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Nats’ low wage economy hollowing us out

Written By: - Date published: 7:45 am, February 8th, 2013 - 42 comments
Categories: defence, International, jobs, national, wages - Tags:

The Nats were elected on a promise of a high wage economy. When it became clear that they were achieving the opposite, they tried to spin a disaster into a “competitive advantage”. Remember this from Bill English?

It’s time to take on the Aussies, says English

More competition, rather than collaboration, should drive the transtasman economic relationship, Finance Minister Bill English says. Throwing down the gauntlet in a speech yesterday…

The fundamental competition is for capital, including Australian capital, he said, and over the next few years New Zealand’s advantages would become more apparent. “One is the wage differential. We have a workforce that is better educated, just as productive and 30 per cent cheaper,” he said. [my emphasis]

We’d better hope those Aussies don’t pick up that gauntlet, because they’d smack us down with it without breaking a sweat. This morning The Herald reported one of the unintended consequences of National’s low wage “competitive advantage”:

Cobbers keep navy afloat

Planned Pacific mission only possible because Australian sailors replacing Kiwis leaving for big pay across Ditch.

The New Zealand navy is relying on Australian sailors to keep it afloat as skilled crew leave in droves for higher-paid jobs across the Tasman.

There are now about 20 Australian sailors at the Devonport naval base in Auckland, many of whom will soon make up the numbers for a New Zealand-led mission in the Pacific. One patrol vessel has been tied up for a year, and two others for seven months, because of recruitment and staffing issues.

This exodus to Australia is hollowing out our country in all sorts of ways.

42 comments on “Nats’ low wage economy hollowing us out”

  1. tracey 1

    If you listen to Joyce you see clearly how he spins things.

    He walked into novopay made some BIG statements about things, including how bad the latest pay round would be, then went live and said of it was only a few hundred, not as bad as we thought…

    Clearly he had been well informed about novopay long before he pretended to just be seeing it for the first time two weeks ago…

    Then he talked unemployment… – it’s not great but moving in the right direction, and it shows as we thought that the previous figures were a bit high (Trans wrong) –

    Punch it up as being really bad, then smile and be pleased cos it’s only bad not really bad.

    • Akldnut 1.1

      It’s OK we’ve cut your legs out from under you but you should be happy because you still have your armes and head.

      • Colonial Viper 1.1.1

        Will we get anaesthetic for our legs, that is the question.

        • Draco T Bastard 1.1.1.1

          Don’t be silly, that costs money and money should only go to the rich who still have their legs and thus don’t need anesthetic.

          /sarc

  2. vto 2

    I know, if we abandoned the minimum wage we could compete with China then. That’s a good idea. But then I guess others would undercut us again. But that’s okay because we could lower our wages again to beat them. This is what it is about isn’t it. Competition in the global marketplace.

    but hang on

    …. something’s not right here ……

    .. hmmm

    head down and swimming for the bottom …….

    … I don’t know

    what’s the answer Key?

  3. alwyn 3

    So it is claimed that we have a low wage economy.
    Perhaps we can follow the Green party policies.
    Let’s have a go at wrecking our currency, say bring it down to about to about half its value against the US dolllar. This will, if Russel is to be believed, reduce the costs for our manufacturers by halving the real wage costs they have to pay their staff. It will also increase the cost of living for everybody who lives in New Zealand by doubling what they have to pay for tradeable goods (those that are either imported to or exported from New Zealand).
    Sure everyone who lives here will take a drop in their standard of living but red Russ and his cohorts will be happy. What doesn’t he understand about the fact that a high New Zealand dollar means a higher standard of living for New Zealanders and a low dollar means a lower standard of living?
    Why do the Green and Labour parties want to REDUCE the wages in New Zealand even further?

    • Colonial Viper 3.1

      Hmmmm, it seems you don’t understand a number of basics.

      A high NZ dollar only helps you if you are already wealthy in NZ dollars and have a strong income in NZ dollars.

