2.4 billion above the Treasury’s Budget 2018 forecast.

“A number of factors contributed to this result being ahead of Budget 2018 expectations. A number of one-offs led to core Crown expenses coming in 1.4 percent below forecast at 30 June 2018. The Treasury says that this was largely due to timing issues, meaning much of this variance is set to reverse out in the 2018/19 accounts. Core Crown expenses were stable at 27.9 percent of GDP.

“A strong economy contributed to core Crown tax revenue coming in 0.9 percent higher than expected in the year to 30 June 2018. Corporate tax revenue was up, due to profits for both large and small businesses being higher than the Treasury had forecast at Budget 2018. This result indicates the strength of the growing economy.

“This underlying strength of New Zealand businesses saw the number of people in employment rise by 3.7 percent over the year, while average wages rose 3 percent. These numbers show that our economic fundamentals are strong.

“The financial statements also indicate the Coalition Government’s commitment to making the important infrastructure investments New Zealand needs to unlock the growth potential of our cities and regions. At the same time, we are making up for neglected investment in critical public services in recent years.

“Net capital investment of $5.9 billion in the year was the highest since 2009 and an increase of $2.2 billion from the previous year. This included investments in hospitals, schools and state highways, while also reflecting the Coalition Government’s move to resume contributions to the NZ Super Fund.

“We are committed to a balanced approach by adopting a responsible debt reduction track. At 30 June 2018, net core Crown debt was 19.9 percent of GDP, compared to the 20.8 percent forecast in Budget 2018.

“We remain committed to the Budget Responsibility Rule that net debt will be 20 percent of GDP in 2021/22. This gives us the space required to make the critical infrastructure investments that New Zealand needs, while still building a buffer,” Grant Robertson said.

Minimum wage rise versus jobs

The effect that the raising of the minimum wage might have on jobs has often been argued but never been proven. It depends on a number of factors, like how much the minimum is raised, and what the business and employment situation is like at the time.

Government officials have warned that the latest increase, due to come into effect next week (1 April), could jeopardise up to 3,000 jobs but the Minister of Workplace Relations disagrees.

NZ Herald: Minimum wage rise to $16.50 at the end of next week could cost 3000 jobs, says MBIE

Government officials say lifting the minimum wage to $16.50 an hour could see a loss of up to 3000 jobs.

Boosting the minimum wage was part of the Government’s 100-day plan and is set to take effect at the end of next week, on April 1.

In its regulatory impact statement, officials from the Ministry of Business, Innovation and Employment said an increase “may have negative employment impacts which include lower job growth and reduced work hours”.

“The estimated restraint on employment for a minimum wage of $16.50 is 3000,” the statement said.

It also noted that the effect on employment “is heavily debated in economic literature … there is no clear consensus”.

And the Minister, Iain Galloway, debates their warning.

Workplace Relations Minister Iain Lees-Galloway said workers had not had a fair share of economic growth, and the boost to the minimum wage was only one part of the Government’s strategy.

“The Government considers advice alongside a range of other factors, including prior experience increasing the minimum wage – which has always been positive.

“I note that Treasury also advised the best time to raise the minimum wage is while the labour market is strong and tightening.

“Treasury forecasts that the unemployment rate will keep falling towards 4 per cent over the next three years, and that average wages will rise on average at about 3 per cent a year over that time, due to a tight labour market.”

So Lees-Galloway seems to be dismissing the MBIE advice, and choosing to use different Treasury advice to support the increase.

This is a fairly modest increase in the minimum wage, from $15.75 to $16.50, but bigger increases are planned.

Labour and New Zealand First have agreed to increase the minimum wage to $20 an hour by April 2021.

One could guess that MBIE may have further job loss warnings if it is bumped up more.

And what if in the future Treasury advises that the labour market is no longer strong and tightening? Would the Government go against that advice?

They already have, last month. Stuff: Labour warned if economy turns, minimum wage plans will hit the young and unskilled

Treasury is urging the Government to ditch its plan to abolish the youth rate, warning that minimum wage pledges will hit the prospects of younger, unskilled workers if the economy cools.

Advice from Treasury officials released under the Official Information Act shows Treasury expressing concerns that a commitment to a substantial increase in the minimum could harming the prospects of the very people the rate was meant to protect.

While Treasury explicitly said it supported hiking the minimum wage by 75 cents an hour to $16.50 in April, as the economy and labour market would see little impact, officials warned the three-year plan to get the minimum wage to $20 could have a series of unintended consequences.

These ranged from hurting the local economy in already slow growth regions, the risk that once New Zealand’s minimum wage was on a par with Australia’s, fewer young, low-skilled worker would cross the Tasman for work and that higher minimum wages “has been shown” to attract young people to leave education to enter the workforce.

Lees-Galloway has been quite selective in picking advice to justify Government policy.

