National and the wage gap

Written By: - Date published: 2:24 pm, December 13th, 2007 - 62 comments
Categories: same old national, workers' rights - Tags: ,

I see National’s complaining about the wage gap between New Zealand and Australia again. As usual they have no answers on what to do about it other than to blindly hope that tax cuts for the rich will lead to economic growth and somehow it’ll all trickle down into the ordinary worker’s pay packet. Ever feel like someone’s trying to sell you a dud for a second time?

Because as anyone who lived through the 90s can tell you, National has a shameful record on wages, as this graph of median wage growth shows:

nominal-small-revised.jpg

The reason for this is simple. When National and its allied employer groups introduced the Employment Contracts Act in 1991 it was deliberately designed to reduce the ability of workers to bargain for better wages through their unions. This was done in a number of ways, but one of the most effective was its restrictions on the ability of unions to negotiate collective agreements across an entire industry.

This meant each collective agreement had to be negotiated on an enterprise (site by site) level, which both moved the balance of power firmly towards the employer and encouraged companies to compete against each other on labour costs. The result was a race to the bottom. Workers lost conditions, wages stagnated or fell for the majority of workers and collective bargaining was largely replaced by the market. Productivity suffered as the low cost of labour made capital investment uneconomical.

So when National talks about the need to lift wages and improve productivity, just remember who it was that slashed Kiwis’ take home pay in the 90s and put us in the position we’re in today. And don’t for a second think they wouldn’t go back there if given half a chance.

The challenge now for Labour is to finish the job they started in 2000 and strengthen the Employment Relations Act to restore effective industry bargaining. Wage growth has improved under the ERA, but it’s not nearly enough if we want to catch up with Australia.

As Council of Trade Unions economist Peter Conway points out, leaving it to the market alone hasn’t worked:

“New Zealand now has a structural problem of low wages, and the 30% wage gap with Australia will only be closed through more widespread industry wide collective bargaining, supported by ongoing improvements in productivity.

‘Wages were broadly comparable with Australia until the late 1980s, but then fell to 60% by 2002, according to Treasury analysis.

‘Similarly, in 1978 New Zealand and Australian workers had about the same amount of capital per hour worked but by 2002, capital intensity in Australia was over 50 percent greater than in New Zealand.

The CTU agrees that lifting productivity is essential to lift incomes on a sustainable basis. However this must be accompanied by effective measures to ensure the benefits are shared, with a strong minimum code and effective industry bargaining.

The next election may well be fought on the wage gap between New Zealand and Australia. It’s up to Labour to show the electorate which party’s really looking out for the interests of working New Zealanders.

62 comments on “National and the wage gap”

  1. SweeetD 1

    Pretty graph Tane, but if you are comparing NZ with Aust, what is the point in showing the last 15 years of NZ medium wage growth? Could you post similar Aust data so we can comapre?

  2. James Kearney 2

    Thank you. It really sticks in my craw to hear National talk about wages as if they’ve going to do anything but cut them to make their big business backers even wealthier. Why don’t the media ever take National to task on this? Maybe the PM was onto something about youth and inexperience…

  3. The Double Standard 3

    Double Standard Alert!

    Tane, I’m wondering what Labour is doing about it – after it was Clark who made the ‘top half of the OECD’ prediction? Surely it is the job of the government in power to provide the solutions, not the opposition?

    After 8 years, I’d have thought that they could have made more progress. The Nats haven’t been in power since last century and it is a bit lame to be continually blaming them.

    Apart from quoting Peter Conway, how is Teh Party addressing the issue? How about nationalising Toll NZ, and agreeing to an immediate doubling of wages for the employees. Would that be a good plan? Or maybe doubling the income of those 44,000 core civil servants?

    It’s not like there is a magic wand to wave!

  4. Tane 4

    SweeetD, that’s a graph I already had on hand from a previous post:

    National: it’s not worth the pay cut

    I used it because I felt it illustrated the effect the ECA had on our wage path and what’s happened since its repeal. People often don’t understand the effect industrial relations law has on people’s wages.

    Certainly some Aussie stats would be good but I don’t have them on hand right now. I’ll get something together eventually though.

