The mini-Budget released by the Coalition Government today leaves many questions unanswered, said CTU Economist Craig Renney. “Despite the Incoming Government calling for clarity on existing spending, the mini-Budget today does not provide any analysis of the tax cut or spending programme of the incoming Government.
“The Mini-Budget doesn’t provide any new analysis of the spending cuts being required of government departments, nor how they are to be achieved. It doesn’t provide a fiscal strategy. In short, New Zealanders will have to wait until May 2024 to understand what is being changed.
“The government is claiming that it is cutting $1.5 billion of spending per year. Of that $1.5 billion, a third are savings commitments made by the previous government. A further $0.4bn are cuts which have already been committed to funding Early Childcare support. So only $0.6bn of the $1.5bn is new. $1bn of immediate cuts is money that comes from reductions to the transport budget – which is paid for by fuel taxes.
“The Government has claimed that it is delivering fiscal responsibility, but in fact it has taken money from climate change to deliver tax cuts for landlords and it’s taking $676m from welfare payments.
“How will that help deliver the legislated child poverty targets, or make the cost of living easier for low income families?
“The announcements today leave much still to be explained. There appears to still be a debate within government about when key planks of the tax cut package will be delivered.
“There is nothing in this package to help with the cost of living. New Zealanders have to wait to find out what the plan is. The Government should be making this clear today.”
All new workers will soon to be vulnerable to being fired at will with no reason following the Government’s reckless haste to pass under urgency an extension to 90 day trials to all businesses.
The Employment Relations (Trial Periods) Amendment Bill is poised to be passed today without the possibility of select committee scrutiny and in the face of clear evidence from officials that the trials have no economic benefit.
“Fundamental protections for workers are again being removed with indecent haste by a Government whose values are clear to all,” said Council of Trade Unions President Richard Wagstaff.
“The right to fire at will and without reason was limited to businesses employing fewer than 20 workers, but now all new workers will be vulnerable to exploitation.
“This Government promised evidence-based policy, but again this is just bluster given Treasury showed in 2017 the 90-day trial policy did not work,”
Treasury commissioned Motu which found ‘no evidence that the ability to use trial periods significantly increases firms’ overall hiring’. It also said there was ‘no evidence that the policy increased the probability that a new hire by a firm was a disadvantaged jobseeker for a range of definitions of disadvantaged jobseeker: beneficiaries, jobseeker beneficiaries, non-workers, recent migrants, youths under 25 years old, Māori or Pasifika under 25 years old, or education leavers. This result holds both over the economy as a whole, and in the high-use industries’.
Richard Wagstaff said; “What we do know is that the policy leads to job insecurity for new workers, who for their first three months of work know they can be fired for any reason (or none at all) and with no explanation.
“This flies in the face of basic natural justice and leaves new workers especially vulnerable and in a very weak position to challenge their employers every whim, without risking their job.
“This Government is making a habit of this. Just last week it ignored advice from officials that axing Fair Pay Agreements deprived women, Māori, Pasifika and the disabled hundreds of millions of dollars in potential pay rises. It is again letting flawed free market ideology dictate policy.
“There’s simply no gain – only pain in trial periods. It is just a political payoff to the business lobby that is allergic to workers’ rights and collective bargaining and now has the ear of the Government.
“Removing basic legal rights should be an anathema in a modern democratic society and can’t be justified by serving business interests by making it cheaper and easier to fire workers.
“Together with the rollback of Fair Pay Agreements, and risks to reforms to contracting, there is a compelling case that this reform is simply designed to create a more insecure, compliant, and less well-organised workforce,” said Richard Wagstaff.
The Government is due to decide how much it will increase the minimum wage at Cabinet today.
“Today’s decision by Cabinet on how much it will increase the minimum wage will be another early test for this Government, providing another telling insight into the importance it places on supporting working kiwis,” said Richard Wagstaff, NZCTU President.
“Ahead of the election, the coalition parties were all over the place on this issue – ACT was against any increases and National was muted.
“We know that the numbers of Māori, women, Pacific Peoples, disabled and other disadvantaged groups are over-represented among minimum wage earners. An increase to the rate makes a real difference to people on the poverty line.
“These are also the very people doing it tough in a cost of living crisis and this Government has made it a priority to support people through these challenging times.
“In the absence of FPAs, large scale collective bargaining, the minimum wage is assuming greater and greater importance over time, as more and more Kiwis are employed on it.”
The previous government consistently increased the minimum wage, bringing it up from $15.75 in 2017 to $22.70 in 2023, a 44% increase overall.
