Jacinda Ardern says unemployment should be below 4%

Prime Minister-designate Jacinda Ardern says GDP per capita is “barely growing” (photo: Jerry Yelich-O'Connor)

Prime Minister-designate Jacinda Ardern says New Zealand’s unemployment rate should be below 4%.

She has also put a timeline on the government’s plan to ban overseas speculators from buying existing homes in New Zealand, saying the mechanisms to do so will be established by Christmas.

Ms Ardern made the commitment this afternoon while addressing a room full of unionists in her first major public speech since becoming prime minister-designate.

A major party of her speech hinged on what she, and incoming deputy prime minister Winston Peters, call the “low-wage economy.”

She says Labour is aware that, while the majority of workers are employed by big, profitable companies – some small businesses will feel the effects of the new government’s plans to raise the minimum wage to $20.

“That’s why one of the tasks for the Tax Working Group will be to look at models overseas for lower taxation for small businesses.”

For too long, Ms Ardern says, a line has been pushed that decent wages and strong economic growth don’t go together.

“I simply don’t buy into baseless claims that paying people well means there will be fewer jobs. In fact, the overwhelming weight of evidence is that strong wages for all working people help to boost growth and create jobs.”

She says GDP per capita is “barely growing” and unemployment is stuck at 5% but she says it should be below 4%.

This is because, she says, the economy has become more geared toward speculation and extraction than value-added exports.

“Low wages aren’t simply a problem for low-wage workers, they are a problem for businesses and the economy.”

Ms Ardern says under a Labour/NZ First government, “we can finally have fair wages.”

She says unions, such as the CTU, played a “crucial part of our campaign.”

She also confirmed a Labour-led coalition will set up a ministerial inquiry into the mental health crisis, and also, into the abuse of children in state care.

She says Labour wants to “hit the ground running,” emphasising her party’s plans for the first 100 days in office.

She praised her predecessor, Andrew Little, and talked up his new role as minister responsible for Pike River re-entry, in “keeping with the commitment I made to the families in August.”


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King Canute said the tide shouldn't come in. Wonder if this turns out the same way.

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If I was Winston I'd be more concerned with my conflicting ideology of trying to get the RBNZ to lower the NZD via direct intervention in money markets, but also my coalition partners highly inflationary move of boosting wages by 30% in 3 years!

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Actually, he said no such thing - it was his advisors (think, bureaucrats?) who told him so, so he sat on his throne on the seashore to demonstrate that they were wrong.

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Jacinda has really given the opposition a gift to keep hitting her with over the next 3 years as the chances of her government getting unemployment under 4% are about nil. Winnie says our economy is had it so one would think that would make job creation difficult. Is she going to put them all back on sickness benefits?

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You are correct. However beware massaged statistics and double speak in the months to come and throughout the term.

The official definition in NZ of employed (and therefore not unemployed), is one or more hours per week paid work, or one or more hours per week unpaid but contributed to a business.

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Funny that "nil chance" - last time unemployment was below 4% was from 2004 to 2008. I wonder who could have been in power back then. Hmmm...

Source: https://tradingeconomics.com/new-zealand/unemployment-rate

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Gee I wonder who moved a great many long term unemployed onto sickness benefits. I wonder who employed a great many dropkicks doing pointless government jobs.

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Wasn't arguing/for against anyone, was just pointing out recorded facts ;)

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The sad part is that currently many businesses are struggling to get staff, under 4% and we will see real issues

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So she wants low value industries (dairy, meat and hospitality), who happen to be the largest employers in NZ, to shell out higher minimum wages and in the process employ more low-skilled people at higher costs.
Delusional!

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Maybe that's the challenge we need to be forced to become high value. Nestle (dairy) based in high cost Switzerland. Danish Crown (meat) high wage Denmark, it's not cheap to visit Canada/Sweden/Norway people still go
If it cost James Cameron more to build his mansion do I care?
Reducing immigration and forcing us to deploy our time and resources into high value/reward activities is a good thing. We need to automate more to reduce labour. So let's take up the challenge

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Automation? Really? Well that’s certainly going to help her get to 4%. Not.

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Not just delusional, more like worrying. Especially if those businesses go under due to a crippling wage bill, and then they all have to head off to the dole office because there's no jobs to be had. I don't suppose Labour MPs think of things like that happening.

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As a small business owner who pays his workers at living wage rather than minimum wage said this week: Business owners who say they can't afford the increase in their minimum wage payments should review their business model. As a professional and voluntary business mentor working with small businesses, I thoroughly agree with him. And I haven't yet found a business his statement isn't true for.

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Yes but we're not talking about a small business owner with just a few staff. We're talking about big employers that are going to have to find millions more every year to pay their employees. If they can't find that money then they go under. You do get that don't you Sam. Or are you just too blinded by the rhetoric.

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Take a look at the huge improvement in the financial ratios of big businesses that have driven records in our share markets and the huge increases in the salaries of their senior executives. If they can't afford the increases in the Minimum Wage and are in danger of going under then there is something seriously wrong or you are talking rubbish Ivan.

