Covid excuse used to raise benefits but ACT reduction policy is nuts

Newshub: ACT’s Brooke van Velden calls for beneficiaries, public service workers to take pay cut

The ACT Party’s deputy leader is calling for public sector workers and beneficiaries to take a pay cut in order to help lower debt levels.

Brooke van Velden was laying out the party’s ‘Alternative Budget’ in an appearance on Newshub Nation on Saturday, and says ACT’s approach will help New Zealand recover from the economic fallout of COVID-19.

The party’s policy includes abolishing the winter energy payment, scrapping KiwiSaver subsidies and putting interest back on all student loans.

Van Velden says lowering New Zealand’s debt post-COVID-19 is important because it’s unknown when another event will happen that requires a large sum of money.

“There are two ways we can go about this recovery: we can have a debt recovery or we can have a growth recovery.”

ACT proposes public service employees should have their “over-inflated wages” cut by 20 percent, and benefits would be lowered back to pre-COVID levels.

Van Velden and Seymour may well be right. The Government has implemented a number of policies by stealth under cover of $50 billion Covid financial package.

The Government has previously defended it’s COVID-19 spending, with Finance Minister Grant Robertson saying it’s “fiscally and socially responsible” to have money set aside in the event of a second wave.

“We are sticking to our word on this. We are investing money where it is needed to respond to COVID-19, and we are setting aside a significant sum of money to be used as needed in the future,” he said in July.

There is no doubt majoe financial support was needed to try to minimise the adverse financial effects of Covid, but I think there are valid questions about a lot of the spending. Some of the spending announcements seem to have been opportunist policy financing of things that weren’t being addressed by the Government before the pandemic.

But Bagrie is probably also correct. Many beneficiaries have struggled for a long time on subsistence incomes. This has had significant adverse effects on the welbeing of families and children, and also on health, crime and education.

And substantially reducing benefits and wages now would be a huge risk given our precarious economic situation. I think that would be nuts.

It’s going to be a huge challenge for the next term Government to deal with the big increase in spending and debt, but slashing benefits and wages would be nuts in my opinion.

Teacher strikes today

Last month it was nurses striking for better pay and conditions, this month it’s primary school teachers. The benefit of patients was promoted, today’s strike is justified as being for the good of children and education.

RNZ: Teachers strike: What you need to know

Primary and intermediate school teachers who are members of the Educational Institute will go on strike on 15 August.

The union says that means 27,745 teachers and 1827 principals won’t be at work.

Teachers who are not union members will not be on strike.

However, principals’ groups have told RNZ News that most schools will not be able to open for instruction because they won’t have enough teachers on deck. They expect the vast majority of the 1945 primary and intermediate schools around the country will be shut, though a few might provide supervision for a limited number of children.

The decision to open a school, shut it or provide supervision is up to each school’s boards of trustees.

Most parents will have to arrange childcare for their children tomorrow.

The union has organised rallies in all the main centres and many regional towns.

In Auckland there will be a march down Queen Street to Aotea Square. In Christchurch, union members are meeting in Cathedral Square and marching around the city, while in Wellington they will meet at the Westpac stadium before marching to Parliament.

Negotiation of the collective agreements for primary and intermediate teachers and principals has stalled.

The Education Ministry and the Educational Institute have tried mediation to break the deadlock, but without success.

The union entered negotiations with a claim that included a 16 percent pay rise over two years for primary school teachers, special education coordinators in every school, and smaller class sizes.

The ministry offered increases ranging from 14 percent over three years for new teachers through to six percent for experienced teachers.

The ministry’s offer would raise beginning teachers’ pay from $47,980 to $55,030 over three years, while the salaries of the the most experienced teachers would increase from $75,949 to $80,599.

Not bad pay, but teaching can be a fairly demanding job.

RNZ – Teachers on strike: ‘I’m starting to feel a little bit angry’

Teacher Matt Boucher said his sign “Still fighting an 8 hour day” referred to teachers’ long working hours.