  5. Lampie 5

    We must also not forget we have to make a “comfortable” environment for business to grow (someone got stats on that?) as in tax relief towards R&D (addressed already?) and company tax (addressed already). Even if this has become more of a reality we still have to a)don’t forget about business and b)blow our trumpet that we have created a better business environment.

  6. Tane 6

    TDS, taken another read of what I said:

    The challenge now for Labour is to finish the job they started in 2000 and strengthen the Employment Relations Act to restore effective industry bargaining. Wage growth has improved under the ERA, but it’s not nearly enough if we want to catch up with Australia.

    As for your suggestion that we double wages etc, you obviously haven’t understood a word I’ve written. But then given your efforts last night I suspect you’re here to disrupt rather than to engage.

  7. Lampie 7

    Bet they wouldn’t print your graph in the Herald, Tane. It’s too positive for them.

  8. djp 8

    I think the graph needs to be inflation adjusted.

    Also how did the Nats “slashed Kiwis’ take home pay in the 90s”? Does not the graph show steadily increasing there in the blue zone?

  9. SweeetD 9

    Tane

    without the aussie evidence, the graph simply shows that medium wage growth has carried on at the same rate under labour as they they receieved from national.

    I might be making a gereralised statment on this one, but then again, so are you. No where does this data show the economic conditions present at the time, so that in isolation, this data set is pretty much meaningless, but it is still a pretty graph.

    Get thise aussie figures up, as we’ll have something to compare.

  10. The Double Standard 10

    Tane – if you think that abusing me personally makes you look better then I guess I can’t stop you. Disappointing though. You might have to do better if you want H1 to comment on your little blog.

    You seem to be saying that improved collective bargaining is a magic wand. If so, why do you think Teh Party hasn’t done it already? Surely it would be an easy election winner?

    And why doesn’t it ‘lead they way’ with state sector wages – after all if its good enough to impose increased labour costs on businesses, then shouldn’t the state cough up significantly as well?

    Might help with our chronic medical staff shortage.

  11. Tane 11

    DJP, there’s a graph adjusted to inflation and taxation in this article:

    National: it’s not worth the pay cut

    And a large number of Kiwis did have their pay slashed in the 90s. See for example Conway’s research on the wages of supermarket workers under the ECA:
    http://www.dol.govt.nz/publication-view.asp?ID=96

  12. Santi 12

    “..that tax cuts for the rich will lead to economic growth..”

    That’s where you problem lies Tane: the notion that people earning over $60,000 per year are rich. You’re wrong, completely wrong.

    Families with that income are probably getting even after having to pay mortgages and living expenses. They are not able to put some funds aside for later in life.

    The income belongs to the people who earn it, not to the state, which in the case of Labour’s Cullen & co appear so ready to get thier sticky fingers in opur wallets.

    Labour’s Working for Families is another attempt at wealth redistribution, with the idea of making some of the middle class even more dependent on the state (Do I need to mention the votes gained in the process?).

    Blatant socialism at its worst.

  13. James Kearney 13

    “medium wage growth has carried on at the same rate under labour as they they receieved from national.”

    Ah no it hasn’t. Look at the trend lines.

  14. SweeetD 14

    James

    under national from ’98, the graph edged up. It has carried on more or less in the same direction under labour. Yes, the increase is slightly steeper under labour, but it is still in the same gereral direction. Therefore, labour is just carrying on the work achieved under national.

    As I said to Tane, without aussie data to compare, this data set in isolation is pretty much meaningless if the whole point of this post is the wage gap between nz and aust.

  15. The Double Standard 15

    Interesting too to consider the effect of housing affordability on perceived income. Spiralling interest rates and house prices (to be following by rents no doubt) will have soaked up much (if not all) of wage growth in the last few years. Prices have more than doubled in many places since 1999 after all.

  16. Tane 16

    SweeetD, the point of the post was not about the difference in wages between NZ and Australia, it was to point out that National has no credibility criticising the government over wages, and to offer an idea of what we can do to lift wages in general.

    We don’t need Australian data to do that. Having said that, I’m happy to pull together some comparative data at some stage. In the meantime you might want to check out NRT’s post over here:
    http://norightturn.blogspot.com/2007/12/productivity-and-wage-gap.html

    And spin all you like, the trend lines for wages under National and
    Labour are significantly different, and the reason is industrial law. Workers were better able to bargain collectively and the wage path showed that. Why else do you think business has been so vehement about attacking work rights and repealing the ERA?

