4. Hon BILL ENGLISH (Deputy Leader—National) Link to this
to the Minister of Finance
Has he seen figures showing that public sector wage growth has been ahead of private sector wage growth for the past 5 years; if so, what does he consider to be the fiscal and other implications for upcoming public sector pay negotiations?
Hon Dr MICHAEL CULLEN (Minister of Finance) Link to this
Yes; the statistics are being driven mainly by the health sector and, to a lesser extent, the education sector. This has obvious fiscal implications. Core State sector wage growth has been the same as that in the private sector throughout the last 5 years.
Is the Minister aware that further public sector wage increases without improved productivity—as is the recent track record—will be inflationary and, therefore, will increase interest rates paid by families and businesses?
Hon Dr MICHAEL CULLEN Link to this
That, of course, is always a possibility. Therefore, it has always staggered me that the National Party has consistently supported every wage demand that has been made in the health sector over the last 5 years.
R Doug WoolertonCan the Minister confirm that public sector wage growth over the past 5 years has driven up public sector growth, thus helping to build a higher-wage economy, whereas in the 1990s the policy was to hold public sector wages down, thus holding down private sector wages—creating a low-wage economy?
Hon Dr MICHAEL CULLEN Link to this
I think it is certainly true to say that there are increasing difficulties in retaining highly skilled staff in the public sector, through a process of trying to constrain wages in the public sector unnecessarily and unfairly. In particular, in the health sector there is a need to compete not just within New Zealand but also in an international arena.
Does the Minister plan to inform public sector unions about the advice of the IMF released just yesterday, where, in describing his policies, it states “… fiscal stimulus is being added to a still over-heated economy.”, and will he explain to them that this means his planned spending surge in the run-up to the 2008 election will push up interest rates higher for longer?
Hon Dr MICHAEL CULLEN Link to this
I will continue to explain to lots of people the distinction that the report draws between the fiscal space available owing to the strength of the overall Budget, and the macroeconomic space provided by the cyclical position of the economy. Unfortunately, I will have to start with Mr Key first, who has never understood that distinction.
Shane JonesHon Dr MICHAEL CULLEN Link to this
Because we were struggling to retain skilled staff. People demand good doctors and good nurses; we need to pay the appropriate rates to retain them. I note that although Mr English on Radio New Zealand National this morning was criticising such increases, the National Party’s industrial relations spokesperson was on Bay of Plenty’s Radio 1XX encouraging hospital workers to strike for higher pay.
Is the Minister aware that the IMF quotes so-called authorities as saying that fiscal expansion would be contained to the extent possible, and does this mean that Treasury has been telling him to watch his spending because it is causing inflation and higher interest rates, and that is what it is telling the IMF, but he is ignoring its advice?
Hon Dr MICHAEL CULLEN Link to this
No. It does mean that we have not had anything like the fiscal expansion that National was planning for the current term of this Parliament, which by now would be putting $3 billion a year extra of tax cuts into the economy. It does mean, as the IMF stated, that should revenues over perform, as they have in recent years, the 2006-07 surplus will be allowed to increase as an automatic stabiliser. That is, in fact, happening and I anticipate Mr Key promising to spend a lot on Budget night on tax cuts.
Hon Annette KingCan the Minister confirm that if we remove health and education from the equation, from June 2001 salary and wage rates, including overtime, in the public service have increased by 14.8 percent compared with 15.3 percent in the private sector?
Hon Dr MICHAEL CULLEN Link to this
I can confirm that. The labour cost index, which takes into account all the movements, shows the private sector and the central government administration and defence sector tracking extraordinarily close to each other throughout the last 5 years.
Has the Minister of Finance discussed with New Zealand First and United Future his commitment to policies that are pushing up inflation and, therefore, pushing up interest rates, and in Export Year, which is promoted by the Rt Hon Winston Peters, are also pushing up the exchange rate to record highs; and what did New Zealand First and United Future say to him about that?
Hon Dr MICHAEL CULLEN Link to this
I have, of course, discussed with United Future particularly, but also with New Zealand First, the issue of business taxation. I am pleased to report that they will be supporting sensible changes in that respect, which Mr English last week indicated to the House he would be voting against.
Is the Minister at all concerned that he now appears to not be managing the economy at all, when the company tax cuts in the Budget were pushed by United Future, the savings incentives were pushed by New Zealand First, and he is trying to deal with his high-interest and exchange rate policy by shuffling it off to a futile select committee inquiry?
Hon Dr MICHAEL CULLEN Link to this
It is always good to see an Opposition person rejecting a select committee inquiry as being futile. It is about all one gets to do in Opposition.