Heather du Plessis-Allan: Pay freeze will put Budget in sharp focus

The Government seems obsessed with balancing the books. Photo / Mark Mitchell

OPINION:

The government decision to freeze the pay of nurses, teachers and police officers for the next three years is a huge misjudgement.

The most logical explanation for this mistake is that Labour remains trapped by its obsession with convincing voters it can be trusted to balance the books. Hence, their 2017 Budget Responsibility rules promising to keep debt to a needlessly low 20% of GDP. Hence this. Presumably, the party believes this pay freeze will prove to voters that it can rein in unnecessary spending.

But few of us would consider the pay of police officers, teachers, nurses, prison guards, social workers and defence force staff unnecessary spending. Few of us can believe they are overpaid. A police officer's starting pay is $61,000. That's not much when you consider the cost of living in Auckland. So, this is backfiring spectacularly.

If Labour wants to cut spending, it should start with its own expensive pet projects, which many of would consider frivolous. Like, the $30m pledged to investigate a hydro lake scheme that is so crazy even the industry can't understand it. Or the $100m election pledge to upgrade marae when iwi like Tainui with more than a billion dollars in assets can surely afford the renovations themselves. Or the $90m spent on a fast train from Hamilton to Auckland that's so slow you can beat it in a car.

Voters can tell the difference between good spending and bad spending. Lifting the pay of a teacher is good spending. Giving $10m to AJ Hackett is bad spending.

This makes no sense to voters who have repeatedly been told New Zealand's doing well: our economy is faring better than expected and outperforming countries we like to compare ourselves.

The message that we're flush has been rammed home for a year now by loose government spending. The wage subsidy was so relaxed that it ended up handing out cash to some of the world's most valuable companies like Adidas, Gucci, Louis Vuitton and Mercedes-Benz.

The "we're flush" message was reinforced this week with news the country's operating balance is $5.2 billion stronger than expected. In fact, there's so much money floating around government that Grant Robertson managed to find a whopping $1b down the back of the couch on Tuesday.

It's hard to ask voters to accept sudden austerity after a year of massive, undisciplined spending and non-stop messages of how well we're doing.

The Government will to need to walk this back unless it wants mounting trouble. It's going to be hard for them to keep lecturing private businesses like apple orchardists on the need to lift workers' pay when the Government refused to do that for its own workers. It's going to be hard for Workplace Relations and Safety Minister Michael Wood to tell employers with a straight face that Fair Pay Agreements will make sure their employees get a "fair go" when his Government just did the opposite to its own employees.

In future, the Government might want to row back on these kinds of surprises. The pay freeze was too much of a shock to too many people. It wasn't signalled at all. The police association claims the first it heard of this was through the media, an hour before sitting down to pay negotiations.

Unpredictability from a government is not a good thing. It freaks out investors, a la the oil and gas exploration ban and the landlords' tax rule change. It signals that the Government has no plan, it's making things up on the fly. It feels like they're executing whatever fresh idea pops into their heads.

This pay freeze is going to put a sharp focus on new spending in the upcoming budget. Every spent dollar should now be measured against this with the question asked 'is this spending more important than paying nurses more?'

That's a harsh lens that's only going to drag out the kickback from this shock announcement.