    TDS, I don’t know why you keep demanding I defend everything Labour has or hasn’t done. My position is that National will attack workers while at worst Labour will keep the status quo. I’d like to see them do better.

    Santi, my point was that the bulk of National’s tax cuts (at least based on 2005 policy) will go to the rich while the average worker will get crumbs. They’re certainly not a substitute for wage growth, no matter how many times Bill English says so.

  17. The Double Standard 17

    Tane – Maybe because you complain that National is not providing all the answers for Teh Party to steal? If the Nats are not providing the answers surely its not unreasonable to ask why Teh Party is not providing them either?

    Or maybe its because you continually misrepresent the facts. As djp pointed out you say “National… slashed Kiwis’ take home pay in the 90s

    The word slashed means that take home pay reduced under National but your chart clearly shows that it increased. I take it this is a new standard for the definition of slashed. This will be useful when the next health minister claims that “New Zealanders who have already seen their primary health bills slashed by Labour” or somesuch we will know that they have actually been increasing by 15% a year?

    It is obvious to all that the primary purpose of this blog is to attack National and John Key, but doesn’t banging the same note on the old piano get boring for you?

    How about some thoughts from the standardistas on how to go about this? “The CTU agrees that lifting productivity is essential to lift incomes on a sustainable basis.”?

  18. Pascal's bookie 18

    “but doesn’t banging the same note on the old piano get boring for you?”

    You don’t have any self awareness whatsoever do you TDS?

  19. Sam Dixon 19

    kiwiblogblog has a look at the economic indictors report and that stas its based on http://kiwiblogblog.wordpress.com/

    double stndard – the grpah only shows increase becuase it isn’t inflaiton adjusted… went went through this a couple of months ago.

    And this, mate ” Maybe because you complain that National is not providing all the answers for Teh Party to steal?” is both desperation stuff and shows the fundemental hollowness of National poltiics – for them its gettign into power that matters first and foremsot not getting policies in place.

  20. The Double Standard 20

    PB – hook, line, and sinker.

    Cap: week work hmmm.

  21. The Double Standard 21

    Sambo – I hope you use a spell checker in your professional life, and post here under an assumed name, because what you write online is just embarrassing.

  22. James Kearney 22

    “Sambo – I hope you use a spell checker in your professional life, and post here under an assumed name, because what you write online is just embarrassing.”

    I thought you were taking a stand against personal attacks double.

    And I still don’t get why you think Labour would steal National’s right wing policies on employment relations that are completely at odds with their policy programme of the last eight years. Why in the world would they do that?

  23. Pascal's bookie 23

    You might need to expand on your fishing analogy TDS/IP, the portion I quoted was pretty much the only content in your comment. If you are suggesting that it was in some way satirical, then I’m afraid I don’t get it.

    Perhaps you are acknowledging that you are a repetitive, boring one (flat)note wonder. If so, well played Sir. You done got me good.

    I would also second Sam’s point that the idea that “labour would steal our policy” is a good reason for not having any policy at all, only displays yourself to be hollow in the extreme.

    If you had a political bone in your body, an ounce of actual ideology or even a coherent philosophy, you would realise that when your opponents steal your policy… you win. That is because, and it’s sad that this has to be spelled out on a political blog, only partisan fuckwits care who initiates the policy, serious people just want the policy. So all your cant about ‘Labour good National bad’ is just (more) projection.

    Who woulda thunk it?

  24. r0b 24

    “you would realise that when your opponents steal your policy. you win.”

    Bookie is right on here. And we should all smile ourselves a smile every time Key flip flops and adopts a Labour policy. Because, much as I abhor the thought of a National led government, it won’t be so bad if they are implementing Labour policy (and constrained form the worst of their own excesses by the magic of MMP).

  25. The Double Standard 25

    What are you guys, a double team?

    PB – It was entirely predicable that Tane or one of his acolytes would post a response like you did. A pity that y’all have nothing better to do than bang on at me eh?

    JK – I don’t usually mention spelling (glass houses and all that), but that one was soooo bad. Ask Robbo – bad english over a threshold gets him a bit wound up too. Of course, he wouldn’t point it out to any of the standardistas though.

    As for National’s employment policies – why are you so keen to know then? I’ve seen various commentary that Teh Party is going to try and make it an election issue, so I guess posts like this are just a bit of framing for Labour.