      If the high NZ dollar has destroyed your job and exported your income, its not of much use to you, is it?

      Let’s have a go at wrecking our currency, say bring it down to about to about half its value against the US dolllar. This will, if Russel is to be believed, reduce the costs for our manufacturers by halving the real wage costs they have to pay their staff.

      Did you get hit with the ignorance stock last night, alwyn? A low NZD makes our NZD priced goods appear far more attractive to foreign buyers. Nothing to do with “real wages”. What are you tripping on, silly fella?

      Now, lets recognise that the US is deliberately devaluing its dollar. (“Wrecking” it if you like). It’s what they call a “currency war” and disadvantages all their trading partners by making their goods look much more expensive. By the way, China and Japan is doing the same.

      At the end of the day, Russel Norman is about the most sensible politician we have in this environment.

      Why do the Green and Labour parties want to REDUCE the wages in New Zealand even further?

      You’re a shit head.

      • alwyn 3.1.1

        Oh dear, where do I start to try and correct your errors.
        1) You don’t have to be wealthy for a high NZ dollar to help you. You only have to buy something that is imported, and everyone does that.
        2) How about we word it as halving the wages the manufacturers have to pay when measured in the currency of the country they are exporting to?
        3) Of course lower priced goods look more attractive to the foreign buyer. The point is that we don’t want the goods to be cheaper to the foreign buyer. If we are happy to sell the goods for less in foreign currency but continue to pay the same foreign price for our imports every New Zealander is going to be worse off due to the declining terms of trade.
        You appear to have the deluded belief that the thing we want to do is export, and that exporting per se is somehow a good thing.
        The only reason we want to export is so that we can buy imports.

        As for your last statement I would note that resorting to profanity is the last resort of the truly ignorant.

        • framu 3.1.1.1

          “As for your last statement I would note that resorting to profanity is the last resort of the truly ignorant.”

          kind of up there with calling people communist (red Russ)

          Have you even read any green party policy? seeing as you claim that they want to lower NZ wages im guessing you havent.

          for an extra 10 points, which leader of which party said this “We would love to see wages drop”

    • Phil Stevens 3.2

      The only thing maintaining an apparent high standard of living in this country (for the ones in stable employment, anyway) is debt. Most of our public and private borrowing is overseas, and the currency wars are simply masking the outflow of interest. More to the point, the high NZD is wrecking our current account and over time will utterly bankrupt us. Then we won’t be able to borrow any more and it won’t matter what imported goods cost.

      By the way, your contention that high exchange rates hurt the affordability of domestically produced goods is false. The Greens’ policies at least would favour local manufacturing and the multiplier effect of the jobs created, while the magical thinking of neoliberals who got us into this mess leaves it to a market which is only able to concentrate wealth at the top.

      • alwyn 3.2.1

        I think you have misread what I said when I read you second paragraph. I did NOT say that “high exchange rates hurt the affordability” etc. I said the LOW exchange rates do this.
        Firstly I regard a high exchange as being that a NZ dollar buys a lot (say 85cents) of a US dollar.
        A low exchange rate means that a NZ dollar buys a little (say 42.5 cents) of a US dollar.
        If we produce, in New Zealand a good that we can sell overseas, say milk powder, that is a traded good. If we can’t sell it overseas, say electricity, it is not a traded good.
        For a traded good the price is primarily determined by what it will fetch overseas. Thus if the exchange rate is high the cost in New Zealand dollars to a New Zealand purchaser will be lower that if the exchange rate is low.
        If for example Fonterra can sell milk powder overseas for $US8/kilo (and I have no idea what the price is) we are going to be paying $NZ10 here if the exchange rate is $US0.80 and $NZ20 if the exchange rate is $US0.40.
        The only real way you can change that is by subsidising purchases by New Zealanders.

