MPs pay increases

Written By: - Date published: 8:57 am, May 1st, 2024 - 94 comments
Categories: chris bishop, chris hipkins, Christopher Luxon, Economy, Parliament, Shane Jones, wages - Tags:

This is very bad timing for the Government.

The Remuneration Authority has announced that MPs will be getting a 10% increase in their salaries during the course of this Parliament. From Radio New Zealand:

MPs have reacted cautiously to the news they are set to get a pay rise, admitting it was a no-win situation.

On Tuesday afternoon, the Remuneration Authority, an independent body which sets pay for key public office holders, determined MPs should get a pay increase.

MPs have not received increases to their salaries since 2017.

Those approached by RNZ shortly after the news broke stressed stressed the independence of the authority.

“I follow the directions of the Rem Authority,” cabinet minister Shane Jones said.

“It’s an independent decision, I think it’s really important these decisions are separated off and not made by politicians, that’s why we have the system we have,” fellow minister Chris Bishop said.

An ordinary MP’s salary will rise from $163,961 to $168,600, a 2.8 percent rise backdated to last October.

That will be followed by another 2.9 percent bump from July, a further 2.4 percent next year, and then 2 percent in 2026.

It means by the end of this Parliamentary term, an ordinary MP’s salary will be $181,200.

To be frank I preferred the approach of the last Labour Government.

In 2018 Jacinda Ardern acted to freeze MPs salaries because proposed increases were out of step with the wider workforce and were adding to the rich-poor divide.

And in 2020 she temporarily cut the salaries of Ministers and chiefs of public services by 20%.

There has been a certain degree of embarassment in Parliament.

Christopher Luxon has said that he will pay his increase to charity. Despite requests he has not said which one.

His gesture would seem to be more heart felt if it was not for his recent attempt to get an extra $52,000 a year by way of tax payer funded accommodation supplement for him to live in his own apartment.

Chris Hipkins’ response is disappointing. He has said that Ardern was wrong in intervening.

He has been quoted as saying:

“I do think it was a mistake, I think we should just leave it to the process and MPs should stay out of it.”

The process involves the ratchetting up of salaries at the top end of the scale. Meanwhile the rest of the public service, particularly at the poor end, get left behind.

Hipkins had a chance to make a principled statement on the matter. Leaving it up to the process will continue to shield MPs from fiscal pressure that for too many of us is our reality.

94 comments on “MPs pay increases ”

  1. bwaghorn 1

    Wouldn't be a problem if it wasn't for the fact the coc is laying people off left right and center, canceling major projects and setting the minimum wage below inflation oh and the police are payed dismally.

  2. Traveller 2

    "To be frank I preferred the approach of the last Labour Government."

    I agree. The way Labour/Ardern approached this issue from 2018 was correct.

    The government is currently working to reduce the size and cost of the public service, and I have been open about my support for that. IMHO the government should initiate a cross party agreement to forgo any increases for the duration of the current parliament.

  3. Gosman 3

    Is the rest of the Public service on a pay freeze? If so, I was not aware this was the case. When did it take effect?

    • weka 3.1

      nah, National wouldn't do that, they're just firing a shitload of people. The ones that get to keep their jobs will get a tax cut I guess, joy joy

      • Gosman 3.1.1

        If the rest of the Public service is getting a pay cut and the core Public service has increased dramatically in size (by around 40%) since 2017 what is the objection to MP's getting a pay increase like everyone else in the Public service?

        • weka 3.1.1.1

          what pay cut is the public service getting?

          what does the increase in public service have to do with this?

          MPs are different than other public servants. They’re elected representatives with a duty to run the country for the good of all.

          • Gosman 3.1.1.1.1

            Apologies. I meant pay rise.

            MP's have not had a pay rise in six years. Inless you think they should never get a pay rise they are eventually due one.

            • weka 3.1.1.1.1.1

              how does this pay rise compare to what other sectors are getting? Didn’t NACTF decide to tie benefits to inflation rather than wage growth? (that’s a benefit cut, btw). Doesn’t this government support wage suppression?

              • alwyn

                People talk about how other payments may or may not have changed. They don't usually quote numbers because they don't have comparable data.

                I have done a very simple calculation for what can be considered as being the most common benefit paid in New Zealand.

                This is the New Zealand National Superannuation amount for people who are living with a spouse or partner and who are taxed using the M tax code.

                That is the most common situation for people getting Super. It has the great advantage when doing comparisons in that the same amount goes to everyone and it doesn't depend on whether you are renting or own a home, or have a part time job or have children living with you. You can also find out much you got by simply looking at you old bank statements.

                I took the amount paid, for a fortnight, from the last payment paid in April in 2018, 2021 and 2024. They were $616.72, $672.22 and $799.18.

                The increases over 3 pears were therefor 9% (2018-2021) and 18.9% (2021-2024) with a total amount of 29.5% for the whole 6 years.

                That is vastly more than the MPs got, wasn't it. At the current rate of inflation it will also be much more of an increase than the amount that the MPs are going to get over the next 3 years.

                When people make remarks like "Not keep pace with the minimum wage and benefit increases that YOU voted for? You know, the ones that actually send people backwards in real terms? This ACT's crowd fealty to the private sector is really starting to show." as Kay did ay 9.46am in this post it would be nice if they could show what the MPs are really getting when compared to these supposed "drops" in benefits.

                • Traveller

                  Thanks Alwyn, that provides some perspective.

