The Labour Party has promised to reduce the unemployment rate to 4% by the end of its first term if leading a government after New Zealand’s 23 September general election.
Finance spokesperson Grant Robertson addressed delegates at the party congress Saturday in Wellington, laying out a blueprint for his priorities as Finance Minister. Among topics including employment, monetary policy and regional growth, Robertson also discussed immigration, saying those talking about race rather than policy were doing so against New Zealand values.
Robertson’s speech was ahead of deputy leader Jacinda Ardern addressing the conference later Saturday. On Sunday, leader Andrew Little is set to outline further measures of Labour’s housing policy, including more detail on how a Labour-led government would tackle negative gearing.
On tax, Robertson reiterated Labour would ask a new tax working group to look into ways to ensure income, assets and wealth would be taxed fairly.
Unemployment to 4%
“As Minister of Finance I will re-assert Labour’s historic mission of full employment. In the first term of government we will lower unemployment to 4%,” Robertson told party delegates.
He later added that, “the Labour Party believes in full employment - anyone who can work should be able to work. And we want all parts of the economic apparatus working towards that goal. That is why we will expand the objectives of the Reserve Bank to include not just controlling inflation, but also maximising employment.”
New Zealand's current unemployment rate is 4.9%. The Reserve Bank of New Zealand last week forecast it would drop to as low as 4.4% in the March 2019 quarter.
Labour has said it would give the Reserve Bank a dual monetary policy mandate, adding maximum employment to its existing price stability goals. Robertson has said the government would not indicate to the Bank which mandate to favour if the two happened to conflict. However, he has also already said that Labour would keep the current medium term 1-3% CPI inflation target band.
There have also been questions surrounding how the Reserve Bank would be assesed as having met its 'maximum employment' goal. Robertson has already said Labour would not set a specific numerical target for the employment or unemployment rates for the bank to hit. The question now is whether his comments on Saturday have effectively introduced a pass/fail measure of 4% unemployment by the third quarter of 2020.
In his speech, Robertson also said Labour will also aim to reduce the number of 90,000 15-24 year olds not in education, employment or training (NEETs). He referenced Labour’s policies for three-years free post-school training and education, its Ready to Work proposal, a boost to apprenticeships and an overhaul of careers guidance.
New Zealand has the fourth lowest productivity in the world, Robertson said. Labour would be an “an active partner in the economy,” as it sought to aid business investment, lift skills levels and invest in R&D. “Not telling people what to do, but supporting them to do it. Working with iwi, local government businesses, entrepreneurs, and workers to sustainably grow our economy.”
He noted regional growth proposals such as Andrew Little’s backing of wood processing plant in Gisbourne and a digital excellence centre in Dunedin. Labour would commit $200m to growing high value jobs in the regions, he said.
Immigration needs to be managed, but talk about policy, not race
Meanwhile, Robertson touched on immigration. His comments included what appear to be a swipe at New Zealand First leader Winston Peters, who in recent weeks has said that immigration is about race, ethnicity and country of origin.
“Every country in the world manages the flow of people coming through its borders and needs to make changes to those rules from time to time,” Robertson said. “We need to manage that carefully at the moment while we build our infrastructure back up.”
“But let me be very clear. This is a debate about policy. It is not a debate about immigrants. And anyone who makes it about immigrants, or indeed about their race must be called out for what they are doing as being wrong and against the values of Labour and of New Zealanders,” he said.
“Immigration has been and will continue to be an important part of adding to our skill base and to the rich cultural diversity that we have. If we manage it well it will improve all of our lives, and that is what we will do.”
Collective bargaining, Budget responsibility
Elsewhere in the speech, Robertson said, “the ability to give everyone a fair share in prosperity also has to be underpinned by giving workers a fair go at work.”
“If we are to build wealth from the ground up then re-establishing the rights to collectively bargain is absolutely critical. Of course we have to lift the minimum wage, of course the government can pay the workers it employs a living wage - but in the end if we are to lift wages across the board we need a fairer and better balance in workplace relations.”