“The amount of workload that we have if we want to do a good job and we want to meet all the demands that are put on us, it takes far longer than an eight-hour day and more than a 40-hour week,” he said.

Across the table, Jamie Hoare, said his strike placard was based on the “learning intentions” used in the classroom by teachers every day.

Mr Hoare said he was unhappy with the way the collective agreement negotiations were going.

“I am starting to feel a little bit angry about it. I’ve been teaching eight years now and over that time have felt like the salary hasn’t met the expectations, also the time demands have increased enormously over that time and we just don’t have the resources to do our job.”

The school’s principal, Traci Liddall, drew a placard that said she was “Seriously SWISed off”.

Ms Liddall said teachers were angry: “It’s been nine years of belt tightening and not meeting the needs of students or teachers and now we need things to change,” she said.

There’s been wage ‘belt tightening’ for many workers over the last ten years.

A question on the strike in Parliament yesterday:

How many primary schools have notified the Ministry of Education that they will be open for instruction or supervision, or will close tomorrow?

Hon CHRIS HIPKINS (Minister of Education): I’ve been advised that as of this morning, 1,264 schools, including intermediates and contributing schools, have notified the Ministry of Education that they’ll be closed tomorrow. The ministry’s continuing to monitor that. Schools have been asked to give parents and caregivers as much notice as possible as to whether the school will be open for instruction or supervision, or will close. The New Zealand School Trustees Association is working with school boards to help them prepare and plan for strike action, and advice was sent out two weeks ago to school boards providing guidance on potential strike action and how to communicate about that to parents.

One pay announcement already- Stuff: Pay rise for 329 women in education

Women working to support children’s learning have signed pay equity deal with Government.

Police prepare for ‘torrid’ pay claims

Following the lead of nurses, teachers and other groups of government workers the Police Association is preparing for wage claims. They will have a good argument to at least maintain parity with teachers and nurrses.

NZH: Pay, recruitment and retention in the mix for Police Association in negotiations

Police are beginning to press their claims for better pay and conditions, with negotiations between their union and their bosses beginning this week.

Among the issues concerning frontline officers are recruitment, retention and pay.

The Police Association has warned its members in its monthly magazine Police News that there could be some “torrid negotiations” ahead which it says it is well-prepared for.

The negotiations come at a time marked by industrial action in the public sector. Nurses have already been on strike, primary school teachers will strike next month, ACC senior doctors walked off the job this week, and MBIE and IRD staff have been on strike.

Government wage bills look like being under significant pressure as different worker groups look to take as much advantage of a Labour led government.

Labour pressured by friendly fire strike threats

It seems a bit ironic that wage claims and threats of strikes have ramped up substantially now Labour lead the Government. In opposition Labour seems closely associated with unions, the PSA and worker groups like the teachers and nurses, so why are they getting more militant now Labour hold then purse strings?

Payback for their electoral support – large scale payback, because it works.

Hamish Rutherford: Labour’s sympathetic ear means it is destined to feel far more pressure from unions

The timing of strike threats from a growing number of corners of the public sector, must be galling for the new Government.

After years of small increases under National, Labour arrives in the Beehive, makes an offer – then doubles it – and the nurses announce plans to walk off the job for the first time in a generation.

So why now? Why didn’t the nurses strike at any point during the last nine years?

“All of the concerns that you are hearing here, were raised with the previous government,” New Zealand Nurses Organisation chief executive Memo Musa said as the group formally rejected the Government’s $500 million offer. It was “not about sympathy” he added.

“The issue now, is pretty much an issue of timing.”

In part it will be economic timing – National tool over in 2008 as the Global Financial Crisis struck and care was needed in spending during years of deficits. Inflation has also been very low for a decade now, and wage increases have been meagre for most workers.

So Labour taking over at the same that surpluses have come back – more money available and a friendly Government is an opportune time to push for a big lift in wages. And they are pushing hard.

Timing is everything, and the nurses are not alone in realising this.

Teachers – who admittedly have used industrial action regularly – are calling for “action”, with votes on strikes in August.