        • bad12 3.2.1.1

          The problem with your whole rant is that you have used a LIE to base your whole fear fear fear argument around,

          No-one, not Russell Norman, not me, NO-ONE is suggesting a dilution of the NZ$ which has it ‘trading’ at 42 cents against the US$,

          When you can come back with an actual scenario that has a basis in reality, for instance the dilution of the NZ$ by printing money that has the NZ$ trading at 70-75 cents, then it might be worth taking the time to debate the issue with you,

          Other than that based upon a 42 cent NZ$ it’s all just bovine defecation on your part…

          • alwyn 3.2.1.1.1

            My assumption is no different to yours. I have illustrated my argument with a hypothetical exchange rate that makes the arithmetic easy.
            You have simply given another hypothetical number of 70-75 cents. Your scenario has no more basis in reality than does mine
            All right give me a real number.
            Just give me a place where Norman has said what he wants the rate to be I will discuss it using those values. He is however very careful NOT to give a value for what he wants the rate to be. Until he does so I allowed to put in what it MIGHT be and it has, for your edification, been under 40 cents. It had that value in late 2000.
            With that in our history, and in the absence of any estimate at all by the Green party I am entitled to use a figure from the past.

            • bad12 3.2.1.1.1.1

              Feel free to carry on with your wee bovine defecation, 70-75 cents has been discussed by Manufacturers and economists as a desirable level for the NZ$ to be trading at for quite some time,

              42 Cents makes all your assumptions that of a horror story, 70-75 cents makes what is best described as a fair price for the NZ$ when considering imports and exports…

    • Draco T Bastard 3.3

      It will also increase the cost of living for everybody who lives in New Zealand by doubling what they have to pay for tradeable goods (those that are either imported to or exported from New Zealand).

      The other point that you seem to miss is that it would become financially viable* to make those trade-able goods in NZ.

      What doesn’t he understand about the fact that a high New Zealand dollar means a higher standard of living for New Zealanders and a low dollar means a lower standard of living?

      Not really, it means that we would be forced to live within our means rather than be able to live beyond our means as we do ATM and, considering that we would be forced to make a lot of stuff that we presently import, it’s entirely possible that our standard of living would actually go up over time.

      * It’s already economically viable

      • alwyn 3.3.1

        Of course we could make most things in New Zealand, if we don’t care what they cost.
        For example I can remember when we used to make television sets in New Zealand.
        In 1966, when they were first included in the CPI a 23 inch black and white TV cost 131 pounds.
        That is the equivalent, after inflation, of about $4,500 today.
        Do you really want that? Wouldn’t you rather import a 40 inch colour LCD set which sells for $700?
        The whole point of foreign trade is to sell what we can produce of goods in which we have a comparative advantage in order to buy goods where we don’t.
        Exporting is NOT a good thing. It is only a means to buy imports.
        Similarly producing everything we use here is not a good thing. It only reduces the production of things we are comparatively better at.

        • framu 3.3.1.1

          “That is the equivalent, after inflation, of about $4,500 today.
          Do you really want that? Wouldn’t you rather import a 40 inch colour LCD set which sells for $700?”

          how much was a flat screen back in the 60s? oh shit the tech didnt exist and production cost were higher

          way to shoot yourself in the foot.

          now if you had compared the cost of producing a tv in nz in the 60s to the cost of another tv in the 60s you might have a leg to stand on

          • Colonial Viper 3.3.1.1.1

            We need bigger TVs in 3D while NZ children go hungry and thousands of workers, our friends and family, leave the country a month.

            No?

            Maybe it’s time to get out ideas straight. Consuming more and more material shite is not really “improved living”, that’s just what sales people tell us.

            • framu 3.3.1.1.1.1

              and oddly enough – ive long thought a marketing ethos that is centered around telling us what we personally want (as opposed to need) fits very nicely alongside a political ideology that likes to trick us into thinking that we are all rational acting individual units and that society is just a quaint ye-oldie concept

              not claiming a conspiracy – but happily compatible evolution of a situation at the very least

              but yes – about these bigger TVs…… can i get some more debt to build a bigger lounge to put the damn thing in?