He was a Nurses’ Organisation organiser (aka a union official) prior to becoming an MP,

Treasury warnings about minimum wage, youth rates

It isn’t surprising to see a warning from Treasury about possible adverse effects of pushing up the minimum wage too much, and of abolishing youth rates.

Stuff: Labour warned if economy turns, minimum wage plans will hit the young and unskilled

Treasury is urging the Government to ditch its plan to abolish the youth rate, warning that minimum wage pledges will hit the prospects of younger, unskilled workers if the economy cools.

Advice from Treasury officials released under the Official Information Act shows Treasury expressing concerns that a commitment to a substantial increase in the minimum could harming the prospects of the very people the rate was meant to protect.

While Treasury explicitly said it supported hiking the minimum wage by 75 cents an hour to $16.50 in April, as the economy and labour market would see little impact, officials warned the three-year plan to get the minimum wage to $20 could have a series of unintended consequences.

These ranged from hurting the local economy in already slow growth regions, the risk that once New Zealand’s minimum wage was on a par with Australia’s, fewer young, low-skilled worker would cross the Tasman for work and that higher minimum wages “has been shown” to attract young people to leave education to enter the workforce.

But the advice provided a key policy challenge for the Labour-led Government, warning that should the economy turn, a world-leading minimum wage would harm young people, so the youth rate, also known as the starting-out rate, should be maintained.

I would replace “should the economy turn” with an inevitable “when the economy turns”.

Treasury said that in economic downturns, employers tended to keep existing workers on without cutting wages, but cut costs by not hiring and employing new staff on lower pay rates.

“This concentrates the minimum wage impact on the groups entering the labour force, like young workers, and those with low skills. The higher proportion of young people on the minimum wage in New Zealand will exacerbate this effect and magnify its impact on youth unemployment.”

“Young workers with low skills are particularly hard hit, and this could impact on those ethnic groups with many young people with low qualifications like Maori and Pacific,” Treasury warned, noting that even during the current buoyant job market, unemployment for young people generally, and especially young Maori and Pacific people, was far higher than for the general population.

There is a problem when unskilled workers remain on low wages.

But many people get onto the employment ladder at minimum wages and youth rates and work their way up.

If those low wage starting opportunities are scrapped it can make it harder for young people and unskilled people to get a start.

Set at 80 per cent of the minimum wage, the youth rate can be paid to workers aged 16-19 in certain conditions including when they first enter the workforce, are coming off a benefit or are in industry training.

Treasury urged the Government to consider maintaining the system, saying it provided “a safety valve in weak economic conditions”.

“We are aware that the starting-out rate is currently not widely used by employers (so currently the consequences on young people of keeping it are low) but it provides a safety-valve of enabling increasing use in an economic downturn.”

Has the Government listened to these warnings?

While Labour has consistently promised that within 12 months of being elected that it would abolish the youth rate, on Saturday Workplace Relations Minister Iain Lees-Galloway was non-committal.

“It’s something that we will include in our policy development and we will work with our Government partners on.”

Or is this another case of walking a different walk to their campaign talk?

 

Labour response to fiscal update

Labour finance spokesperson Grant Robertson has responded to the release of the latest half yearly Treasury update.


Economy must deliver a fair go for New Zealanders

The latest Half Yearly Economic and Fiscal Update (HYEFU) provides further evidence that the economy that the National Government and Bill English have is sitting on shifting sands and leaves many people behind, Labour’s Finance spokesperson Grant Robertson says today.

“It’s easy to glance at the headline figures and see a rosy picture of government surplus and economic growth, but look harder and there is plenty for New Zealanders to be concerned about.

“The country’s economic growth is a sandcastle based on rampant house price inflation, high personal debt, and on population growth that is putting pressure on infrastructure and public services – pressure that this Government is failing to address.

“On a per-person basis New Zealand is hardly growing at all. It’s no wonder people are feeling that they are working longer hours but they are only treading water. And the forecasts today are for almost no real wage growth in the next two years.

“And then there are the tens of thousands of people just being left behind, homeless, out of work and losing hope under National’s watch.

“Labour’s focus is getting New Zealand back to its best. That is when everyone has a roof over their head, access to the best health and education systems in the world, and the opportunity of decent work and a good pay packet.

“As Finance Minister I would commit to more investment in people through strong public services, starting to pay back the enormous debt that been amassed since 2008, and planning for the future by restarting contributions to the New Zealand Super Fund.

“Bill English however is still playing politics with dangling irresponsible tax cuts. This is all the more so with this year’s surplus slashed due to the Kaikōura earthquakes.

“Calm the farm, Bill, and pull back on the tax cut carrot. The HYEFU shows that the real priority is invest to get sustainable growth that foster the innovative and productive economy that will deliver decent jobs,” says Grant Robertson.share on twitter