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4% - this will come back and bite her so hard in the next election ( whichever comes first - snap election or general election) that her relentless positivity and toothy smile will turn into something else..

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Pretty easy really... anyone who cant find a job.. you send them on one of the free tertiary courses... no longer actively seeking work.

I do recall last time unemployment was below 4%... checkout operators who couldn't give change, sales staff who couldn't work out a 10% discount WITH a calculator.

This is sounding more and more socialist every time she opens her mouth.

Everyone has a job, Everyone has a house, everyone gets paid the same.

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The sending them on courses to train was the Shipley approach in the 1990s. After 1 course they were sent to another. The KPI wasn't whether the course got them a job but simply how many unemployed had been on courses!

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Unemployment should currently be under 2%

Taxcinda please do tell us how you are going to reduce the number on unemployment while raising benefits. There is already a hard core of proffesional beneficiaries and raising benefits will only increase that number......if they haven't got a job now they are choosing not to work.

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Perhaps they'll be employed to count the people amongst a mass exodus of NZ. Peters, not the full monty, will then market that as success in exporting.

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Shes putting her money where her mouth is..shes already taken 21 unemployable people and made them Cabinet ministers.

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The next step is to create a couple more Super Cities. Based on the Auckland merger that will give at least 10,000 more people a job, many on over $100,000 salaries as in Auckland Super City.

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Like it.

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The net effective GST rate for NZ is 28.39% thanks to the ETS on CPI. When labour/NZ Last/Green put small businesses under pressure with further background tax penalisation, the current unemployment and welfare stats will look like utopian.

Welcome to communism.

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With regional fuel tax (on top of the already existing fuel levies, GST and emissions taxation), businesses will fold. Poverty will climb.

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Why 4% precisely? Why not 3.75% or 2.5%? Any reasoning, facts, evidence for 4%? Or is just a wishful number plucked from a good vibe on employment?

I agree low real wages are a real problem and they have been for going on 4 decades now in the West. Fixing it with wage controls is not the answer. The problem is monetary at it's root and that's where it needs to be solved. Putting patches and playing whack-a-mole with the symptoms of monetary inflation with wage controls, govt. supply-side intervention (housing projects) etc and multi-tiered taxation stop-gaps is how economies go over the edge and down the slippery-slope to ruin.

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No the problem of low wages isn't monetary whatever that means...it's globalisation...read this weeks economist magazine ...local wages to unskilled workers reduced because imports are happy to work for less.

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This old myth's been dis-proven hundreds of times. Read some actual research on the matter.

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By whom ...the employers federation maybe or the nz initiative?

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By the same people who claim that a tax on sugary drinks/alcohol/tobacco reduces consumption but a tax on wages doesn't. Or in other words, people with intellectual issues.

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No the problem is welfarism. Too many people on it who won't get off their backside and get a job so taxes are far higher to foot the bill for them. If people can not get a job now they never will.

A friend has a business where he employs lots of unskilled people. He trains them and pays them a couple bucks above the minimum wage. A large proportion of them leave after a few months or sooner using the justification of....I used to get $200. per week on the dole. I get $500.00 now so really I am only earning $7.50 per hour which is below the minimum wage and I am not working for that.....

No pride in themselves, just too easy on the benefit....and before you dismiss it, I will ask you this....Do you know any unskilled people on benefits?

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well if it provides jobs for poor people in overseas countries who wouldn't otherwise have one then socialists should be happy. After all aren't socialists supposed to be a caring lot or do they only care for those within their geographical borders?

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I for one think we should prioritise the welfare of our own people particularly when cheap labour from overseas is effectively a subsidy to capital.

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Its time to lift the minimum wage. Its current setting is effectively subsidising overseas owned business, through working for families support and the accommodation.

If these overseas comapnies arent prepared to pay their fair share of tax, which if you look at their effective tax rate most dont, then increasing the cost of their wages is another way around it.

Nothing wrong with having the aspiration of 4% unemployment. Think you might find that once we stop importing cheap labour and increase the minimum wage to a living wage, and provide free teritary education, this will be achievable. People will have to be patient as this may take up to 3 election cycles to play out.

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so are you a socialist who only cares about poor people in your own country? That is discriminatory socialism I guess

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Yes, scrapping tax reductions for all, raising (minimum) wages, reducing immigration and introducing a left wing nanny state are all know to induce a recession.... Yet she wants unemployment to drop, how naive / dumb is she?

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Just remember what her CV looks like. Real financial and real world experience? None.

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That's true but I would rather have inexperience over a compromised expert every time.

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She just got into bed with Winnie....she is now inexperieced and comprimised.

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What creates recessions are asset price bubbles when they burst.

If ANZ annual profit increase to $1.8 billion is anything to go by, they have done well out of this asset bubble. And wouldn't you know guess who is in charge now.

If you understand anything about house prices, short term stimulus is what creates the house price inflation, and its Chinese money that's done this rather than foreign immigration. Now that this has disappeared, and shouldn't have been allowed, guess who is holding the baby? This government, and Winston Peters was right to suggest all is not rosy.