In 2023, a full-time minimum wage earner is getting $278 more before tax than they were in 2017.
Treasury and the Reserve Bank are projecting that inflation will be 4.3% for the year ending 31 March 2024. This means the minimum wage needs to increase to at least $23.67 to ensure that minimum wage earners do not take a pay cut in real terms.
“We urge the Government to have a heart and do the right thing by those earning the least and maintain the momentum of the last few years – now more than ever that should be a priority,” said Richard Wagstaff.
New analysis from the CTU shows the cost of the Government’s tax cuts for landlords will be many times more than the investment required for the much-needed Cook Strait ferry upgrade.
This shows the Government making a clear choice to back unproductive investment in property over investment in critical infrastructure that would help grow our economy and support business, says CTU Economist Craig Renney.
“National says the Inter-island Resilient Connection project is too expensive, but our analysis shows that, over the lifetime of the assets, the cost is only around $11 per New Zealander a year in today’s dollars. Contrast that to the landlord tax cuts, which would cost $139 per Kiwi each year. Landlord tax cuts are more than 12 times the cost of the Interislander project.
“This Government was elected with the slogan ‘get our country back on track’ – yet one of its first acts is to derail a vital transport link between the North and South islands, which carries $14bn of freight and 850,000 people each year.
MUNZ National Secretary Craig Harrison says “The upgrade of the Cook Strait ferries is not an option for New Zealand, it has to be done. The regular technical problems experienced by the ferries are a result of using end-of-life vessels in a challenging maritime environment.
“The failure to modernise this essential infrastructure leaves New Zealand exposed to further delays, service outages, expense for industry, and serious safety issues for crew and passengers. The Government’s decision sets back New Zealand’s transport resilience and will set New Zealand back.”
RMTU General Secretary Todd Valster says “The Government has stated they want KiwiRail to provide a safe and resilient service but that conflicts with aging ferries due for replacement. KiwiRail has had rail-enabled ferries since 1962. Ferries that are rail enabled allow rail freight to be moved without freight having to come off rail wagons to travel the Cook Strait. Rail-enabled ferries are safer and more efficient to load and unload. The proposed new ferries would have produced 40% fewer emissions, and the hull is designed to have a lower impact on the marine environment”.
Craig Renney says “This is a government that claims it is economically responsible while it guts New Zealand’s freight capacity and spends billions on unproductive tax cuts for property speculators. For the future prosperity of our nation, New Zealanders need to be able to move themselves and their goods around the country in ways that get easier over time, not harder. The Government should urgently reverse this mistaken decision at the mini-Budget this week.
CTU analysis
We have modelled the costs associated with the $3bn programme over a 50-year average life of the assets, using a 4% interest rate which is above the long-run average for long-term New Zealand Government bonds. This conservative analysis makes no assessment of the likely economic benefits of more regular, safe, and reliable crossings, which is likely to be in the range of many billions in the period. Nor does it make any assessment of the cost of leasing the replacement smaller ferries over the same period, which again is likely to be in the low billions.
This assessment also makes no analysis of the environmental costs of taking freight off rail, the extra roading costs associated with more trucking, nor the continuing use of less efficient ferries that produce higher emissions. All of which are likely to be very significant.
We have also examined the cost of restoring interest deductions for landlords over the same period. We have not assumed any new landlords or any new growth in the rental market, simply that the cost of the policy rises with inflation. This is very likely to be an underestimate of the real cost of the tax cuts.
We used the base case population forecasts from Statistics New Zealand.
Nominally, the Inter-island Resilient Connection would cost on average $19.55 per person, per year over its lifetime. Adjusting for inflation over the fifty-year period, this would fall to an average $11.12 per person, per year in 2025 dollars. The landlord tax cut costs an average of $232 per person, per year before inflation adjustment. After adjustment, each New Zealander would be paying $139 per person, per year in 2025 dollars.
“The worsening shortage of secondary teachers shouldn’t come as a surprise to anyone. What is shocking is the failure of successive governments to do something meaningful and effective about it. We are really hoping this government will take a different approach and grasp the nettle. Every young person in Aotearoa New Zealand deserves a specialist teacher in every subject to enable them to acquire the knowledge and skills they need.”
Chris Abercrombie said it was good to see the Ministry of Education, in a teacher supply report released today, acknowledging that unless overall teacher numbers are increased, initiatives designed to spread them are relatively unhelpful. “Acknowledging that we are beyond the bandaids is an important step in making real headway in addressing our national supply problem, and through that taking pressure off our rural and hard to staff schools around the country, and giving all schools the opportunity to select suitably trained and qualified candidates in all subject areas.
