Growth seen further lifting average wage by $7,500

The average annual wage is expected to increase by $7,500 to around $62,200 a year by 2018 if New Zealand achieves its economic growth forecasts over the next four years, Finance Minister Bill English says.

This follows a $3,000 increase in the average wage to $54,700 a year over the past two years.

In a pre-Budget speech to the Wellington Employers’ Chamber of Commerce today, he notes that Treasury expects the economy to grow by between 2 per cent and 4 per cent a year out to 2018.

“Quarterly GDP or current account statistics are not, in themselves, what matter to families,” Mr English says. “Jobs, higher incomes and opportunities to get ahead are what really matter.

“Everyone’s situation is different and many families are still finding times are challenging. But the benefits of a sustainably growing economy are tangible and meaningful,” Mr English says.

Over the past two years, as economic momentum has picked up, the average full-time wage has increased from $51,700 a year to $54,700 a year – an increase of $3,000.

Looking ahead and based on its economic growth outlook, Treasury’s preliminary Budget forecasts show the average wage will rise to around $62,200 a year in four years’ time – an increase of a further $7,500 by 2018.

“So if you take that six-year period as a whole, the average wage will have gone up $10,500, or around 20 per cent, compared to inflation of around 12 per cent over the same period,” Mr English says.

“The forecasts will also show around 170,000 more people will be working by 2018. Together with a falling unemployment rate, this will build on the 66,000 jobs created in the past year alone.

“That’s what a sustainably growing economy actually means for hard-working New Zealanders. And that’s why it’s important that we remain focused on our programme of considered and consistent change over time.”

As part of its programme to support sustainable economic growth, Mr English also confirmed that the National-led Government will be disciplined with new spending over coming years to avoid the Reserve Bank reacting by further tightening monetary policy and pushing up interest rates.

“The Budget next month will be about thoughtful targeted spending, not a spend-up. It will invest in better healthcare, more effective education, safer communities and less welfare dependency,” he says.

“We will have more to say about the Government’s future framework for fiscal policy in the Budget.

“As the Prime Minister confirmed two weeks ago, the Government will stick to its $1 billion Budget allowance for the 2014/15 financial year. This is the responsible thing to do.

“Imagine the effect on interest rates – and the rest of the economy – of a return to the $3 billion-plus annual spending allowances we saw under the previous Labour government from 2005 to 2008.”

By helping to restrict interest rate increases, the Government can make a significant and positive contribution to family budgets, Mr English says.

“Every one percentage point movement in mortgage interest rates is worth around $40 a week – or $2,000 a year – for a family with a $200,000 mortgage.

“So when you hear politicians promising to ramp up spending to pay for expensive election promises, you should remember that this would come at a significant cost to households and businesses.

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