              • alwyn

                If you are really desperate for a giant screen go ahead. I am a believer in letting you choose what you spend your own money on. Just don’t ask me to pay for it though. I would also be grateful if you don’t join the groups who insist on telling me what to do with my money.
                In fact you could be like me. I own one TV, a 21 inch and 20 years old. It isn’t flat screen though I will probably get one when we go digital in Wellington. The colour needs to be turned up to the maximum values these days.

                • Colonial Viper

                  Sorry mate there are times when the needs of the country and of the community are more important than your individual convenience.

                  And we’re not “telling you” what to do with your money. Just providing market incentives to help you make good choices lol

                  • framu

                    “we’re not “telling you” what to do with your money”

                    well – no more than numerous economists, treasury, politicians, business ‘oracles’, pundits and so on :-)

                • framu

                  dude – it was a joke! no need to act all hollier than thou

                  Care to address your logic fail regarding production issues of the 60s vs now? Or are you just going to witter on about how awesome you are?

                  • alwyn

                    It wasn’t meant to be holier than thou. The main reason for the TV is that the stuff broadcast on free-to air is almost exclusively crap. About all I do watch these days is the last few minutes of the news to get the weather.

                    In terms of technology and prices of course electronic goods are much cheaper. However whereas we now pay about the same prices for things as people in the US in the mid 60’s we paid much more. In the US in 1965 a 21 inch colour TV was about 80 pounds in NZ currency. I cannot guarantee the accuracy of the comparison. I wasn’t there and the number is just a rough estimate from a google search.
                    That’s about 40% cheaper for a colour set as compared to a NZ made b&w of the same size. Of course everything is cheaper today but prices here for such goods have fallen much faster than in larger markets.

                    In terms of telling me what to do addressed a little up politicians are of course quite different to the other groups you mention. The problem is that politicians can mke me do things. The others can be ignored if I want to.

        • Draco T Bastard 3.3.1.2

          Ah, the old but it’s going to cost more excuse for fucking over the economy.

          The whole point of foreign trade is to sell what we can produce of goods in which we have a comparative advantage in order to buy goods where we don’t.

          Except that we could produce TVs here for the same cost as what they’re made overseas as they’re made in factories and every country is quite capable of producing everything that they need and doing it cheaper than importing it. What that means is that there is no comparative advantage as there is no export market.

          • TheContrarian 3.3.1.2.1

            “Except that we could produce TVs here for the same cost as what they’re made overseas”

            Draco – It is cheaper in China because the cost of health and safety, compliance and worker pay is much much lower.

            This point has been made to you several times yet you haven’t ever addressed it.

          • alwyn 3.3.1.2.2

            “Every country is capable of producing everything they need and doing it cheaper than importing it”
            and
            “there is no comparative advantage”
            Did you bother to think about these statements when you wrote them?
            What you a saying of course is these sorts of things.

            Singapore (about the size of Lake Taupo) can produce all the food it needs.

            Monaco can build a chip factory and produce its own computer chips as cheaply as in Intel’s factories.

            New Zealand can produce, from its own mines, the rare earth elements needed in modern electronic gear and magnets.

            One doesn’t have to go that far of course. Just look at the theory of comparative advantage in any elementary textbook

            • TheContrarian 3.3.1.2.2.1

              In Draco’s world the Sudan is perfectly capable of building all their own computers.

              • Draco T Bastard

                And in the world of modern economics, which seems to be your preferred world, there aren’t any limits. It’s called Planet Key.

                • TheContrarian

                  So the Sudan is totally capable of making their own computers? Fascinating.
                  You should let them know.

