2025 Taskforce or 1984 rerun?

The 2025 Taskforce seems reluctant to tell us what we already know: that New Zealand incomes have fallen further behind Australia since 2009 despite government policies, said the CTU.

CTU Economist and Policy Director Bill Rosenberg said: “By our calculations, after taking into account purchasing power on each side of the Tasman, Australian wage rates have risen from 35 percent ahead of New Zealand’s to 41 percent ahead between mid 2009 and mid 2010.”

“Part of the reason is the New Zealand government’s inadequate response to the global financial crisis. It still needs to do more, with unemployment remaining high and not expected to fall significantly in tomorrow’s Statistics New Zealand release. Unemployment over the last two years has for the first time since 1989-1992 been higher than Australia’s. It is probably no coincidence that 1989-1992 was the height of the policies advocated by the Taskforce.”

“The Taskforce prescription of deep cuts to government spending would send us spiralling into deep recession. In fact the latest Statistics New Zealand and Treasury analysis (Taking on the West Island: How does New Zealand’s labour productivity stack up?) suggests that New Zealand’s labour productivity is rising more slowly than Australia’s mainly because of negative productivity growth in the property and business services sector, not because of the government sector.”

“Just why does the Taskforce think that repeating the failed policies followed since the 1980s will work now when they didn’t work before? Such policies are rightly unpopular. Why do they think that a privatised Kiwibank or New Zealand Rail will work better? Or that privatised health would be cheaper when the private US health system costs twice as much as a proportion of GDP with worse health outcomes? New Zealanders will have paid around $4 billion to first privatise and then rescue New Zealand Rail from its private owners. Kiwibank has created a model the Australian banks are being forced to follow after its predecessors – Postbank and most of the Trustee Savings Banks – were killed off by privatisation. Public-private partnerships have proved hugely costly in the U.K., hiding that government’s debt but increasing public costs and cutting their employee’s wages.”

“Yet it ignores the social costs of its policies. Just on Monday, Dominique Strauss-Kahn, the Managing Director of the International Monetary Fund, in the past an institution that aggressively drove policies like those the Taskforce is advocating, stated that such ‘growth models’ were ‘unbalanced and unsustainable’ and ‘Inequality may have actually stoked this unsustainable model. In countries like the United States, borrowing seemed to allow ordinary people to share in the rising prosperity.... Inequality can dampen economic opportunity, by preventing the poor from accessing the financing needed to pursue profitable investments. It can divert people toward unproductive activities.’”

“We need a focus on wages and productivity, and ensuring the benefits are shared. Instead, all of the Taskforce’s recommendations affecting workers’ incomes are to reduce them. They want a cut in the youth minimum wage, further worsening of rights at work, cuts in Working for Families, an increase in the cost of student loans, and severe cuts in other government programmes.”

“The Taskforce has no new ideas that will work. It is endlessly trying to revive a failed economic experiment. It should be disbanded. The CTU has proposed an Alternative Economic Strategy that would help New Zealand become a better and fairer place to live – an economy that works for everyone.”

If the government is still serious about closing the gap, the CTU is calling for some milestones along the way.

“The CTU has proposed a focus on three main elements: lifting the minimum wage; an open discussion on how we establish industry standards for wages across the economy; lifting labour and multifactor productivity and ensuring the benefits are shared.”

“We are asking the Government to meet with the CTU to discuss how we can set some targets for, say, 2012, 2014 and 2016 to make a start on closing the wage gap.”

ENDS

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