                • weka

                  Did you just say that because Super has been increasing at a higher % than MP salaries, people on the dole have nothing to complain about?

                  To point out the bleeding obvious, if you've been earning over a hundred grand a year, your ability to survive a cost of living crisis is vastly different than someone on a benefit or minimum wage.

                  People talk about how other payments may or may not have changed. They don't usually quote numbers because they don't have comparable data.

                  Don't know wha you are on about. Work and Income rates and yearly increases are a simply google for the data, and after the election the MSM covered the change from indexing benefits to wage growth to now indexing it to inflation, a change that NACTF rushed through.

                  You don't need the data to understand it is a benefit cut, altough I guess if NACTF suppress wages it won't be so terrible, right?

                  https://www.rnz.co.nz/news/political/509161/government-pushing-benefit-indexation-through-under-urgency

                  https://www.workandincome.govt.nz/products/benefit-rates/index.html

                  • Traveller

                    "Did you just say that because Super has been increasing at a higher % than MP salaries, people on the dole have nothing to complain about?"

                    I didn't read Alwyn's comment that way at all. He/she is making the point that if people make claims comparing changes to MP's salaries with changes to the minimum wage and benefits, they should be able to back those claims up. Alwyn gave the illustration of Super because it is "considered as being the most common benefit paid in New Zealand."

                    As it happens, my view is that any comparison of benefits and salaries for MP's is going to be fraught, simply because the gap between the raw numbers is so large that %'s become a nonsense in $ terms. And we don't index MP's pay to benefit rates.

                    I reiterate my earlier comment that I agreed with MickeySavage about the approach of Labour in 2018-2020. I would prefer our MP's refuse the increase, but after 6 years of no increase, they don't seem inclined to do so.

                    • Phillip ure

                      Yeah…they must be doing it hard .

                      (Who will end this war on struggling MPs…?

                      Restore them some dignity..!)

                    • Phillip ure []

                      And funny story…taxpayers union have come up with the brightest idea for this…

                      Saying salaries should be set before each term…and not increased every year..

                    • Traveller

                      @Phillip ure

                      "And funny story…taxpayers union have come up with the brightest idea for this…

                      Saying salaries should be set before each term…and not increased every year.."

                      In a sense that has merit. MP's know in advance exactly what they'll be earning over the term of their 'contract' (as determined by the people).

                      David Farrar has another idea – that MP's remuneration be linked to the median wage. The upcoming MPs pay rise | Kiwiblog. That could be a good incentive for them!

                  • alwyn

                    Just a couple of things to remember. The indexing of benefits to wage rates was only in place for a few years. Prior to April 2020 benefits were indexed to inflation. It now will be again. It isn't a sudden change to a new regime. It is a reversion to the old approach.

                    It is quite wrong to say the indexing benefits to inflation is a cut in benefits. If you index after tax benefits to a suitable measure of inflation it maintains their value and the person on the benefit has, in real terms, a constant unchanging income. The benefit may rise at a slower rate than wages or at a faster rate than wages. It will however retain its value and will not be a cut in benefits.

                    If you index benefits to some measure of wage rates the benefits could rise, or fall, in real terms.

                    You also say "To point out the bleeding obvious, if you've been earning over a hundred grand a year, your ability to survive a cost of living crisis is vastly different than someone on a benefit or minimum wage."

                    That is not "bleeding obvious". If you were earning a hundred grand and trying to pay off a house mortgage where your interest rate has doubled because of inflation you are likely to be struggling much harder than is someone on a fully indexed to inflation benefit who is living in a subsidised social rental unit where your rent is fixed at a percentage of your after tax income. For that person there is no cost of living problem if their income is maintaining its value in real terms.

                    The real place where a "cost of living" crisis, or to call it by its real name "inflation" crisis hits us is in the bracket creep that causes peoples taxes to rise as a percentage of income even though they have had no real increase in income. That is the obscene part of of the scenario. The last time that the tax brackets was changed was in 2010 IIRC. They should be adjusted every year in line with inflation, as is done in the USA and about half the EU countries.

                    Politicians rather like that of course as taxes rise as a percentage of GDP without them having to admit it is going on.

                    • weka

                      yes, you are right, silly me, people living in poverty all have fixed rental housing costs and aren't affected by the cost of living crisis, but wealthy people are hard done by because their mortgage is too big and they might have to downsize if they've been living beyond their means on their $163,000 salary.

                    • alwyn

                      My claim was that it wasn't necessarily the case, as is implied by a statement like –

                      "To point out the bleeding obvious, if you've been earning over a hundred grand a year, your ability to survive a cost of living crisis is vastly different than someone on a benefit or minimum wage." implies.

                      It maybe, it may not be.

                    • weka

                      you know the dole is deliberately set below the poverty line, right?

                    • Nic the NZer

                      Your claim that indexing benefits to inflation maintains their value is a deflection. Wage changes generally run above inflation and if this isn't matched by benefit changes then relatively speaking beneficiaries are getting poorer than their waged counterparts. Over a long enough time frame it becomes obvious that the median person today simply lives materially much better than the median person in 1924. National is naturally reverting to an unfair policy while punching down for no good reason, as should be expected.

                    • alwyn

                      And just what do you mean by "the dole". I don't think I have neard that phrase since the 1960's.

                      I would also like to know what you mean by "the poverty line". New Zealand doesn't have such thing defined. If you mean Charles Waldegrave's little exercise in a living wage can you justify his calculations. They were supposed to apply to everyone even though he came up with numbers that appeared to be based on the traditional view of a suitable income for a man in a family with 2 kids and a wife with a part time job. Now there really was a man from the 1950's.