He paid homage to previous Labour Finance Minister Michael Cullen, saying the previous Labour government “ran surpluses, paid down debt, carefully managed government spending - and delivered the second lowest unemployment rate in the OECD and programmes like 20 hours free early childhood education, Working for Families, Kiwisaver, Interest Free Student Loans and more.”
“What Michael and Helen and the last Labour government showed was that you can be disciplined and responsible with the government’s finances and still make massive social progress,” Robertson said.
“We have done it before and we can do it again. The Budget Responsibility Rules that we agreed with the Green Party give New Zealanders confidence that we will carefully manage our debt, run genuinely sustainable surpluses, invest in the long term, and undertake bold reform.”
Tax income, assets and wealth fairly
On tax, Robertson reiterated that a “fresh approach” was required with a “more balanced and fairer tax system.”
“That is why we are establishing a tax working group in government. It will not be the random and unfocused undertaking we saw from National. It will have a mandate. A mandate to develop a system that has the values of simplicity, fairness and collectability,” he said.
“A system where multinationals pay their fair share, where income, assets and wealth are all treated fairly, and where the new and different world of work is recognised.”
Labour had already made some decisions that gave a clear indication of its thinking.
“We are cracking down on tax loopholes for property speculators, including through taxing anyone who flips an investment property within five years. We are also saying that with the changing technology it will be possible to more accurately assess your tax obligations - and therefore we can get rid of secondary tax,” Robertson said.
46 Comments
Got to love all the pre election promises but the fact remains Labour never got it to 4% and I doubt anyone ever will as there is a core percentage that will never work topped up with students at the start of every year and those that just come and go by chance depending on the type of business they are in and how unlucky they are getting laid off in the now infamous "Restructure". 5% is pretty low as it is and don't see it changing unless you start fiddling the numbers.
According to Michael Reddell in a detailed analysis of the NZ labour market: "In 2007, the unemployment rate was down at around 3.5 per cent, but the official view at the time was that the overall economy was more or less in balance. "
https://croakingcassandra.com/2017/05/12/a-questionable-indicator-of-th…
The long term unemployed as a percentage of the total unemployed was less than 4% at the end of that Labour Governments term in 2008. Unemployment was 3.7% of the total workforce in 2007, something to be proud of I'm sure you would agree. Long term (over 12 month) unemplyed climbed to almost 12% of the unemployed four years later with the GFC. Put another way the long term unemployed at the end of the last Labour Governments term was 4% of 4% of the workforce or 1600 people in 1,000,000. There is no reason on earth why we should accept even 4% unemployment.
This myth about a large pool of useless Kiwis that haven't had a job for years is often trotted out by immigration proponents; the same people that seem to think it's OK to have half the population on less than a living wage. If you don't like it we're happy to bring in desperate third world labour to take your job.
Here are some links to the statistics: http://www.tradingeconomics.com/new-zealand/long-term-unemployment-perc…
http://www.stats.govt.nz/browse_for_stats/snapshots-of-nz/nz-progress-i…
And, if you want to know why the neo-lib economic experiment and a constant pool of unemployed has failed the people try this: https://www.gmo.com/docs/default-source/research-and-commentary/strateg…
we went into recession 2008 q4 , we went from 1.1 growth to -0.1 and it lasted until Q2 2010
The GFC started in 2007, but we first felt it in September 2008 when lehmans collapsed
so that matches the stats and would have happened no matter which party was in power at the time
http://www.rbnz.govt.nz/statistics/key-graphs/key-graph-real-gdp
https://www.theguardian.com/business/2011/aug/07/global-financial-crisi…
Wrong.
We recorded negative growth in the March 2008 quarter (1Q08) and June 2008 quarter (2Q08). So technically we went into recession in 2Q08.
http://www.nzherald.co.nz/business/news/article.cfm?c_id=3&objectid=105…
The GFC didn't blow up into a fully fledged shit storm until the failure of Lehman Brothers on 15 September 2008. Up until that point we were still in the midst of a commodity boom that had oil peaking at US$147.30 in July 2008... and, need you be reminded we were, and to a great extent still are, a commodity based economy.
