Read the original article in the Post
If you were wondering why the political right have been so eager to talk about gangs recently, one glance at this week’s wage data will resolve the mystery.
Calculations by the Council of Trade Unions (CTU), released on Tuesday, show minimum wages have fallen by 6.7% since June 2023, once the rising cost of household goods is taken into account. In other words, a low-wage worker’s pay packet buys 6.7% less than it did.
Even the average wage, adjusted for inflation, is up just 1.1% over three years. As part of said inflation, the same period has seen the cost of bread rise by 17.3%, milk by 27.9% and energy 29.2%.
It’s hardly surprising, in short, that National, ACT and New Zealand First would rather talk about gangs than discuss their economic record, when you consider what that economic record is like.
Delivering higher wages and basic goods at affordable rates is a core part of any economic manager’s job description. Yet the Government has singularly failed in this task.
And although overall inflation has slowed under this Government, this is – as The Post’s Wednesday editorial pointed out – due almost entirely to interest-rate hikes by the Reserve Bank. Ministers claiming credit are, in The Post’s words, committing an act of “crankery”.
In any case, overall inflation is still 3.7%, well above the official 2% target, and more interest-rate rises are expected from December onwards. That will make investment and hiring look less attractive, hampering a nascent recovery.
The Government could, of course, legitimately blame much of the inflation irritation on Donald Trump’s Iran War – if it hadn’t, in opposition, refused to allow Labour the same excuse vis-à-vis Covid-19 and Ukraine. So these problems will be sheeted home to the coalition parties: live by the sword, die by the sword.
Nor are other numbers kinder. Some 50,000 jobs have been destroyed on the Government’s watch, including 12,000 in manufacturing and nearly 14,000 in construction. Job ads have slumped to a level last seen a decade ago, when far fewer people were looking for work.
All this has driven unemployment upwards, from 4% in December 2023 to 5.6% in June this year. Around 171,000 people are officially unemployed, up almost 40% since the last election. Even GDP growth – a limited metric for many reasons – has crawled along at a snail’s pace, totalling perhaps 1% over the last three years.
What might the Government have done differently? Not implemented real-terms minimum-wage cuts, perhaps. Not hiked car rego fees and other public-service charges in a way that sent “administered inflation” soaring. Reassigned thousands of public servants to more productive tasks rather than crudely firing them.
The greatest failing, however, has been conceptual: a failure to properly appreciate the role the state plays in the economy. When households and firms were cutting back and downing tools, the Government should have stepped into the breach, using its own spending to maintain demand for goods and services.
In particular, it should have ramped up state house-building, preserving construction-sector jobs and expertise. Instead it did exactly the opposite, slashing Kāinga Ora’s building programme.
Even for centrists who think some moderation in overall government spending was needed, the cuts have appeared reckless. Recently a friend of mine, discussing the Government’s record with a local tradie, was told: “They turned the tap off too hard.” Much truth lies in those simple words.
Another failing has been to not attack the worst sources of local inflation – namely, price-gouging by firms whose dominance of their market allows them to generate excessive margins. Power companies and supermarkets – the latter found by the Commerce Commission to be pulling in $1m in unwarranted profits every day – top this list.
In fairness to National, it appears to want to confront the supermarkets, but has been blocked by ACT. Even there, though, its proposal to break up Foodstuffs would be contingent on a further study, rather than a guaranteed step.
Almost everything in politics is a choice. So it’s not a given that low- and middle-income earners have to suffer in the way they have done these past three years.
As the CTU’s research shows, between 2010 and 2023 the minimum wage increased by an average of 1.8% a year, even after inflation (rather than falling at around that rate, as it has since the last election). That 2010-2023 period included seven years of John Key’s National government, which was hard on minimum-wage workers initially but then changed tack.
ACT, conversely, has pledged to freeze the minimum wage for the next three years. And if re-elected, it might get its way, given how often the current National leadership has caved into its extremist demands.
Ditto New Zealand First, despite its occasional claims to represent hard-working Kiwis. Yet if those parties had been less supine, they might have had a better story to tell about these last three years.