                      Without an agreed poverty line I don't see you could possibly be setting an unemployment benefit at a level "deliberately" below the poverty line.

                    • Nic the NZer []

                      The poverty line is usually defined as something like 60% of the national median income as it is in NZ.

                    • alwyn

                      That is a way of doing it. However what that means is that it is really just a fixed number that has nothing to do with poverty.

                      After all, if everyone in New Zealand was to double their income, and be like Singapore say, then there would still be exactly the same number of people in poverty.

                      Not terribly helpful is it?

                    • Nic the NZer

                      You're unrealistic counter example proves precisely nothing even on its own terms. If your denomination of who is in poverty changes when you double everyone's nominal incomes then it's not a measure of poverty (either absolute or relative).

                    • alwyn

                      Nic. I was merely demonstrating why YOUR definition of poverty is pretty useless.

                      You would appear to agree with me. After all, if your definition of poverty were used, there really would be the same number supposedly in poverty if everybody's real income doubled.

                      You said nominal but the result is exactly the same if you use real income.

                    • Nic the NZer

                      If you want to argue against relative poverty measures you should invoke some criticism which actually demonstrates they don't measure relative poverty. All your thought experiment demonstrated is that if NZ changed speed limits from kilometers per hour to miles per hour then all the road speed signs would have been changed.

                      Probably eventually you will register that what your trying to imply is that relative poverty is unimportant to economics or society. This is untrue of course, but nobody really cares about what untrue political opinions you happen to hold.

                  • Traveller

                    "The reason Labour linked benefits to wage growth and the reason NACTF reversed that and linked them back to inflation is because wages under Labour were growing faster than inflation."

                    That's not correct Weka.

                    Using New Zealand Wage Growth (tradingeconomics.com) and New Zealand Historical Inflation Rates – 1926 to 2024 | Inflation Rate and Consumer Price Index (rateinflation.com), the sum of the annual inflation rates (calendar year) for 2018 through 2023 inclusive was 21.7%. The sum of the annual wage growth rates for the same period was only 16.9%.

                    In early 2022, Murat Ungor warned (Inflation is raising prices and reducing real wages – what should be done to support NZ’s low-income households? | RNZ News):

                    "The real wage is calculated by dividing the nominal wage by a price index such as the CPI. A concern with inflation is that real wages can fall even if nominal wages don't. And this is happening in New Zealand. While wages have increased, they haven't come close to keeping pace with inflation".

                    Using the same sources, under the last national led government, the annual wage growth %'s totalled 15.5%, whereas inflation was 14.6%. In other words, real wages grew under the previous National government, whereas they fell under the last Labour government.

                    By reverting to the inflation rate indexation for benefits, if recent history is a guide, wage earners will be better off (because real wages will rise more under a National led government), but beneficiaries will be worse off.

                    I think I've got all that right!

                  • Traveller

                    "have a look at this and see what you think,"

                    The change to indexing was announced in Budget 2019. For the 10 years to end 2018, the average annual inflation rate was 1.6%, the average annual wage growth 1.8%.

                    Based on that history, the change in indexing would have been anticipated to result in a 0.2% higher annual increase in benefits.

                    However that isn't what happened. Over 2021, 2022 and 2023, inflation averaged 5.6%, wage movement 3.67%. In 2021, the year Sepuloni was crowing about the 3.1% increase, inflation was 3.9%, so beneficiaries went backwards.

                    Unless I've stuffed up in my calculations, the change actually hurt beneficiaries.

                    • weka

                      then there is this (Feb 2024 RNZ),

                      National set out its fiscal plan during the election, including a move to reverse a change brought in by Labour to link main benefit increases to average increases in wages.

                      Wage growth has typically increased faster than inflation.

                      While this had been expected not to be the case this year, the latest statistics showed the consumer price index was lower than expected – at 4.7 percent – and the minister during the debate quoted the latest average wage growth figure as 5.3 percent.

                      This means the change will immediately mean savings for the government, with smaller increases to benefits than would otherwise be the case.

                      The party said its approach would save the governmnt about $2 billion over the forecast period, but has now revised that estimate to $669.5m through to 2027/28.

                      Analysis by the Ministry of Social Development from late January shows making the change now will likely mean higher immediate costs for the taxpayer with bigger increases for beneficiaries, but lower costs for the government and smaller benefit increases in the long run.

                      https://www.rnz.co.nz/news/political/509161/government-pushing-benefit-indexation-through-under-urgency

              • James Simpson

                Its independent of government. The government isn't setting these new salaries. Although yes they could legislate to reverse it, I think it will be reasonably close to inflation over the past 6 years.

                Although the perception is pretty bad right now when we are in the middle of what feels like an 18 month downturn, the process looks right to me. Keep it away from the politicians themselves.

                The salaries need to be at a level that attract skilled people to parliament

                • weka

                  Yes, I know it's independent. And I'm sure they have a good process relative to people in that income bracket.

                  That doesn't explain why someone earning $164,000 needs a pay rise of $16,000 over 3 years, while benefits are being cut or people can't afford the basics of life in minimum wage.

                  I agree that MPs need to be paid at a rate high enough to warrant them putting the effort into what can be a difficult job. Why don't nurses deserve the same kind of respect?

                  I also agree there is a fairness issue, but again, why not beneficiaries, minimum wage earners and nurses to?