So, in short, Labour were hopeless in the best of times.
I'll call out any attempt to revise that poignant piece of history.
No need to get worked up cmat.
The down turn was due to a severe drought and the rise in the OCR (a recession engineered by the RBNZ in other words) to combat our high rate of credit/debt expansion and consequent housing bubble. Nothing to do with the government.
The GFC that followed had similar roots but on an epic scale.
I'm not getting worked up - I'm calling out incorrect revisions of history. Don't try and belittle facts by making out that I am getting emotional.
Cullen crowed about leaving the Government accounts in a rubbish state - sorry, that is something that I will always treat seriously, whatever the hue of the party responsible. Muldoon did it in the 80's and Cullen did it in 2008. The fact Grant Robertson still holds this up as fine fiscal management sticks in my craw.
You can put any kind of belt-way spin on it you want, Cullen will go down as a History professor that was an incompetent manager of the economy.
Cullen didn't leave the accounts "in a rubbish state". Yes, the recession and subsequent anemic growth did create deficits but that is not the same as leaving the government in a poor fiscal position. There was plenty of scope to raise more revenue/cut spending if needed. National took advantage of the later but for obvious reasons neglected the former.
It's worth noting that Cullen was mocked by the opposition at the time for running cash surpluses which was considered by his detractors to be crazy fiscal management. He packed away money in the Cullen fund and paid down debt to the point where people were debating whether we needed to keep some debt just to facilitate commerce rather than because we needed it. He was dragged to giving tax cuts but he did so eventually.
The deficits that national inherited were a function of tax cuts under labour and national, low growth, and a natural disaster. It's worth noting that national runs on economic management but their performance on growth/productivity has been poor. When you borrow down to some of the sub objectives they haven't hit their targets.
Hardly, here is some bedtime reading for you:
http://www.treasury.govt.nz/budget/forecasts/prefu2008/prefu08-pt4of9.p…
I know, there are big words and not too many pictures for you, so here are some highlights:
- "The OBEGAL... shifts into a deficit position in the current year (i.e. 2008) of $31 million which worsens to $3.2 billion by the end of the forecast period (i.e 2013)";
- "A sustained period of large cash deficits is forecast";
- "In order to meet the cash shortfall... borrowings are forecast to increase by $22.5 billion and its financial assets are forecast to reduce by $11.2 billion over the forecast period (i.e. 2008-2013)."
- "medium-term projections show that this deterioration continues throughout the 10-year projection period" - i.e. 10 years of deficits forecast when Labour left office. Surpluses were not expected until 2018.
I'll make this simple - The PREFU is a "PRE-ELECTION fiscal update"... That kinda means the election result is unknown so therefore it doesn't factor in National's proposed tax cuts at the time - it was based on Labour's settings. So in a terrible economic setting you would have raised the highest marginal tax rate above 39%?
As for a "natural disaster"? I don't know how Labour had the ability to predict an earthquake happening in 2011. Was Ken Ring in cabinet?
I understand that when the recession/GFC came along the budget deteriorated, that is what usually happens in an economic cycle. Counter cyclical deficit spending in a recession is normal and a common strategy to support the economy through that period. So I'm not going to look at some red ink and say Cullen was a looser.
Looking at the figures from that report they show net debt including the super fund at -7.2% of GDP. That means the government at that point had more assets than debt, an extraordinary fiscal position. Also the operating balance - which is what national claimed Cullen should be tax cutting down to small surpluses - is barely in the negative at the end of the forecast. So I really don't see how that proves your argument at all. The books look fine to me for a economy going into a cyclical recession, a recession as someone pointed out engineered by 10% interest rates.