Thousands of core public servants are also being balloted on strikes. Although the proposed action by more than 4000 members of the Public Service Association – two two-hour strikes in July – will hardly bring the nation to a halt, the way it is being billed is telling.

The PSA has opted for “co-ordinated” action across Inland Revenue and the Ministry of Business, Innovation and Employment (MBIE), with national secretary Glenn Barclay saying it was “a big deal because we haven’t had industrial action in the public service for a long time”.

Labour will come under more pressure from the unions for a good reason.

It is not just that expectations are higher, it is that the Government has a sympathetic ear. Unions are likely to protest more under the current administration because it will work.

Labour have already raised minimum wages, and promise more increases. They may get pushed by threats of strikes to give generous increases to nurses, teachers and other public servants.

This will be good for the economy, short term.

But it will put a lot of pressure on companies to pay more too, or public-private wage disparities will increase.

If private sector wages are forced to follow Government wage generosity this will likely lead to price inflation as well.And there will be pressure to increase benefits.

Will we end up any better off?

Nurses reject large pay offer, Government says no more available

Nurses have rejected a half billion dollar pay offer. In response Health Minister David Clark says there is no more money available to “fix nine years of underfunding in one pay round”.

They have been offered a 9% increase but are seeking 15% – that’s a huge adjustment given the low rate of inflation and pay rises over the past decade.

Nurses’ Union:

NZNO seeking urgent mediation

The latest revised DHB MECA offer has been strongly rejected by NZNO members. However, Industrial Services Manager Cee Payne says that as nursing and midwifery is an essential service, mediation or facilitation will begin with urgency. NZNO remains committed to working with DHBs to find a resolution to this impasse and avoid strike action.

“The immediate staffing crisis as a result of the past decade of underfunding of DHBs has taken a heavy toll on nurses and their ability to provide safe patient care.

“Whilst the revised offer was substantially improved, compared to the previous one on pay for some members, members have rejected this. There may be concern about the variability of the offered pay increases.

“The revised DHB MECA offer on pay equity fails to specify how and when outcomes will be implemented. This has created uncertainty for members,” she said.

What is curious is why the NZNO aare taking such strong action seeking such a large settlement now that Labour are leading the Government, but did relatively little over “the past decade of underfunding”.

The Government response:

Minister disappointed nurses reject $500m offer

Health Minister Dr David Clark says he is disappointed that nurses have voted against the District Health Boards’ half-billion dollar offer, the largest made to nurses in more than a decade.

“Nurses are a vital part of our health workforce and clearly feel they have been undervalued over the last nine years. Their frustration is understandable. This offer goes a long way to address their pay and staffing concerns, but you cannot fix nine years of underfunding in one pay round.

“The deal that’s been rejected today is the largest nurses and midwives have been offered since their historic pay jolt 14 years ago under the last Labour-led government.

…the Government has to balance pay demands across the public sector. We have gone as far as we can in terms of extra Government money but hopefully the offer can be reconfigured in a way nurses are happy with.

It seems that nurses have a habit of pushing for pay jolts when Labour is in charge of the finances.

Perhaps they do deserve to be paid substantially more, but this puts the Government in an awkward position.

They are already making a large offer. If they give nurses a big catch-up then it’s likely teachers will be asking for something similar, mental health workers are also trying to get (deserved) increases. The police may then want to maintain parity.

This will substantially increase government spending, and could put pressure on non-government workers who will be left relatively worse off.

Everyone wants to be paid more, but no one wants to be taxed more, or pay higher mortgage and interest rates, or to pay higher prices for goods forced up by wage induced inflation.

Business confidence is wavering at the moment. Uncertainty over the cost of wages won’t help.

This is a very challenging environment for the Government.

Minimum wage and potential unintended consequences

One of the biggest risks with changes promised by the incoming Government is the rapid increase of the minimum wage, from the current 15.75 per hour to $20 by 2021.

There’s no argument that many workers struggle on low wages, so increasing them is a laudable aim, but there is real potential for unintended consequences, and it won’t be known what impact they might have until they happen.

