New Zealand Mulls Halting Wage Hike for Public Sector Staff: Minister Cites Low Inflation as Reason
New Zealand’s Finance Minister Bill English has cautioned public sector employees that they will have to face "restrained" wage hike as the government is grappling with lower inflation and trying to bring its books back in the black.
According to the Government data, consumer prices have fallen to 0.2 percent in the December quarter and annual inflation slowed to 0.8 percent. reported 3 News.
Tax Revenue
The government is claiming low inflation as a problem for it as tax revenue will be hit with lower consumption eroding goods and services taxes and income tax collection likley to be affected by low wages. The Finance Minister in a statement reasoned, "The wages are expected to outpace inflation. If inflation remains low, the dollar value of future wage increases will be smaller than previously expected."
Minister English wanted more restraint after the new inflation figures by Statistics New Zealand came out and showed lower inflation was driven by falling petrol prices. In the last three months of 2014, New Zealand experienced negative inflation with the consumer price index falling by 0.2 per cent. The Finance Minister said on Monday that over the past four years, the average wage has increased from around $49,500 to $55,000.
Unions Adamant
However, the trade unions are in no mood for a compromise and rejected the call of Finance Minister for restraint because of low-inflation. The Public Service Association said its members have been the victims of belt tightening in the wake of the global financial crisis and now expect "to get their cut". The Council of Trade Unions also said low-inflation environment is ideal for businesses to offer pay rises as they can afford it, reported New Zealand Herald.
Reacting to the Finance minister’s counsel, PSA national secretary Erin Polaczuk said it looked as though English expected public servants to live with the brunt of the financial crisis."He is basically trying to get a Budget surplus by cutting into the wages of our members again,” the leader noted. Bill Rosenberg, CTU economist, also said low consumer price rises are not a justification to stop wage hike.
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