Now we all know that things got a bit worse after that, the recession was global, deeper and longer than expected. But, the point is cullen left an enourmous amount in the piggy bank to ride it out with. You haven't responded to my point that he was heavily criticised for that and yet the National government have used that reserve to shepherd the economy through difficult times.
"The decades of deficits line" that you've obviously swallowed hook, line and sinker, was political distortion created by national to make them look like saviours and to justify cuts. It was the same tactic used with ACC. Pick a point where things are really bad because of temporary factors, extrapolate like those factors are permanent, create a negative narrative based on that extrapolation, make some politically painful changes under the guise of crisis, wait for the cyclical factors to reverse, the results rebound, claim you saved the country/system. If you can't see the cynicism of this....
You really don't need to school me on the history of the 2000s, I was there and I was paying attention.
I'm not having a go at national here but the idea that Cullen handed them a bad set of accounts is ridiculous and a political distortion to low the bar the public measured them by.
the official stats from the reserve bank don't agree with your claim, whilst I agree labour lost focus and brought in (in my mind) bad policy. WFF, interest free student loans, buying kiwirail. Which in turn increased spending for poor outcomes
my point still stands the recession was brought on by events outside NZ and it would not have mattered who was in charge of the country it still was going to happen.
As a aside the so called ACC deficit was due to the plummeting value of ACC's investments on world markets and the recovery was due to the same markets roaring back, but that is ignored as both sides try to make political headlines
I am not sure I understand your response cmat, did you even look at the sources I linked to. The extended graph of long term unemployed trended steadily down from all the way back in 1995 (30%) to reach a low of under 4% in 2007. There was no sudden aberration in 2007, certainly in terms of long term unemployed and likewise with the unemployment rate generally which was 10.7% back in 1992 and down to 3.7% by 2007. These trends were in force regardless of who was in power but Labour have now made a point of standing up for Kiwi workers and altering the RBNZ settings and made full employment their priority. That's good right?
Yes, and my argument still stands, being that:
1. The early 2000's were wildly exuberant times globally and you're right there was no sudden aberration in 2007 - sub-prime mortgages were being written and collateralised across the US for a decade before the GFC - effectively putting a bunsen burner under consumer confidence in the in the world's biggest economy;
2. Labour increased government spending by 50% in 5 years in the early 2000s - by the time they left office it was 35% of GDP, crowding out the private sector and creating jobs by expanding / establishing departments under the auspices of their social engineering experiments - effectively "make-work" schemes.
Is low unemployment a good thing (whilst still acknowledging the existence of cyclical, structural and frictional forces)?
Yes, as long as they are sustainable - It's easy to link to stats without acknowledging the causal effects in play at the time - The lead up to the GFC was a historical aberration and Labour's make-work Government spending policies don't fall into the category of sustainable, productive jobs.
Who says 35% is problematic. It's about the efficiency of the spend and the measured impact on incentives to work and invest. I haven't seen any evidence to show we'd empirically be better of as a society with govt expenditure at 30% comepared to 35%. If you have some you can share it.
One interesting example with regards to this is the top tax rate. Nationals tax changes were supposed to address tax avoidance at the top band limit but I recall seeing articles on this site showing perverse behaviour continues.
Re government expenditure, the govt is an efficient purchaser of social services. If 30% government size is built on people not being able to get hip replacements I'd rather we all paid a little bit more.
There are serious problems including a growing infrastructure deficit (due to growing population), high private debt (driven by housing), and pressure on living costs due to housing.
National has done some things that I approve of, particularly the GST switch but there have been some howlers. Not contributing to superfund was a big one. The strategic projects in Christchurch looks like another. More work on skilled trades for the building industry should have been a priority and I think their aversion to a public led house building project was a failure. The tax system is overdue for a rejig, i'd recommend a land tax. Finally, their NZ Super policy change is too far out.
national have made some financial howlers while in power, so to claim they are good financial management is a bit rich.
the worst part is they squandered political opportunity in there first term to reset the economic environment and instead followed ideology so what could have been achieved has not.
that is the problem with our political democracy all sides promote policy that will gather enough votes to gain power, and will not risk that by doing something that is good for the country long term as it will get them thrown out.
how much better if sir dove myer had got this through at a fraction of todays cost
https://www.greaterauckland.org.nz/2013/10/29/photo-of-the-day-sir-dove…
Think you might find that what measure that classes you as unemployed was altered a bit by the Nats. I believe the number of hours to qualify you as being in full time work may have shrunk a bit. I am sure Labour could have shown an even more favourable number has they done the same.