“We also hope the Ministry will be more proactive in measuring and managing recruitment need by subject. There is no indication in the Ministry’s report of how many teachers are needed by subject, how many are currently available and how many are projected to be available going forward. A surplus composed of, for example, Physical Education teachers, does not meet the needs of schools and students and can lead to long term problems when schools are pressed to appoint teachers to positions that their subject qualifications are not suited to.
“Secondary teaching is an amazing job. However, relative wages for secondary teachers continue to fall and employment has remained relatively strong. Workload pressures and ongoing disruption remain disincentives for many teachers. These combine to make secondary teaching less attractive to many potential teachers and also to teachers reconsidering their careers.
“The Government must ensure that our Initial Teacher Education centres are full of well qualified and highly inspired new graduates across the subject areas we need, and in numbers that allow schools to have a genuine choice of applicants across all subject areas There needs to be a fundamental shift in how the government approaches salaries and conditions, and supports for teaching and learning and staffing levels in secondary and composite schools.”
Chris Abercrombie said he hoped the Government would give serious consideration to the recommendations of the 2023 Arbitration Panel and to the findings of the 2021 SPC secondary school staffing report in this regard.
GDP numbers provided by Stats NZ today demonstrated that the size of the economy fell by 0.3% in September 2023.
NZCTU Economist Craig Renney said “this data is much weaker than had been expected by commentators, and should give decision-makers food for thought. If growth is weakening, additional interest rate increases should be even further from consideration. The coalition Government should also be making sure that it has support for workers and communities ready should unemployment rise quickly as well.
“This data shows worrying signs that important parts of the economy have stalled. Manufacturing (-3.4%), mining (-1.8%), food production (-2.4%), construction (-1.7%), and transportation (-4.5%) all saw significant falls in output this quarter. Goods-producing industries saw their output fall 2.6%.” GDP per capita fell 0.9% in September, demonstrating that GDP figures may have been worse were it not for the impact of population growth.
“Now is not the time for tax cuts that will simply stoke house prices in the housing market and add little value to the real economy. Instead, government can act to counterbalance the impact of this downturn through investment in tackling our chronic infrastructure gap. That would not only have the benefit of making New Zealand a better place to live, it would also support future economic growth.
“GDP data shows weakness in both the consumer pockets, with household spending being down 0.6%. In particular, spending on durable goods (like household appliances) fell by 3.2%.
“This is indicative of households feeling worried about the future, particularly about their employment security. The government should be showing how it is going to support economic demand over the next few months, rather than taking it away through cuts and removing employment protections.”
The New Zealand Council of Trade Unions says a dark cloud has descended on New Zealand as the Fair Pay Agreement legislation begun to be repealed under urgency.
NZCTU President Richard Wagstaff said the move is going to hurt hundreds of thousands of New Zealand’s most vulnerable workers.
“Not only will repealing FPAs hurt workers, but it could also violate our obligations under our trade agreements with other countries.”
Yesterday, the NZCTU hosted a day of action against the move, presenting the ‘Keep Fair Pay Agreements’ petition that has gathered nearly 15,000 signatures to MPs from the Labour and Green Parties.
The NZCTU also hosted a ‘Stand Up for Fair Pay’ event at Parliament, with working people and union leaders from across the country.
Wagstaff said Fair Pay Agreements represented the biggest step forward for workers in a generation.
“We are not going to sit on our hands while the Government takes this away. It is very disappointing that they continued to ignore advice from its own officials around Fair Pay Agreements.
“The most vulnerable parts of our workforce – women, Māori, Pasifika, and disabled workers are going to be disproportionately impacted by this move.
Wagstaff said the NZCTU action was followed by the ‘Our Future – Up In Smoke’ rally organised by the Association of Salaried Medical Specialists.
“This Government is off to a horrific start. Every policy they have up for repeal will do untold damage to marginalised Kiwis. We deserve better.”
Private control of the electricity industry will significantly raise the cost of NZ’s recent commitment to triple renewable power generation by 2050, according to a new report co-authored by FIRST Union, the NZCTU and 350 Aotearoa.
The report, which updates last year’s Generating Scarcity report, argues that for every dollar the four gentailers invest in new renewable capacity, $2.41 is paid out to shareholders in dividends.
“We now have a decade of data to show us the impact of privatisation on the electricity industry.
