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Shock, horror - AFR sounds alarm about Aussie jobs being offshored to NZ

An intriguing email arrived in my inbox last night. I'm assuming it was sent to all Australian Financial Review subscribers.

It's from the paper's editor-in-chief, Michael Stutchbury. He sounds the alarm that despite Prime Minister Julia Gillard's "Aussie jobs first" pitch, more jobs are being offshored to the lower wage economies of India, the Philippines and (horrors!) New Zealand.

The immediate spark of concern is IBM's decision to offshore as many as 1500 jobs (about 10% of its workforce) to Asia and NZ.

IBM won't comment on how many, or what type, of jobs are heading here. But the Sydney Morning Herald quotes an analyst who says:

He wouldn't be surprised if New Zealand ended up benefiting the most from the cuts because of the country's cheaper real estate, lower mandatory superannuation for employees and lower labour rates.

New Zealand also had better English language proficiency than other countries in the region, which would help drive productivity when talking with clients.

Australia's cost base has become too high, says Stutchbury. 

And he doesn't see the political will for change any time soon. "Labor can't do it because it is run by the trade unions and is locked into the rhetoric of 'spreading the benefits of the mining boom'. [Opposition leader] Tony Abbott won't do it because he doesn't want to expose himself to the memory of John Howard's Work Choices."

Australia's pain is New Zealand's gain. 

IBM won't be the first to move jobs eastward across the Tasman. The Australian Financial Review itself moved subediting jobs to the cheaper environs of NZ. Heinz moved 300 jobs from Queensland and Australia to Hastings, iiNet (Australia's largest independent ISP) has moved part of its call centre operation to NZ, and the CEO Vocus, which last year bought NZ ISP Maxnet, tells NBR ONLINE his company is looking at building data centres here - in part because labour is cheaper, but mostly because of our cheaper electricity.

We don't want to become a cross between Tasmania and Bangalore; a marginal offshoot of mainland Australia that picks up bottom-of-the-ladder jobs. But let's face it, not every school leaver can be a systems architect.

And this is happening at the same time as we're seeing a boom higher up the food chain as the likes of Orion Health, Datacoom and Xero sign on people for skilled roles.

Australian companies moving jobs to NZ also shows it's not just about wages. New Zealanders are paid less than Australians, and the gap is growing, but India and the Philippines still win hands-down on that front. It's also about factors such as geographic proximity; Australia and NZ being very culturally close (and they are, at the end of the day); the two countries' union on many regulatory fronts; and our handy skills base. The IT labour market is tight, but our workforce is growing.

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Comments and questions

Great news and great article. Opposition will spin it as low wages, but better low wages than no wages.

Shows the danger of unions becoming too strong (in Oz).

Too true!

Yep - keep pushing up your minimum wage fellas, we'll look after the casualties.

1499 jobs to Asia
1 Job to NZ

Bill English was right all along!
We have a distinct competitive advantage because of the artificially high costs the mining boom has laced into the Australia economy at all levels.
In IT we can out-compete Australia, especially in coding/programming and support, which can be done remotely with no loss of service (if done well).
Our organisation keeps Australian staff essentially to be seen doing so. All our heavy lifting work is done in Auckland at about 30% saving vs Sydney/Melbourne.

And even better if not in Auckland.

The problem with moving to a 'branch office' economy is that the bright school leaver who is capable of becoming a systems architect will have to go overseas to achieve their goal.

Pretty much happens now - we get back a lot of good people when they come back here to settle down...

With head offices and R&D moving offshore, there is less and less for them to come back to.

Or, they come back filled with aspiration and motivation and start businesses themselves...

So why was it they had to leave in the first place?

It's lifestyle and kids they come back for...

But the question was why did they have to leave?

Because they can. It's no longer difficult to travel from NZ, and young qualified people who don't make the most of the opportunities to do so are robbing themselves. Many will come back, wiser in every way and experienced in their field. It's to be encouraged.

Ask 100 and you'll get a 100 different answers. Most don't have to leave, but choose to, usually chasing riches and adventure.

Though they all come back with a different perspective, learning new skills, aspirations and outright gratefulness to be home and renewed respect for our lifestyle and NZ's natural beauty.

I didn't really comprehend just how awesome NZ is until I departed, or how patriotic you can be watching the All Blacks play while in London.

But lifestyle and awesome outdoors, combined with an economy beating most others, NZ is a very desirable home. No wonder house prices are rising!

And go where? Australia unlikely, UK for a short term. There is an overflow of architects at the moment anyway, with a lot from the Oz and the UK applying for jobs here.

This confirms New Zealand as a source of third world wage labour.

Great for people to get jobs. A sad indictment that New Zealander's wages are so low and are forced to live in wage poverty.

Correct. In 2011 the United Nations was alarmed that it found 20% of NZ's children live beneath the poverty line in an OECD country.

I wonder if it's the same 20% who are failing at school and leave illiterate?

The introduction of charter schools could address this issue, though.

Have you ever lived in a country that tried charter schools? I have and they usually fail.

Shane, because you saw failures doesn't mean they all do.

There's plenty of evidence they do work. Google is your friend.

Where failures continue, different, measurable approaches are required.

It's the parents' choice - not the unions.

Staggering the UN could find anything. Overpaid, over heard from, do nothing. A bunch of ex-pollies who tell us how it is well living in lala land.
Parents need to be taught not to be parents if they can't afford it, and if they do have kids to stop wasting money on the unnecessary.

Your opinion is an educated one from a background of privilege.

If you grew up in a slum, your parents were on the dole or minimum wage and your parents didnt give a stuff about you, I wonder if you'd be writing comments at all on the NBR.

And, yes, the UN has problems but so does every organisation. What they are good at is running surveys and identifying human rights abuses.

Would this be the same United Nations that appoints Pakistan and Saudi Arabia to their Agency for Women?

Quite a smart move to bring problem countries into an environment of increased scrutiny for women's rights, wouldn't you think?

And, if there were no UN, there would be no international courts for human rights criminals in such as Bosnia, Cambodia, and the Sudan.

It's a bit silly trying to belittle an organisation dedicated to doing good. Nothing is perfect and it's better than doing nothing and throwing stones from the sideline.

I would rather higher employment with lower wages than higher unemployment with higher wages, which, to be fair, is what India and China are guilty of to the extreme.

Yes better to be poor and in work than even poorer on the dole.

OK, where is the next best country to move to?

That's where I am moving too next year, thanks to my European passport.