                  There's something quite repugnant hearing MPs saying 'we deserve this' when they're the ones responsible for the low incomes of other NZ citizens.

                  • Traveller

                    Whenever I can, I go with a friend to visit his wife in a high dependency dementia unit. W's wife 'L' is looked after by a fantastic group of care givers, who are paid a pittance. So yes your comment resonates with me, but the solutions seem beyond us.

                  • alwyn

                    You persist in saying "while benefits are being cut ".

                    Can you demonstrate this claim? Where are the real value of benefits dropping if the after tax benefit value is indexed to inflation?

                    • weka

                      The reason Labour linked benefits to wage growth and the reason NACTF reversed that and linked them back to inflation is because wages under Labour were growing faster than inflation.

                      that’s how I understand it, feel free to prove me wrong, but I don’t see how I am.

                      Benefits are raised each April. Benefits over this term will be lower.

                    • alwyn

                      At the time, which was in the period leading up to the 2020 election, wages were rising faster than inflation. However who is to say that that will always be the case? It is unlikely to be the case this year as we try and kill the bout of inflation Robertson's policies have kicked off. I think inflation will be a bit ahead of wage growth for a bit.

                      What do you mean by benefits this term will be "lower"? If you mean lower at the end of the term than they are today I am sure you will be wrong. If you mean they won't rise as fast as they did last year I certainly hope you are right. Otherwise we won't have fought off inflation. If you mean we will be spending less on benefits I hope you are right. There are a lot of people who could be working who aren't, for a variety of reasons.

                    • weka

                      I encourage you to poll other Standardistas and ask them if they would be ok with the government deciding their wage growth over the next 3 years was held back. Hell, ask your right wing mates.

                      I already pointed out that National will probably suppress wage growth as well.

                      Cutting benefits doesn't provide people with jobs alwyn, it makes it harder for poor people to get a decent job. Has anyone explained where all those sacked public servants are going to be working?

                      And some beneficiaries can't work, well fuck them, they're already poor, what's a bit more poverty.

                    • Drowsy M. Kram

                      It is unlikely to be the case this year as we try and kill the bout of inflation Robertson's policies have kicked off.

                      And consider the global reach of Robertson's policies – mind-blowing!

                      Monetary policy responses to the post-pandemic inflation: Challenges and lessons for the future
                      [14 Feb 2024]
                      The robust policy response to the pandemic described in English, Forbes and Ubide (2021) appears to have successfully avoided the protracted weakness in employment and output and persistent low inflation that followed the Great Recession. In fact, unemployment rates today are not only close to pre-pandemic levels in most countries, but lower than 2019 levels in many cases (and these levels were previously believed to be around full employment in many cases).

                      Bill English is an author. No, not that Bill English – don't be silly!

                    • alwyn

                      When I said "If you mean we will be spending less on benefits I hope you are right. There are a lot of people who could be working who aren't, for a variety of reasons." I wasn't suggesting that we should be cutting benefits. I want people who can work to get jobs and we won't need to pay them a benefit because they had a job.

                      The Public servants who will be out of a job won't even be as many as those who were added to the number in the Public Service in the last 12 months of Labour's term.

                      Nobody is talking about abandoning people who cannot work. That doesn't mean we should support people who could work but won't.

                    • Traveller

                      "At the time, which was in the period leading up to the 2020 election, wages were rising faster than inflation. However who is to say that that will always be the case? "

                      In fact it wasn't for the past 3 years, By my calculations (https://thestandard.org.nz/mps-pay-increases/#comment-1998218), inflation from 2021 through 2023 averaged 5.6%, average wage growth 3.67%.

                      Which is what Murat Ungor was referring to in 2022 (see link above).

                  • Traveller

                    "then there is this (Feb 2024 RNZ),"

                    "…the latest statistics showed the consumer price index was lower than expected – at 4.7 percent – and the minister during the debate quoted the latest average wage growth figure as 5.3 percent."

                    Where do they get those figures, and are they even comparing the same periods?

                    The wage growth data is at New Zealand Wage Growth (tradingeconomics.com). That shows that the wage growth for 2023 was 3.9%, not 5.3%.

                    For the inflation rate I have used New Zealand Historical Inflation Rates – 1926 to 2024 | Inflation Rate and Consumer Price Index (rateinflation.com), they appear to be using the quarterly (annual) rate for the December quarter. So I have reworked my numbers based on their methodology, and it makes it worse! The sum of the annual inflation rates (calendar year) for 2018 through 2023 inclusive (using their methodology) increases from 21.7% to 23.0%. The sum of the annual wage growth rates for the same period remains only 16.9%.

                    "but lower costs for the government and smaller benefit increases in the long run."

                    That part I agree with, if (and only if) we return to the scenario under the previous National government during which real wages increased, as opposed to during the past 6 years when real wages declined.

                    As I said above, "wage earners will be better off (because real wages will rise more under a National led government), but beneficiaries will be worse off".

                    Edit: https://berl.co.nz/economic-insights/slow-growth-wages-likely-cause-labour-market-turmoil#:~:text=Although%20wages%20have%20been%20steadily%20rising%20since%20the,reduction%20in%20the%20real%20value%20of%20their%20wages.
                    This compares the CPI with the Labour Cost Index. “Even though wages have been steadily rising, high inflation has contributed to a fall in real wages”. That was written in February 2022, and 2022 and 2023 made it even worse.

                    • weka

                      I don't know. You could be right. But it seems odd that National would be doing this if it didn't save them money. And that MSM wouldn't have checked. I'm guessing they're using different data than you. You could look on the MSD website?