Perhaps that should be productivity growth - basically flat for five years now. Coincidentally a time of high immigration and the emergance of our so called rock star economy. Mind you our productivity is certainly nothing to be proud of (Australia's is 35% higher) and is well down the pack. India has productivity per worker only one tenth of ours so plenty worse than we are.
https://en.wikipedia.org/wiki/List_of_countries_by_GDP_(PPP)_per_hour_w…
Interest.co.nz need to set up a function where I can respond to a headline with a laughing emoji.
National may be doing an abysmal job with Housing but my 2 year old son's finger paintings are more credible as economic forecasts than Grant Robertson's grand prophecies of what Labour think they will achieve.
“What Michael and Helen and the last Labour government showed was that you can be disciplined and responsible with the government’s finances and still make massive social progress,” Robertson said.
What alternative reality is this Grant??? Labour put us into a recession in 2008 before the GFC hit; just to remind you, that point in time was one of the most artificially buoyant economic times in history. Then Michael Cullen's parting shot was a PREFU forecasting a decade of deficits. It's beyond me how anyone can label that as being "disciplined and responsible with the government’s finances"!
Robertson, a career Student Unionist and sycophantic disciple of Clark and Cullen, is not Finance Minister material for me. Not close.
Totally agree cmat. Cullen's parting shot was to buy back Kiwirail at a stupid price, and squander taxpayer money. I see his reign at nz post has been a disaster too with acc, and the superfund coming in to bail out Kiwibank, and in recent times KB, has hit the press for all the wrong reasons. A failed recapitalization, and resignations from half the board.
Not sure unemployment is even really an issue ATM compared to the housing crisis. Not much point in working to live, if you have no hope in buying a proper house. All you are doing is just existing, and paying off someone else's mortgage. We are heading to a two tier hierarchy.
A pity we don't have a single strong opposition party, as it means we aren't getting any decent policies imo
I agree Rob - luckily the number of 'have nots' is increasing by the day. And they each have voting rights.
An interesting proposition would be to somehow trigger mass unemployment. I mean who in their right minds wants to continue paying someone elses mortgage the rest of their lives? If a significant number of tenants decide to start skipping their rental payments (either willingly or unwillingly) it would be a faster way to resolve the housing crisis than attempting to do it politically - which is flawed because of the type of people we have in government at present.
Basically what I'm saying is to have all tenants strike at the same time until our voices get heard.....I'd happily go and live in the streets for 6 months, if it means I have a chance of buying my own home down track at a realistic price. For those who are locked out of the Auckland housing market, we could together save ourselves half a million dollars by doing nothing other than begging on the streets - cripple the housing market and see a 50% crash. That's actually quite a good return on investment......for doing nothing.
I've voted labour most of my life out of either a sense of duty or feeling that at least they were the lesser of the evils. Rarely were their policies to my material advantage but I've done well enough anyway and am in a financially comfortable position in my 50's with investments, a high value home and little debt. My concern is for my children's future and I don't have a party to vote for anymore. None that gives me any confidence at all. Everything Labour positions itself on is just National- light. Business as usual, bottom line GDP growth and dance to the tune of international finance. Winston is the only choice left to people like me who want their children to have something like the opportunities we had. Yeah I know he's a risk but look at what we had after 18 years of essentially the same political philosophy.