  26. Tane 26

    Na, I just put this post up because I was pissed off that National would have the audacity to talk about lifting wages given their history and the fact they still have exactly the same policy agenda. I bet their business backers (especially the Australian ones) are gagging for a bit of WorkChoices over here too – gotta keep the flame alive now that Johnny Howard’s gone.

  27. The Double Standard 27

    Rob – funny that I was thinking along the same lines. I wonder if we will see posts here praising the Nats when they confirm (yet again) that they will keep Kiwisaver. I won’t be holding my breath though.

    And of course, I’m sure all here are pleased that Labour picked up this little gem from National for this years budget. Shame they hadn’t thought of it before.

    http://www.nzherald.co.nz/section/1/story.cfm?c_id=1&objectid=10440386

  28. Pascal's bookie 28

    TDS, you’re so hollow I suspect you come with “life like sucking action”.

    The phrase ‘hook line and sinker’ implies that you caught me out in some ploy.

    So what was the ploy, to get someone to respond? Is that it?

    Jeebus wept. Aside from the fact that it confirms that as well as being an politically empty partisan fuckwit, all you are doing here is trolling. Which is sad more than any thing else. The only thing you can do, for hours and hours is to try and get people to talk to you on-line by being a contrary wanker. Why don’t you take up bridge or something?

  29. r0b 29

    Rob – funny that I was thinking along the same lines.

    That must be a first!

    I wonder if we will see posts here praising the Nats when they confirm (yet again) that they will keep Kiwisaver. I won’t be holding my breath though.

    I’ll try and remember to do so on that happy day. Have they confirmed supporting KiwiSaver II yet?

    And of course, I’m sure all here are pleased that Labour picked up this little gem from National for this years budget. Shame they hadn’t thought of it before.

    Indeed. A good idea is a good idea, no matter where it comes from. National could probably have achieved so much more over the last 8 years if they had grasped that fact, and been a constructive opposition, instead of being a knee-jerk “anti everything” opposition.

  30. Phil 31

    30-odd posts on this topic, and yet not a single reference to GDP… another case of wanting to beat people over the head with an ECON101 textbook, I suspect.

    We can argue all we like about the root causes, but if the national income “pie”, GDP, grows fairly weakly, and there isn’t any additional money to go around, there isn’t any reason for wages to increase.
    On the other hand, if GDP has done quite well – the “pie” has gotten bigger – as you would expect, wages should improve.

    Looking at NZ, the economy as a whole grew 24% between June 1990 and June 1999, while growing 32% from June 1999 to June 2006.

    Once you take into account the impact of inflation, as you have done in the previously noted article where this frst came up, you will note that under BOTH NATIONAL AND LABOUR, the increase in GDP is greater than the increase in wages (14% real income to 24% real GDP under National, and 21% real income to 32% real GDP under Labour)

  31. PhilBest 32

    You guys just do not like it when I mock the notion that prosperity is dependent on strong unions, industrial legislation, and minimum wage laws.

    Would you advise Somalia and Bangladesh that this was the way out of their economic malaise?

    Can you guys see ANY role at all for enterprise, investment, and capital? And the right incentive structure?

    You just CAN’T wave a magic wand, and say, presto! henceforth New Zealanders, Somalians, and Bangladeshis, will be paid just as much as Americans or Frenchmen. The wealth has to BE there in the first place before you can “share it around”. And it is not as if it isn’t obvious HOW that wealth GETS created. No GOVERNMENT creates it.

    But I’m banging my head on a brick wall. YOUR type’s legacy to the world is North Korea.

    “Reason supported by evidence is insufficient to dislodge from the human heart, a lie grounded in desire” – David Horowitz.

  32. “30-odd posts on this topic, and yet not a single reference to GDP. another case of wanting to beat people over the head with an ECON101 textbook, I suspect.

    We can argue all we like about the root causes, but if the national income “pie”, GDP, grows fairly weakly, and there isn’t any additional money to go around, there isn’t any reason for wages to increase”

    Guess you haven’t read my links then Phil.

    Actually, from 1991-2004 GDP growth in NZ averaged 0.2% per year less than Australia, yet growth in average wage was 0.6% per year lower than Australia’s. So NZ has been doing fine with regard to GDP growth – it’s just that, unlike the situation in Australia, workers haven’t been receiving the benefits of that growth. I hear growth in corporate profits haven’t been too bad though.