Increasing wage costs for businesses means those costs of goods and services will need to be passed on to customers. It is also likely to result in lower employment to try to reduce costs where recovery of the costs isn’t possible.

The biggest problem may come the pressure on all wages to rise. Those currently earning $3-5 above the minimum wage will still want to be paid more.

And there are signs of this pressure already – NZH: Minimum wage threatens economy: Employers and Manufacturers Association

Campbell said businesses would be worried by what the cost increases would mean for them.

His comments are starkly contrasted by those of First Union, whose general secretary Robert Reid said in a statement the incoming Government acknowledged the huge economic pressure working people – especially low paid workers – had been facing for the last decade.

“Today marks a sea change. We now have a Government showing respect for working people.”

The union was especially pleased to see the minimum wage will move to $20 per hour by 2021.

“Business leaders often say the main thing they need is certainty. This announcement gives them that certainty and now they need to start factoring in significant wage increases for all their workers over the next three years.”

Reid added that the era of 2 per cent a year wage offers was over and employers would need to be looking at annual increases of about 8 per cent to stay at or ahead of minimum wage rises.

It was obvious this would happen – but an increase of all wages by 8%, well ahead inflation, will push up inflation, and possibly increase unemployment.

There is no way of knowing how much bumping up the minimum wage will have, but unintended consequences are certain, it’s just unknown to what degree they will impact on employment and the economy.

Housing promises don’t compute

Vernon Small points out that political rhetoric on housing does not match reality, and it simply does not compute when you look at some basic numbers.

Stuff: Promises houses can be more expensive – and more affordable – do not compute

But whether it is a crisis or not, it is certainly becoming a farce.

No more so than in the mutually-exclusive policy aims that Building and Housing Minister Nick Smith has to trot out on behalf of all his colleagues – and he was at it again over the weekend.

Policy goal one is that house prices should not fall, but should rise by single digit percentages.

Policy goal two is that the ratio of house prices to income should fall from the current nine time (going on 12 times) to an average of four to five times across the country.

Policy goal three is that incomes should rise steadily, but not in a highly unsustainable or inflationary way. That will not, for yonks, deliver the $200,000-$250,000 a year household income needed to ensure the average $1 million Auckland home is around five times the average household income.  

Play around with the figures, and give Auckland a price margin over the rest of the country (shall we say six times household income?) and you still have a very long wait.

Then add in percentage house price increases that even in single digit percentages are likely to outpace wage increases and  … well you get the picture.

The picture is very clear.

Unless house prices come down a lot or wages go up a lot then ‘policy goals’ are way off the mark. They don’t compute.

And not just for the Government.

Labour MPs are hoist on a similar petard by refusing to publicly admit they would like to see a fall in prices. They have one mitigating grace; that they are prepared to use Government cash to build a swag of affordable houses; but refuse to face the inevitable (perhaps even desirable) truth that house prices must soften – not just rise more slowly.

But Labour’s policy of providing tens of thousands of ‘affordable houses’ comes nowhere near close to making what is actually affordable to people on modest wages possible in Auckland and other cities and regions.

Only Green co-leader Metiria Turei – and a raft of clear-eyed economists – seem prepared to utter the unlovely truth; only a big dive in house prices, especially in Auckland, will provide a significant easing in home affordability in the next 10 to 20 years.

Many may not agree with what Turei has proposed but at least she is being honest about the numbers.

We either need significant housing deflation, or some honesty from National and Labour.

They don’t seem to be inclined towards either.



Poll – top 5 election issues

Colmar Brunton have polled on what people think are the  ‘top 5 issues’, with education and health head of the rest

Poverty and inequality are there but not as prominent as some may think.

It’s interesting that education is the top rated issue, especially as National’s Hekia Parata struggled with her education portfolio at the start of the term. John Key had faith in her ability, and that may turn out to be a significant election factor.

A notable absence from the list is the economy, which is something many claim to be a major deciding factor.

Asset sales may be fading in importance.