To be honest the rate is so low now that our focus should probably be on measures that support wage growth like productivity improvements and restructuring of industry (i.e moving the workforce towards higher value employment). We need to find a way to unwind distortions in our economy through higher wages to creating inflation. I would argue anything under 5% is probably very close to the natural rate taking into account people who aren't employable and the normal ebb and flow of employees between jobs anyway. Wage growth would be much more meaningful for most New Zealanders.
Seems to me the best way to encourage wage growth, productivity and equality is to get that unemployment rate down.
Our median income (all adults, all sources) at about $32,000 is well below the recognised minimum living wage - that's half the people Squishy. The high levels of immigration have reduced the bargaining power of workers and reduced the incentives for more productive workplaces. Our skilled and industrious have left for better prospects and the financialisation of the economy has given a huge boost in income and wealth to the top 10 or 20% - largely invisible due to the way we tend to ignore capital gains in this country.
"the decades after the war are generally known today as
capitalism’s Golden Age. The Golden Age was characterised by high rates of employment, economic
growth, and an equitable distribution of income and wealth. In the mid-1970s, however, these policies
were abandoned because they were thought to be causing inflation. This was an incorrect assessment,
as the inflation was actually generated by oil shocks imposed by the OPEC cartel in response to
US foreign policy in the Middle East combined with poor labour relations in the English-speaking
countries that led to class conflict and strikes over who should bear the brunt of these higher oil prices.
But the economics profession at the time did not realise this. Their theories told them that it was the
full employment policies that were generating the inflation, and so they encouraged policymakers to
abandon these policies and instead have the central bank attempt to control inflation through the use
of monetary policy"
https://www.gmo.com/docs/default-source/research-and-commentary/strateg…
The 'median' income on an all-adults-all-sources basis is a fiction. And comparing that with the 'living wage' is just misleading.
The 'living wage' level is for people in work. So you need to compare in-work medians. For people ~22 yrs the median is $38,400, for people ~27 yrs the median is $50,100, for people ~32 yrs the median is $56,300, for people ~37 yrs the median is $59,500, for people ~42 yrs the median is $60,000, for people ~47 yrs the median is $58,900, for people ~52 yrs the median is $58,000, and for those aged ~57 yrs the median is $56,000.
This data is from the IRD's PAYE data set, so includes nearly everyone on wages and salaries. The median is the middle point, so half will be above these levels, half below.
It is entirely misleading to include people not in the workforce in any review of pay levels. To do that will cause you to draw very dodgy conclusions.
(The political group that promotes the 'living wage' says it is currently $20.20/hr. On an annual basis that is $42,000.)
Point taken but it is worth remembering that the $32K is the reality for half our adults and, given the workforce participation rate we have, represents the actual wages for hundreds of thousands of hard working Kiwis. That's before tax BTW.
PS the median income is $48,859 somewhat less than the figures quoted would tend to suggest.
http://www.nzherald.co.nz/median20income20immigration/search/results.cf…
I agree with others here, the focus should be on generating a higher wage economy. Unemployment will naturally fall by itself when there is more of a significant difference between the benefit and the minimum wage. Considering our so called "Rock Star" economy we have had for years now, little has changed for the average worker. Unless you got your foot on the property ladder years ago, you have gone backwards.
4.9% to 4% in three years doesn't seem that ambitious and I say we will get there regardless who wins the election. The more interesting things were tax and collective bargaining. A comprehensive review of the system is in order but it has to be serious about taxing capital the same as income - but the leader announced the ring-fencing of loses for housing so I am sure if that is part of the review or is open for modification. We need to lift wages in NZ and this means we need to kill the legacy of the Employment Contracts Act forever. We need for those at the bottom to really get good wage growth.
But I would address one persistent theme in the comments. Tax cuts aren't bribes - you can't be bribed with your own money.
As I see it 'collective bargaining' is no longer 20,000 going out on strike. Modern union management tend to use the pressure of local groupings to protect individuals. In doing so many employees get a 'free carry' without paying for it. Just look at the "freedom" of those overseas seasonal and student workers to exist on $5 per hour.
We welcome your comments below. If you are not already registered, please register to comment.
Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.