  33. Phil 34

    I started reading them, Roger, but got bored and fell asleep.

    Just kidding.

    Here is a little bit of speculation, which I have no data for, but is still a reasonably interesting thought that I’ve just considered (take that as a disclaimer, if you will)

    I suspect that a great deal of Australia’s growth has been in Minerals (especially the mines in WA). Going down a mine shaft is a dangerous job, but it doesnt require a great deal of training (I have an older brother over there, a qualified mechanic, repairing machinery) so it’s fairly easy to get a foot in the door and earn good money quickly.

    Perhaps, just perhaps, the compositional effect of all those workers has pushed up the averages?

    Contrast this to NZ where our growth has been more Agricultural – an industry comparatively dominated by sole traders and family owned farms – whose income is probably not included within employee wage and salary measures.

    Might help to explain some of the apparent lack of growth here?

  34. I suspect that a great deal of Australia’s growth has been in Minerals (especially the mines in WA). Going down a mine shaft is a dangerous job, but it doesnt require a great deal of training (I have an older brother over there, a qualified mechanic, repairing machinery) so it’s fairly easy to get a foot in the door and earn good money quickly.

    I read in a treasury report that the mining industry only represents 3-4% of Australia’s GDP – it really doesn’t impact the economy that much.

  35. Leftie 36

    On the subject of increasing NZ pay…
    We should not forget the manipulation of the unemployment rate upwards, resulting in worker versus worker competing for jobs. This is an excellent tool to control escalating wages.

  36. The Double Standard 37

    I read in a treasury report that the mining industry only represents 3-4% of Australia’s GDP – it really doesn’t impact the economy that much.

    Similarly, the diary industry is a bigger contributer to GDP in NZ. I’ve seen it quoted at 7% for Fonterra alone.

    Makes me wonder why Cullen gets away with statements like this

    Well if we had the kind of natural resources they have we’d be digging them up and exporting them to Japan and China as they do and getting the kind of growth that they’ve had

    Just trading on public ignorance I suppose.

  37. burt 38

    Tane

    Pledge to do better as NZ slips back

    New Zealand has “a solid platform for future growth” but is 22nd out of 30 OECD countries on material standard of living – two places lower than in 2005.

    So Tane, just how is this graph representing the big picture in NZ?

  38. Robinsod 39

    DS – you’re citing an agenda transcript I see. That’s some nice work bro, but just outta interest did you come up with the quote first and then frame the dairy angle around it or did the dairy=natural resource=mining angle come first and the quote follow?

  39. The Double Standard 40

    Robbo – you are getting boring. Perhaps another curry? It might help you have an original thought or two.

    PB – no, not a ploy to get a response. Just an feeling that some standard plonker would likely respond in that way to that bit of the post and completely ignore the rest of it. Have you ever heard of self-deprecation? I guess not. Why don’t you go defenestrate yourself?

  40. Robinsod 41

    DS – it was a kebab you fool. Now you’ve bored us all to tears lately and we’ve answered you. How about a little reciprocation?

  41. The Double Standard 42

    Curry/Kebab who cares?

    Here’s a link that might help you understand

    http://www.monpa.com/wcp/documentry.html

  42. Robinsod 43

    So you do have a sense of humour. Nice diversion bro, but it still doesn’t answer my question. Here’s an easier one: how’d you come across the agenda transcript anyway? Actually more to the point – why were you looking for it?

  43. Dean 44

    roger nome said:

    “Sweet – at the risk of appearing to be self-promoting i’ll post a couple of links that may answer some of you questions re-Australia vs NZ.”

    Have you remembered to include tax rates in those posts roger?

  44. The Prophet 45

    Mike, why do you use the name Robinsod?

  45. Robinsod 46

    Robinson was my Grandmother’s maiden name. I changed it to Robinsod after “Robinson” was disabled on KB – it was funny at the time because it is only one consonant different and “sod” is a funny word. See how easy it is to answer a simple question.

    Now, why do you refuse to call me by my handle and instead use my real name?

  46. The Prophet 47

    Well Mike, I like to think I’m a friend of yours so I thought I’d use the name your mates call you.