                  • Traveller

                    "But it seems odd that National would be doing this if it didn't save them money. "

                    I think they are betting on a return to wages running ahead of inflation, which would lead to lower benefit increases than the current policy indexing.

                    National seem to be taking an approach to the economy that I would describe as 'aggressive orthodoxy'. They are hammering inflation harder than Labour would have, which will likely produce an earlier and deeper recession, but likewise a quicker recovery, with lower cost of living and interest rates. That's what will feed the next recovery, and off we go again. There’s going to be some hardship along the way though.

                    • Nic the NZer

                      This is sheer nonsense. The recession is being extended by National's cuts to every area and the recovery from that unnecessary recession is in no way being expediated by taking a hard line with the economy. The reason interest rates will be lower later on is because the slump is being extended and monetary policy is the only way this government will be looking to deal with that (given they are no longer cutting and making it worse).

                      One of the main reasons the recovery time will be extended is the additional unemployment created. It takes considerably longer unemployment to recover than to be created. This at minimum lowers NZ's longer term GDP prospects (also known as falling further behind Australia). It also makes the economy fragile to external inflationary pressures as the people who go through this miss out on a portion of their career and the skill development this entails (which also later often affects their income potential).

                      It should also be understood that monetary policy clearly pushes inflation through the economy in certain sectors, most observably rents where interest rates are a cost of business to many rental business owners. Using it to target inflation can also be exacerbating the impact of external price pressures.

                      Simply put, the country would be in a better off today had the previous Labour government told the RBNZ to just leave the interest rate at zero indefinitely, and had the National government come in and at least maintained the public spending levels (and given out some tax cut). I know that is completely unrealistic to expect, but had that happened the country would be running a more fair economy more resilient to external pressures and likely with lower inflation rates to boot.

                    • Traveller

                      @Nic

                      We have a very different approach to economic theory, which is fine – it adds to the conversation. Just a couple of responses:

                      "The recession is being extended by National's cuts to every area and the recovery from that unnecessary recession is in no way being expediated by taking a hard line with the economy."

                      The recession is not 'unnecessary', it is inevitable, given the high levels of inflation within our economy for a prolonged period, and the structural deficit. And the 'cuts' being made are little more than a clawing back of the size of the public sector to what it was pre 2023.

                      "Simply put, the country would be in a better off today had the previous Labour government told the RBNZ to just leave the interest rate at zero indefinitely, "

                      Apart from the fact that that would contravene the RB mandate, it would almost certainly result in rampant inflation, higher debt, and the further depletion of real wages and asset values.

                      By returning the RB mandate to a single focus, by reducing the size of the public sector, and by inflation indexing tax rates, the recession will be deeper but shorter than it otherwise would have been. That is good economics, and good politics.

                    • Nic the NZer

                      The recession is not in any way inevitable. It's a simple point to refute actually, as the implementation of lockdowns were going to cause a follow on recession following on from the large economic contraction of locking down across the whole country (yes, the economy did contract and bounce back). Obviously the government intervention in that demonstrated how to create a rapid economic recovery and demonstrates economic recessions are actually unnecessary. The same point is being debated better in Australia recently where their response to the GFC avoided a recession there also.

                      I agree my suggestion could contravene RBNZ independence though couched appropriately in the treasurers instruction letter it might still be feasible.

                      Your claims about resulting inflation following are contradicted by the application of similar policies following the GFC, though more so internationally than in NZ. But there was no sudden surge in inflation following the GFC despite interest rates being anchored at zero for a decade. In fact it was a very quickly marginalised view to say the global economy was about to enter massive inflation when it became so abundantly clear it wasn't. This should make it very clear that this linkage between monetary policy and inflation is not clear thinking.

                      Why was there inflation following the pandemic however, obviously locking down the economy (+ other significant geopolitical impacts) does have actual cost implications for production. We ought then to understand what is actually going on to cause that recent surge in inflation which has been abating for close to six months now. Everyone including blind Freddy knows that if OPEC objects to what is going on in the middle east and protests by cutting production then a large bout of inflation is hitting NZ and the globe, and it makes not a single bit of difference what the OCR is when that happens. The OCR does not alter any actual costs faced by businesses and the OCR does not mediate the profiteering and monopoly pricing which is often justified onto such cost increases. The OCR is not connected to the causes of these inflation problems hitting the NZ economy so its simply moronic to claim yanking on the disconnected lever is sensible economic policy.

                    • Traveller

                      @ Nic

                      "Obviously the government intervention in that demonstrated how to create a rapid economic recovery and demonstrates economic recessions are actually unnecessary. "

                      The government intervention was paid for out of massive and unsustainable borrowing. That debt has to be repaid, and in the meantime the interest is a direct imposition on the economy.

                      "But there was no sudden surge in inflation following the GFC despite interest rates being anchored at zero for a decade."

                      There certainly was a sudden surge (inflation rose as high as 4% in 2011). The surge was considerably less that in the past few years primarily due to better targeted spending.

                      The rest of your comment reflects your unorthodox economic thinking. That's not a criticism, but when you say things like "The OCR does not alter any actual costs faced by businesses", it's clear we're talking across each other.

                    • Nic the NZer

                      The governments borrowing was quite clearly sustainable it basically ended up owing the money to itself. This has all been clearly documented in public.

