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Minimum wage too high to hike without fuelling inflation - National

Grant Robertson and Nicola Willis
Grant Robertson and Nicola Willis. Photo: RNZ / Angus Dreaver

National says it's a "great shame" Labour has increased the minimum wage by so much, because it means they can't do it now to help low-income Kiwis make ends meet without stoking inflation.

On Wednesday, Statistics NZ said inflation in the 12 months to December was 7.2 percent, unchanged from September's figure and slightly down on June's.

Finance Minister Grant Robertson told RNZ's Morning Report he thinks inflation has peaked.

"Most commentators yesterday when they saw those numbers, would say that," Robertson said.

"Doesn't mean that that makes life easier immediately for people, but it's the trend."

Prime Minister Chris Hipkins earlier this week singled out what he called the "global inflation pandemic" as his number one priority this year.

"He's put cost of living front of centre," Robertson said. "He's asked us to go back and relook at everything that we're doing to make sure our prioritisation is on those issues that are affecting people in their everyday lives."

The current wave of inflation is not unique to New Zealand, which has arguably had it easier than many of our trading partners. In Australia it's still rising, hitting 7.8 percent in the 12 months to December; the UK saw inflation hit 11.1 percent in October, since easing to 10.5 percent; while the US hit 9.1 percent in mid-2022, since dropping to 6.5 percent.

National Party finance spokesperson Nicola Willis said the blame for continued price hikes here though cannot continue to be blamed on offshore influences. The December quarter saw inflation for non-tradables - "goods and services that do not face foreign competition", in Statistics NZ's words - at 1.5 percent, slightly higher than inflation for tradables at 1.4 percent.

"Domestic inflation pressures are pushing inflation more than what's happening internationally," Willis said.

"We've now spent three quarters of the year over 7 percent. We've been outside New Zealand's target for inflation, which is less than 3 percent, for almost two years."

Robertson said from April there would be "some pretty significant increases for benefits, family tax credits, superannuation" to help struggling people out.

"We are very conscious that lower-income New Zealanders are being absolutely smashed by inflation," Willis said.

"The great shame is that Labour increased the minimum wage so much in previous years, but what you've seen has happened is that they have not been able to increase it as much in these inflationary years because they know it will be passed on."

In his first Budget as finance minister, Grant Robertson hiked the minimum wage by 4.7 percent, followed by a 7.3 percent boost in 2019. Since then, the increases have been 6.8 percent, 5.8 percent and in 2022 - the first year of abnormally high inflation - he put it up 6 percent, more than the year before.

Deputy leader of National Party Nicola Willis
Nicola Willis. Photo: RNZ / Angus Dreaver

This year's minimum wage hike, if there will be one, has not yet been announced. National and the ACT Party have opposed Robertson's hikes in the past, but warnings they would boost unemployment have not come to pass.

"Now, every year National was in government we increased the minimum wage - we think that is the right thing to do - but how much you do that by is a very careful balance," Willis said.

"Because what we don't want is workers on the one hand being paid more, but on the other hand having to pay so much more in costs at the supermarket, on rent and other things that their wages just get eaten up."

When National's Bill English was finance minister, he typically put the minimum wage up between 25c and 50c a year. Robertson's hikes have ranged between 75c and $1.20.

Council of Trade Unions secretary Melissa Ansell-Bridges said they would like it to go up to the figure set by the Living Wage campaign - $23.65. That would be an 11.6 percent hike, dwarfing any in recent history.

"It needs to be enough that working people are actually able to afford to thrive and not just scrape by," she told Morning Report.

She said the government and Reserve Bank needed a "more nuanced" approach to curbing inflation than simple raising the cost of borrowing.

Community Housing Aotearoa chief executive Paul Gilberd said the biggest cost for most households was housing, calling it the "centre of the jigsaw" for reining in costs.

It's the largest cost for most households in New Zealand by far … if they rent, it's paying the rent. If they part-own, it's paying the mortgage. If they're privileged enough to own 100 percent of their own, that's the cheapest possible way you can live."

National has proposed reinstating tax breaks for landlords, saying their removal is pushing up rents.

"Tenants are paying more tax than ever. The government has been warned by its advisors that those costs get passed on - we're seeing that in practice."

After a steep jump in late 2021 from $500 a week to $550, median weekly rents have stabilised, according to data from Tenancy Services.

In the five years to September, the median rent rose almost 32 percent. In the five years before that, when National was in power, they rose 24 percent.

"The truth is rents have gone up considerably under Labour," said Willis. She would not give a guarantee rent hikes would stop should National win the election in October, because "there are a number of factors" that influence prices.

Such as the cost of building new houses.

Combined Building Supplies director Carl Taylor said prices for their shareholders were "levelling off".

"But from what I'm hearing on the ground is that their pipelines for work are slowing up due to those costs increasing and having to pass them onto homeowners. It is a genuine concern for guys on the ground."

He said a big help for cutting building costs would be to make it easier to import materials and increase competition, as recommended in a 2022 Commerce Commission report.

source: https://www.rnz.co.nz/news/political/483135/minimum-wage-too-high-to-increase-further-without-fuelling-inflation-national-s-nicola-willis