House prices are beyond the affordability of the majority, which means some degree of correction to a level locals can afford; and so it should be. I feel for those who have entered the market in the past 18 to 24 months, as they will see some of the equity evaporate.

This would have and is happening regardless of who is in government now. A lot of people have been played by the banksters, and those with limited experience in the commercial world are still buying into it.

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Very sensible analysis and if we have a big housing crash followed by lots of defaults guess who guarantees banks senior debt...yes taxpayers.

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It's basically how speculative private debt was turned into public, taxpayer debt in Ireland, wasn't it?

I still get pissed off at how National have allowed and even encouraged this situation to inflate, even bragging very recently that things were looking great because house prices were going up.

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Yes it is and banks have much higher levels of leverage than is disclosed by their dodgy Basel numbers.leverage of 12x equity is normal and if it all turns to crap taxpayers step up.we are effectively subsidising bank debt via too big to fail.

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Would love to know which countries/economies have managed to get and keep the employment levels below 5% (the natural rate of unemployment) without a World War or Socialist/communist Govt.....oh wait a minute

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The PM says: "The majority of workers are employed by big profitable companies...."

Can this be correct? I've always understood that over 80% of the private sector workforce are employed in SMEs – most with less than 10 employees. In many such cases, employees already earn a higher average hourly wage than the business proprietor.

Could the Labour wage-boosting policy all be based on a simple misunderstanding?

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Yes it could.

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Barry: According to NZ stats 84.5% of Nz economy is SME.

Comrade Ardern will cripple Nz with it's mix of taxes

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Peters promised that small businesses would be compensated by tax cuts for NZF's proposed 33% increase in wage levels.

Full compensation will require a 200% allowable deduction for labour costs.

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Switzerland - And they are highly regulated with high wages, low immigration

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What planet is Jacinda on? 4% of the potential work force are not interested in working to any acceptable level mostly because the handouts from Welfare make it just to easy to do so or they are just don't have the ability or work ethic where anyone is interested in employing them. NZ is operating on a "Free Trade, anti protection of local industry policy", which means we have to compete with low income economies for things that are actually made. Minimum wage at $20 will need all those people that were on $20 up to more like $23 and those on $23 to $26 etc etc. Cost of goods and services will increase so in the end those people realise very little benefit and ultimately industry will either move abroad to make products, or automate basic skilled work so they won't need these people. Then to fund all of this the Government will have to raise taxes because unemployment will grow, tax take from companies will reduce etc etc. Hopefully they get their head out of the sand and realise how the real world actually operates.

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I agree with waht you are saying, but for them to pull their heads out of the sand, first they must realise that they are not in the clouds.

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Let's not overlook Labor/NZF's huge commitment to expanding Rail. It used to employ about 10% of the entire country back when my grandfather worked there.

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Oh dear. seems our pollies havent figured out we live in a connected joined up world not in a fortress as it was up to the mid 1980s.

The new Gumint clearly want to go back to Fortress NZ.

Unemployment kept down with NZ Railways Min of Works make work schemes.

High tax and duties in imported goods.

Low NZD.

I predict unemployment will be lucky to be under 10% by mid 2020.

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Maybe the $20 minimum wage is just an aspirational target, like the 4% unemployment rate appears to be? Maybe it will remain her dream and not become NZ's nightmare. Ms Ardern also needs a lecture on the difference between correlation and causation - high wage rates are correlated with high growth, but it is growth that causes the higher wages and not the other way round. You cannot simply wish the workforce to become more productive by paying them more.

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Why can't we just keep Key's plan of inflating our house prices and importing plenty of cheap and exploitable workers who won't complain, to keep our wage bill down? Life was great for me then!

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Who is exploiting who. It is fine to import with no tariffs from Asia, where there is little compliance costs and the pay is barely $2 per hour. Is Labour going to create fair trade or just make it harder on those trying to make product in NZ.

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I’m a capitalist but I support raising the minimum wage. I think both aren’t mutually exclusive. We only need businesses that can pay a living wage.

But the current problem is a lack of skills. More skilled people earn more money providing the economy provides opportunities to use that skill. NZ workers should not worry about competing with a 3rd world education system. If we do then it’s our education system that’s at fault.

The current immigration loop hole where companies exploit unskilled migrants ( usually here on dodgy student visas) won’t impact the minimum wage once that loop hole is closed. However it might result in those businesses relying on exploiting immigrant labour to close if they can’t pay an honest wage. That’s a good thing.

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A recent discussion I was part of touched on the feasibility of moving lowest-paid employees from the minimum to the living wage, and the predicted increased annual wage bill which would nudge seven figures. How to cover this cost? Really only two options - lifting prices, or a reduction in dividend. The option of freezing or reducing senior exec pay is still considered taboo. I think it's time we had some brave conversations about this. At its heart the agitations about low wages are a natural and entirely predictable result of growing social inequality - something I fear Labour's blunt policies and glib assurances will do nothing to improve.

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