                      On the statement, yes, I did misstate it. It is true that the OCR is part of a cost to some businesses, specifically every time the OCR is raised that tends to impact mortgage rate costs to rental owners to which they frequently pass on rental price increases. So sorry for the distraction of that mistake.

                      Anyway, what I was intending to say was raising the OCR does not alleviate any of those real price increases, which it doesn't. At best its just draining from the spending coming in the front door to NZ businesses, making it harder for those businesses. Unless your dealing with a NZ based excessive spending problem the OCR is not dealing with the causes of inflation.

                    • Traveller

                      @Nic

                      "The governments borrowing was quite clearly sustainable it basically ended up owing the money to itself. "

                      “In New Zealand, we have to go offshore to fund that debt. We go to foreign-owned banks and we go offshore to government money through selling government bonds. And that means we generally have an account deficit.

                      The Front Page: Debt explained – How much does NZ owe and who do we owe it to? – NZ Herald

                      "Unless your dealing with a NZ based excessive spending problem the OCR is not dealing with the causes of inflation."

                      I would assert that is what we are dealing with.

                    • Nic the NZer

                      That is a very misleading implication from the Herald. There are three balances between the sectors of the government, the non-government and the current account. These add to zero at all times.

                      https://en.wikipedia.org/wiki/Sectoral_balances

                      The same current account deficit happens when the non-government increases its debt levels and the government runs a zero deficit. One should not really interpret this causally in any direction as its an accounting identity, but the non-government sector is typically the dominant sector there.

                      In practice the NZ government denotes virtually all debt sold in $NZ which means its basically the NZ financial institutions which can purchase them. There is no source for the funds lent in these transactions except for government spending (it's the only source of $NZ high powered money, with the RBNZ the monopoly issuer). So all that's going on in these markets is financial institutions converting non-interest bearing funds which they don't immediately need into interest bearing bonds. This is a lot like you transferring money between a current and savings account, which also doesn't cause the country to be borrowing overseas.

                      Anyway the reason to say that the government owed itself the debt is because the RBNZ publishes how many government bonds it holds and it ended up holding quite a lot of them.

                    • Traveller

                      @ Nic

                      V

                      It’s not a ‘misleading implication’; it’s a simple explanation of how debt is funded.

                      In practice the NZ government denotes virtually all debt sold in $NZ which means its basically the NZ financial institutions which can purchase them.”

                      That’s not correct. We have the SDDS, the position with the IMF, and statements of our net international position from the RB that show foreign currency denominated debt.

                      This isn’t some giant money go round. The debt is real. Bonds issued by Treasury to fund debt represent money owed by the government to individuals or institutions, whether in NZ or overseas. Debt for dummies: How the Government borrows money | Newshub

                    • Nic the NZer

                      It's actually even simpler than around the points being discussed. The RBNZ is the only institution capable of issuing $NZ (on behalf of the treasury). As the only source for this money is the government and it doesn't need resources to issue them (as the RBNZ does when banks borrow, at the OCR) the government can't be short. At most the implications are the RBNZ running at a loss while the only institution which could bankrupt them is the parliament, making this a non-issue.

                      It is expected that the government will pay these bonds out of course. Typically a reason financial institutions lend to the government in it's own currency is that these bonds don't carry default risk, as discussed above, e.g the rate on government bonds is often called the risk free rate of return. Note there are some complications introduced inside the Euro Zone by the common Euro currency for reasons which should be obvious from the above.

                    • Traveller

                      @Nic

                      "The RBNZ is the only institution capable of issuing $NZ (on behalf of the treasury). As the only source for this money is the government and it doesn't need resources to issue them (as the RBNZ does when banks borrow, at the OCR) the government can't be short. As the only source for this money is the government and it doesn't need resources to issue them (as the RBNZ does when banks borrow, at the OCR) the government can't be short. "

                      Are you meaning that the government simply prints money? Because that doesn't end well either.

                    • Nic the NZer

                      The better description is that the RBNZ changes the values in its interbank settlement accounts (which includes a government account). But this is the equivalent of what your calling printing money, these days. That is just the nature of money.

                      Looking at history of money the analogy is good, at sometimes in the US it was not worth the IRS shipping paper around so they would at times just burn taxes received and spending would happen with fresh cash coming from the Fed, probably delivered to banks.

                      The point is its just accounting. This was exactly Milton Friedman's understanding, though his link between monetary volumes and inflation never followed.

                    • Traveller

                      @ Nic

                      Thanks. We see things differently on some of this, but I always enjoy our conversations.

                    • Nic the NZer

                      Agree, I have enjoyed our conversations. My main reason for being very specific about mechanisms is due to a lot of the main ideas floating around involving strong and unrealistic behavioral assumptions, but you seem reasonably aware of that which is important as we don't share the same framework for talking about the economy.

    • Traveller 3.2

      I would suspect that very, very few people, if any, in the public service will be getting pay rises right now. There may be some targeted increases to hold on to key people, but IMHO they will be few and far between.

  4. Kay 4

    David was very keen for all MPs (not just Ministers) to have their pay reduced at the start of Covid. But only because

    "Parliament must share the sacrifices the private sector is making."

    Not the sacrifices of the citizens, heaven forbid.

    https://www.act.org.nz/govt_should_explain_its_plan_for_cutting_mp_pay

  5. Kay 5

    ACT again:

    ACT's Simon Court said he was not in Parliament for the money but observed MPs had not had a pay rise since he entered Parliament in 2020.

