NZ First leader Winston Peters says an increase to the minimum wage could be on the table next year, as Cabinet approves second effective cut

Cabinet may need to approve a larger increase to the minimum wage next year in order to fulfill a coalition agreement promise struck between National and New Zealand First. 

The Act Party's Workplace Relations and Safety Minister Brooke van Velden announced on Tuesday the adult minimum wage rate would increase by just 1.5% to $23.50 in April 2025, less than the rate of inflation. 

In April 2024, she lifted the adult rate by 2% when annual inflation was still 4%. Taken together, these two decisions have reduced the real minimum wage by roughly 2.5%.

The exact calculations vary based on which time periods are compared. Van Velden has previously compared the increase to the forecast calendar year inflation rate. Using that comparison, the effective reduction in the minimum wage shrinks to 1%. 

But the purchasing power of the minimum wage has been reduced in each of these two years, however the numbers are cut. This arguably breaches the NZ First–National Party coalition agreement which commits to “moderate increases to the minimum wage every year”.

Asked about this, NZ First leader Winston Peters said the minimum wage had increased considerably over the past seven years and these two years shouldn't be taken in isolation. 

However, the coalition agreement—signed in 2023 in the context of increased minimum wages—requires further increases “every year” not in aggregate.

When pushed on this further, Peters said cryptically: "What's more important is next year … we’ll have turned the economy around by then”. 

The party leader wouldn’t promise an increase above the rate of inflation, but said the Cabinet would be “looking at the issue next year” and reporters would have to wait until then.

Van Velden said there was no breach to the coalition agreements as all three parties had signed off on the below-inflation increase during Cabinet discussions.

“If you look at the seven years before I became a minister, the minimum wage went up by 50% when CPI [the Consumers Price Index] went up by around 25%, so if you take all of those years together … people are still better off than in years prior,” she said.

When asked about Peters’ suggestion that next year could see a larger increase, she said she couldn’t speak to what future decisions Cabinet might make. 

Labour leader Chris Hipkins said Peters had either been duped by his coalition partners or was only ever pretending to support workers. 

“These are real terms cuts and so either Winston Peters was naive in signing up to something that involves cutting the minimum wage, or he himself was being very cynical," Hipkins said.

Camilla Belich, Labour’s workplace relations spokesperson, said she would have increased minimum wage at the rate of inflation, considering it was lifted in the previous two terms.