    ‘Sod’ – Yeah man, that IS pretty funny.

    Ha ha

    Ha ha

  47. Robinsod 48

    Um dude – between that comment and your handle you’re sounding a little creepy. Oh, and you’ll never be a mate of mine, even I’ve got standards higher than that so you better start calling me “robinsod” again. Sorry.

  48. r0b 49

    The Prophet has appropriated a very auspicious handle, but methinks that Khalil Gibran would not approve…

  49. The Prophet 50

    So Mike – you don’t want to be my friend? Oh, thats sad. I quite like callng you Mike though, so I hope you don’t mind if I continue to in our future conversations.

    The “even I’ve got standards” comment is much funnier than ‘Sod’ by the way

    Bahahahahaha.

    Rob – KG is dead mate, he won’t care.

  50. r0b 51

    “Rob – KG is dead mate, he won’t care.”

    False Prophet, I don’t think your words will be remembered as long as his.

  51. Mike Porton 52

    Ok Prophet – If you’re gonna be my mate we should probably catch up and make it official. I get the feeling you’re a Wellington boy so you should ring me, my number’s in the book and it’s a local call. Or if you want you can email me at mickyporton[]hotmail.com

    I reckon we’ll get on like a house on fire.

  52. The Prophet 53

    Are you asking me out on a date Mike?

  53. Mike Porton 54

    Damn straight Prophet. I figure clever fellows like you and me would hit it off real well. We should have a beer or something. I’m thinking the Bristol – I’d say that’s probably not too far for you to go. I don’t want to post a time up here though ‘cos there’s like y’know some odd people on line. How about you email me at mickyporton[]hotmail.com?

  54. “Have you remembered to include tax rates in those posts roger?”

    No – not sure how you would – they have property taxes and stamp duties that NZ doesn’t. Mr Farrar and the rest of the Nat research unit never seem to take these into account so their figures are always flawed.

  55. Matthew Pilott 56

    Phil, Roger Nome and TDS – i was looking at this: http://kiwiblogblog.wordpress.com/2007/12/13/what-do-the-indicators-indicate/

    and noticed the WA stats were much higher than the rest of aussie. Reckon that could be because of mining?

    If so, then NZ having WA’s resources would have quite an impact! Mebbe Cullen ain’t so dumb after all…

  56. The Prophet 57

    THE BRISTOL – Fuck, I wouldn’t be seen dead in a joint like that.

    How about Liks?

  57. Mike Porton 58

    Prophet. Ring/email me.

  58. Mat Pilott:

    WA only represents about 10% of Australia’s population. Nuff said?

    BTW – while not being overly significant in terms of wages, the mining industry certainly could be considered an important part of Australia’s export industry – remember, most GDP in Aus is accounted for by goods and services produced locally for domestic consumption. So while the mining industry only represents 3-4% of GDP in Aus it might comprise something like (at a guess) 10% of export $. So it certainly is important for the Aus economy in terms of balance of payments (i.e. stopping capital from leeching oversees).

  59. PhilBest 60

    At 0.2% growth per annum, how long will it take for OUR economy to double in size compared to an economy that is growing at 0.6%, or at 6.0%?

    0.2% is PISS-POOR. NO-ONE is going to get the increases in wealth, living standards, and social services that we WANT and feel entitled to because we’re a “first world” nation. Yeah right.

  60. Matthew Pilott 61

    PhilBest, bash yourself once more with the ECON101 book yeah?

    Do you seriously think that our economy is growing at 0.2%??

    Roger Nome mentioned that our economy is growing at a rate 0.2% slower than that of Australia’s. Unless Australia’s economy is growing at only 0.4%…

    With knowledge like that, I can see why you imagine New Zealand isn’t a developed (you used the backwards “first world”) nation. BTW Have you ever been to a developing nation?

    Roger Nome – what I meant is that if NZ had WA’s resources, while it cotributes only 3-4% of Australia’s GDP, that would be a far greater percentage in NZ.

    That would make Cullen’s comment accurate – the one TDS thought was clearly wrong…

  61. Joshua 62

    Very interesting graph, although perhaps for completeness it should be extended back to 1984 to show what happened during the Douglas Regime. This is not an argument that the ECA was not detrimental to wage conditions, rather an attempt to ascertain what kind of position the National government inherited in 1990

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