    "I think it's really important we keep this in context. I'm willing to accept a pay rise of 2.8 percent. The cost of living has gone up by much, much more than that in the time I've been in Parliament. I think it's important that MPs' salaries and allowances keep pace as far as practical with the private sector."

    Not keep pace with the minimum wage and benefit increases that YOU voted for? You know, the ones that actually send people backwards in real terms? This ACT's crowd fealty to the private sector is really starting to show.

    https://www.stuff.co.nz/politics/350259986/live-mps-react-cautiously-first-pay-rise-2017

  6. Michael 6

    They're entitled.

  7. weka 7

    Chris Hipkins’ response is disappointing. He has said that Ardern was wrong in intervening.

    He has been quoted as saying:

    “I do think it was a mistake, I think we should just leave it to the process and MPs should stay out of it.”

    Imagine saying the same thing as Shane Jones and the National Party at this point.

    This in a nutshell is why Hipkins needs to go. To me this signals what he will be like in the election campaign in 2026, and if he gets to be PM again. I don't know who Labour has to replace him, and if they would have a better class consciousness, but if there isn't anyone else, what then? This is why the Greens are going to go hard on class politics this term.

    ffs, that total increase is within cooee of being the same amount someone on Jobseeker because they are unwell gets for a whole year.

    • weka 7.1

      this is disappointing from the Greens too,

      Green Party co-leader Marama Davidson admitted she was uncomfortable getting the pay increase amid a climate of rising rents and the loss of half-price bus fares.

      "There are other things we could be doing to make sure ordinary New Zealanders don't feel like we're rushing ahead," she said.

      Fellow co-leader Chlöe Swarbrick agreed it would be galling to some members of the public to see MPs get a pay rise.

      "I think that we end up with a real political football whenever we are engaging in what politicians should be paid or otherwise, and I think that's the point of the independent Remuneration Authority," she said.

      https://www.rnz.co.nz/news/political/515611/never-a-right-time-mps-respond-to-pay-rise-news

      How does the RA come to its conclusion?

      • Traveller 7.1.1

        It's actually quite a detailed process.

        The terms of reference of the review: terms-of-reference-members-of-parliament-review.pdf (remauthority.govt.nz)

        The review findings: review-of-mps-salaries-and-allowances-2023-24.pdf (remauthority.govt.nz)

        • weka 7.1.1.1

          got a tl;dr synopsis?

          • Traveller 7.1.1.1.1

            They look at:

            a) the 'requirements' of the position of an MP.

            b) the pay of MPs in other Westminster style democracies.

            c) the remuneration paid elsewhere within New Zealand in both the public and private sectors.

            They then calculate a "baseline salary of the ordinary MP" as a multiple of the average wage, using Stats NZ reports for the June quarter 2023.

            They further apply a ratio between MP's, Ministers and the PM/Deputy PM rolls, and also consider “… prevailing adverse economic conditions, based on evidence from an authoritative source”.

            • Grey Area 7.1.1.1.1.1

              I heard the head of the remuneration authority on RNZ on Midday Report I think saying part of the equation is that they found an equivalent role to measure against MPs against. But he didn't say what it was, and the RNZ "journalist" didn't ask him what it was, which I thought was a very obvious follow-up question.

              • Traveller

                This is what the RA says in review-of-mps-salaries-and-allowances-2023-24.pdf (remauthority.govt.nz):

                "The Authority calculated the baseline salary of the ordinary MP as a multiple of the average wage. For that, Stats NZ reports published for the June quarter 2023 were used. This provided a methodology where some multiples of the average wage could be compared to roles in the wider marketplace that are paid around that multiple. Two New Zealand-based commercial salary surveys were accessed to conduct these comparisons. The research focused on the position and salary of an ordinary MP, which was then used as the baseline for all the other Parliamentary positions.

                Roles in the commercial surveys were located that have role requirements generally comparable with the requirements of the MP’s position. The Authority determined that alignment to this salary range met the legislated need to achieve and maintain fair relativity with levels of remuneration being received elsewhere. That level of annual salary for the ordinary MP is $168,600 per annum (rounded). This is an increase of 2.8%."

                I'm just glad I'm not having to make that comparison!

                • Tabletennis

                  “Roles in the commercial surveys were located that have role requirements generally comparable with the requirements of the MP’s position.”

                  However roles in the commercial sector requires:
                  Qualification, experience and or knowledge and carry accountability.

                  Non of these are applicable to MPs, so the Remuneration Authority have really nothing to go by.
                  Other than the average hours MP are on the job. (Other than the volunteer sector?)

                  Plus in the private sector, for most salaried jobs, you build up your pension yourself if you want a top up on your super. etc.

      • Grey Area 7.1.2

        Davidson and Swarbrick could always tithe 15% to the party.

  8. Ffloyd 8

    Must agree with Jacinda in this instance. Chris H was wrong to publicise his disagreement publicly. IMHO.

    • tc 8.1

      As weka states hes got to go if labour want a shot in 2026.

      Parker would be great IMHO as he has the gravitas.

      Chippie shows hes just another beltway trougher, putting the boot into JA shows his true colours and lack of class.

  9. Kat 9

    Hipkins certainly made a hash of it with his statement, should have kept his powder dry.

    Timing is everything.

  10. Adders 10
    1. Luxon is still taking the money. He is still costing the public more at a time when he's telling everyone else to accept less.

    2. The more a nation relies on charity, the more it fails. Luxon is exacerbating failure.

    3. Luxon's "largesse" is a tacit admission that he and his ilk can and should pay more tax. His endorsement sets a welcome benchmark for opposition tax policies.

