Brian Fallow

The Economics Editor of the NZ Herald

Brian Fallow: Approach to business splits big two

The ideological gulf between the two major parties is seldom more evident than when it comes to the costs businesses face.

National's rhetoric is about rebalancing the economy towards earning a living as a trading nation.

It is about competitiveness and making the boat go faster. The "boring but vital" work of regulatory overhaul, Finance Minister Bill English calls it, aimed at reducing non-tradeables inflation from the debilitating 4 per cent per annum it has averaged over the past 10 years.

Labour's focus is on the downside of rising income inequality. Economic growth alone will not close the wage gap with Australia, it says, unless there is a labour relations environment which allows workers to capture a greater share of the benefits of that growth, as they do across the Tasman.

And on the grounds that one firm's employee is another's customer, it argues that policies like raising the minium wage, and making the first $5000 of income tax-free for that matter, will provide a timely boost to demand.

Labour would raise the minimum wage from $13 an hour, or just over half the average wage, to $15.

National says this would cost thousands of jobs, Labour disputes that.

National would allow employers to pay 16- and 17-year-olds 80 per cent of the adult minimum wage for six months instead of the current three.

Labour plans to institute a new system of "industry standard agreements" that lay down minimum terms and conditions nationwide, industry by industry. National calls that a return to the national awards and strife of the 1970s. Nonsense, says Labour, it is not proposing a return to compulsory unionism.

National's idea of improving collective bargaining is to return to an original provision of the Employment Relations Act which simply required bargaining to be done in good faith, instead of the current requirement that negotiations reach a conclusion.

Labour would "Mondayise" Waitangi Day and Anzac Day to avoid the situation where people lose the benefit of those statutory holidays when they fall on a weekend.

It also plans to make it compulsory for employees to belong to the savings scheme, KiwiSaver, from 2014 and would increase employers' contributions by half a percentage point a year until they reach 9 per cent in 2022.

On the face of it, both measures would cost businesses money.

But such changes do not increase the amount employers have on the table for remuneration.

Like income tax changes, they are likely to affect someone's take-home pay, rather than the total cost of employing him or her. Labour tacitly acknowledged that by putting the annual increase in employers' contributions in the context of Treasury projections of wage increases - 3.9 per cent a year over the next four years.

National's policy is to move to the automatic enrolment of all employees (not just new ones) in KiwiSaver so that the onus is on them to opt out.

It also plans to open up workplace accident insurance to competition, a policy Labour opposes.

Last month, ACC Minister Nick Smith announced levy reductions for employers and the self-employed, which would save them collectively $250 million a year, without dwelling on the fact that he was rolling back increases the Government had imposed in its first year.

Whether opening the work account to competition will save money overall remains to be seen. Its proponents contend that competition will deliver efficiency gains, while sceptics point to duplicated overheads and providers' need to generate a return on capital.

On the emissions trading scheme, National has accepted the Caygill review's recommendation that the existing half-obligation - under which oil and power companies, as proxies for energy consumers, only have to surrender one unit for every two tonnes of emissions they are accountable for - be phased out over three years, rather than terminating as the current legislation requires at the end of next year.

Labour says it is still considering the Caygill review.

- NZ Herald

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