                  • bad12

                    You know the one, planet Slippery where even the banks think that if you push people out into the street to look for work they will ‘magically’ have ajob appear befor them,

                    Funny how the figures just don’t show such ‘magic’ actually occurs…

            • Draco T Bastard 3.3.1.2.2.2

              Singapore (about the size of Lake Taupo) can produce all the food it needs.

              It could, if it wasn’t over populated.

              Monaco can build a chip factory and produce its own computer chips as cheaply as in Intel’s factories.

              Yep, it could.

              Just look at the theory of comparative advantage in any elementary textbook

              I have done but, more importantly, I’ve looked at reality and realised that modern economics textbooks don’t come close to it.

              • alwyn

                So Singapore could produce all its food, except that it can’t.
                Not a very rational statement that one.
                Monaco could produce its computer chips as cheaply as Intel.
                Don’t be so bloody stupid. Factories to produce these chips cost billions.
                Are you really going to create a factory like that to produce the 10,000 or so chips that Monaco would need in a year? After all you have said that there will be no foreign trade so they can only use the ones their population (about 30,000 I think) need. I assume no foreign trade because you say “there is no export market”.

                • Draco T Bastard

                  So Singapore could produce all its food, except that it can’t.
                  Not a very rational statement that one.

                  It’s perfectly rational – you just didn’t grok it. The problem isn’t that they can’t produce all the food that they need but that they’ve become over populated. Of course, the whole world is presently over populated.

                  Monaco could produce its computer chips as cheaply as Intel.
                  Don’t be so bloody stupid. Factories to produce these chips cost billions.

                  Yep, and if Monaco built the same type of factory it would cost them the same amount to produce computer chips. Fairly obvious really.

                  Are you really going to create a factory like that to produce the 10,000 or so chips that Monaco would need in a year?

                  Nope, I’d make a factory to produce 10,000 per year. And, yes, I know what you’re going to say: But that costs more than the factory that can produce 10,000,000 million chips per year. Except that it doesn’t. The use of the big factory does because it results in fewer people working to produce the chips resulting in less innovation.

                  After all you have said that there will be no foreign trade…

                  No I didn’t although I can see how it could be construed as that. What I meant was that there would be no foreign trade in products that each country is capable of supplying for themselves. What I’d expect would be a trade in information and luxury items.

                  The use of money produces a false economy.

                  • TheContrarian

                    “Yep, and if Monaco built the same type of factory it would cost them the same amount to produce computer chips. Fairly obvious really.”

                    It is fairly obvious the Monaco couldn’t sustain that based on it resources.

                    Draco fail

    • Fortran 3.4

      I did not know that Russel trained as a Nurse in Australia.
      Wish his bedside manner was better.
      No wonder he is out of his depth as an economist – he needs more bandages.

  4. Skinny 4

    If I recall correct Key is on record spouting off at a Business New Zealand conference ‘that wages were too high in this Country.’ which really shows that he is out of touch with the everyday struggle the a vast  number of Kiwis face on low wages. 

    Speaking of Business New Zealand, I heard an interview with their chief executive Phil O’Reilly, on the Radio yesterday. How this guy defended the poor running of the economy by National was utterly incredible. From the high NZD slaughtering 
    his manufacturing members to the drain of skilled workers heading to Australia, excuse after excuse. I got the impression that he is so well versed at defending Key, English, Joyce & Co that the gribble just flowed out of his mouth. 
     
    The thought of the heat O’ Reilly would be getting from the likes of his manufacturing members made me smile :)  “Actions talk & bullshit walks…remember that Phil.”

    • tc 4.1

      Phil O’Reilly coming to a safe national seat soom probably, he’s such a gov’t shill I wonder if their membership has suffered under his non existent lobbying for their interests.

      A decent MSM would have these nat fanboys shown to be the shysters they are.

      • Skinny 4.1.1

        O’Reilly becoming an MP  wouldn’t surprise me in the least tc. The guy is such a Joyce clone he even looks like the bald headed prick & preaches the same snake oil remedies of deregulated free market tripe. 

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