    • bwaghorn 10.1

      May 2024

      Luxon is still taking the money. He is still costing the public more at a time when he's telling everyone else to accept less

      The whole wealthy right wing mindset is that low taxs high incomes for them is right and proper, and any crumbs(charity) they sweep off the table should be applauded and great fully accepted.

      The fact we have food banks in this country of plenty is proof.

      .

  11. Rosielee 11

    In addition, let's have a list of all the expenses and perks they get over and above their salaries.

  12. Rodel 12

    I'dlike to see the RMA extend its wisdom to workers and beneficiaries.

  13. Mike the Lefty 13

    I don't disagree with MPs getting a pay rise as such. The 10% quoted is apparently for two years, not immediate. But after the government demanding hospitals save $105 million, massive cuts to the public service workforce coming and unemployment rising then MPs getting a nice wage rise now New Zealanders can be forgiven for taking this as a massive FU from an uncaring administration.

    As for Luxon reportedly donating the extra to charity. Not such a big deal, John Key used to do that too. Luxon probably earns more from his investments than he does in PM salary.

  14. Visubversa 14

    The Remuneration Authority has input into salary levels in most Public bodies. I spent a lot of time explaining its workings to fellow staff when I was working for a Local Authority.

    Basically – all jobs can be "sized" – with level of skill measured in various categories such as training required, decision making, level of risk, human interaction etc.

    This gives you a points scale by which any job can be measured against the salary levels for comparably sized jobs in other sectors.

    Parliamenterian's jobs are thus compared with the levels of remuneration for similar sized jobs in the Private Sector.

    • Descendant Of Smith 14.1

      The problem though is that with the rise of the managerial class in the private sector they paid themselves ever increasing salaries to legally steal capital from the businesses (and the workers in those businesses) that they worked for.

      Pay rises through comparative means then become self perpetuating. Managers get a salary increase means the comparative rate goes up to justify the next increase to justify the next. The rules for senior managers and CEO's is quite different than the rules for workers.

      Linking MP's pay to the private sector managerial class then results in the same perpetuation. There is no reason it cannot be linked to increases in the minimum wage for instance. None at all.

      Research by the University of Otago published in 2017 found the gap between chief executive compensation and worker income was widening.

      The longitudinal study by Helen Roberts​ from the Department of Accountancy and Finance, showed New Zealand chief executive compensation had increased almost five times faster than worker income in New Zealand.

      https://www.stuff.co.nz/business/126432044/bosses-of-our-biggest-companies-can-earn-nearly-40-times-more-than-their-workers

      Exorbitant CEO pay is a contributor to rising inequality that we could restrain without doing any damage to the wider economy. CEOs are getting ever-higher pay over time because of their power to set pay and because so much of their pay (more than 80%) is stock-related. They are not getting higher pay because they are becoming more productive or more skilled than other workers, or because of a shortage of excellent CEO candidates. This escalation of CEO compensation and of executive compensation more generally has fueled the growth of top 1% and top 0.1% incomes, leaving fewer of the gains of economic growth for ordinary workers and widening the gap between very high earners and the bottom 90%. The economy would suffer no harm if CEOs were paid less (or were taxed more).

      https://www.epi.org/publication/ceo-pay-in-2021/

  15. woodart 15

    jacinda had the balls to put a salary freeze, and decrease into practice. why hasnt luxon got the balls to do the same thing? as P.M. he has the power , and with coalition support, it would be law. SO?

  16. Christopher Randal 16

    If Seymour was serious about reducing Government expenditure this is one organisation that he should have already disestablished.

    The fact that he hasn't shows that he is, like the entire coalition of chaos, all talk and no action

  17. UncookedSelachimorpha 17

    Wow! The National Party workers union is knocking it out of the park!!

  18. Subliminal 18

    Just a wee word on percentage increases. Using percentages as a mechanism for pay rises increases the gap between the highest and lowest pays every time they are applied.

    Saying the cost of living has gone up 2.8%, doesnt mean the whole of a 160k salary needs to rise by this much as a large part of this will just go into investments.

    If Mr Luxon gets 10% on his quite large salary then someone on the minimum wage should be getting at least 20% to obtain the same increase in purchasing power

  19. Peter 19

    I recall a well known historic quote – "remember when MPs were paid the same as teachers?"

    Consider the contexts now. Apparently it's quite hard to get teachers, especially good ones.

    • Belladonna 19.1

      It seems equally hard to get good MPs…. so the amount you pay don't seem to be particularly relevant.

  20. Darien Fenton 20

    My 5 cents worth ; MPs salaries are always a hot topic and easy hit job. I agree that MPs should stay out of the process.. I don't see anything wrong with what Chippy said or, for that matter the Greens. Interference can go both ways. MPs shouldn't set their own pay. And no one has picked up that the leader of the opposition is getting a much smaller increase for the first time, which used to be paid the same as Ministers. I imagine Chippy was trying to avoid commenting on that. To his credit he has said nothing about it. One question : do co-leaders each get paid a party leader salary?

    • weka 20.1

      I haven't seen anyone suggest that MPs control their own pay. The criticism is whether MPs need that degree of pay rise during a cost of living crisis when so many people are living in poverty.

      The specific critique of Hipkins is that as the leader of the Labour party, he couldn't even bring himself to express any kind of solidarity for people that are living in poverty.

      The conflict around setting one's own salary might be gone, but the conflict between having a high income and making decisions for people on low incomes hasn't.

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