“Despite earning $7.6 billion in net profit after tax, the industry has paid out $10.8 billion to shareholders – including excess dividends of $4.2 billion – over the decade. During this time, national generating capacity has increased by only one percent”, said FIRST Union Researcher and Policy Analyst Edward Miller.
“The Key Government’s decision to partially privatise Genesis, Mercury and Meridian has put shareholders ahead of people and planet. In 2023 alone, gentailers distributed dividends of $1.1 billion off only $521 million in net profit after tax, an excess dividend of $638 million,” said Miller.
CTU Economist and Policy Director Craig Renney said it is notable that this report follows the release of a government-commissioned report on energy hardship that suggested that 110,000 households could not afford to keep their homes adequately warm.”
“Our report suggests that consumers, including low-income households – are providing a windfall to energy company shareholders. We support the commitment to triple renewable energy production, but we need a policy framework to ensure these costs aren’t pushed onto working people while shareholders continue to make record profits”, said Renney.
Executive Director of 350 Aotearoa Alva Feldmeier says “By choosing to prioritise dividends, the gentailers have largely delayed action to lower carbon emissions, lower bills for households and support greater energy freedom. Government coffers have been filling up from gentailer dividends, earned by keeping power prices high and fossil fuels on life support. It’s climate hypocrisy, plain and simple.”
“We’ve been trapped in a toxic cycle whereby gentailers have a perverse incentive to keep fossil fuels in the grid which hikes power prices, enables them to make record profits, and distribute excess dividends which slows the development of new renewables. We will not see an end to this unless the incoming Government sets the right levers and uses its power as a majority shareholder in the electricity generation market,” said Feldmeier.
“There is large interest among communities in Aotearoa to contribute in meaningful ways to climate change mitigation. 350 Aotearoa calls for expanding public participation in the renewable energy transition and the broader functioning of the energy sector,” expands Feldmeier.
Four unions representing maritime and rail workers have condemned the Government’s decision to effectively cancel the Cook Strait iRex ferry upgrade project, and are demanding the resignation of the Minister of Finance for the decision.
The four unions are the Maritime Union of New Zealand representing seafarers, the Rail and Maritime Transport Union representing rail workers, the New Zealand Merchant Service Guild representing ship’s masters and officers, and the Aviation and Marine Engineers Association representing marine engineers.
Maritime Union of New Zealand National Secretary Craig Harrison says it is not tenable that such a major decision with massive implications for the economy should be made in such a ‘fast and loose’ manner.
“This is far more than a fiscal decision – this decision shows poor judgement and a total lack of understanding of the importance of a functioning Cook Strait connection to New Zealand’s supply chain.”
He says the ongoing technical issues with Cook Strait ferries are a result of end of life vessels being used on a notoriously challenging crossing and had resulted in serious incidents in the last few years.
“The can has been kicked down the road for years and the upgrade has to happen now.”
“This Government campaigned on getting our transport infrastructure sorted and their first move is to basically jeopardize the future of road and rail transport between the North and South Island.”
Rail and Maritime Transport Union General Secretary Todd Valster says the ferry upgrade project was an essential part of maintaining a ‘fit for purpose’ national transport system initiated by the previous Labour Government.
He says the new Government’s decision to dump the project was reckless and indicated an agenda to run down key parts of our transport infrastructure.
“The iRex project would deliver fit for purpose, modern vessels and terminals, that would provide reliability, resilience, low emissions and a safe service.”
Mr Valster says the iRex project would deliver a long term solution for the Cook Strait over decades, which justified the cost of the project.
He says the Minister of Finance and the Government had made an irresponsible decision that would cost millions to rectify by breaking contracts with overseas suppliers, and leave the Cook Strait connection with third rate, ageing infrastructure.
“We wholeheartedly support the protest being held today against the repeal of this law.
Scrapping legislation such as this takes Aotearoa New Zealand from being a world leader to a lemming.
“The impacts of smoking and vaping in schools are persistent and require significant resources to address. The promise of a smokefree generation was a tangible example of social and health issues being sorted at a community level rather than being left for schools to try and manage. Repealing the legislation is a regressive step for schools and students.
“Actions speak so much louder than words. Scrapping this legislation, which was going to save up to 5000 lives each year, tells us clearly that the health and future of New Zealanders is not a priority for this government. Doing away with this ground-breaking law, as a short term fix to fund tax cuts that will not make a difference and that Aotearoa New Zealand can simply not afford, is an utter disgrace.”
