Minimum wage set to increase by $1.50 an hour

The increase will take effect from 1 April this year. Photo / 123RF, RNZ

By RNZ

The minimum wage is set to increase by $1.50 an hour with the Government saying the impact on inflation will be “negligible”.

Prime Minister Chris Hipkins has announced the move to a new rate of $22.70 per hour from April 1 as part of a raft of changes as the Government resets its agenda heading into the general election in October.

The Starting-Out and Training minimum wage rates will be maintained at 80 per cent of the adult minimum wage.

“I do understand that a number of small businesses will have concerns about this decision, however in a cost of living crisis we can’t leave those on the lowest incomes behind,” Hipkins said at his post-Cabinet media briefing.

“An inflation-adjusted lift to the minimum wage will mean that thousands of New Zealanders don’t go backwards.”

Chris Hipkins says he is honouring a commitment he gave when he became Prime Minister. Photo / Angus Dreaver, RNZ

He said past experiences with minimum wage increases showed people were unlikely to lose their jobs as a result.

“Those concerns have been raised every time the minimum wage has been increased and we’ve got record low unemployment.”

Hipkins said when first taking over the role he had promised to do more to help families cope with the cost of living.

“In tough times, it’s critical to support those who struggle the most to make ends meet. Those on low incomes make impossible trade-offs between food and medical care, dry homes and a pair of shoes.

“These families need our support now more than ever and an inflation-adjusted lift in the minimum wage will mean thousands of New Zealanders do not go backwards.”

The Government was conscious of the need to find the right balance, however, it was unlikely the $1.50 an hour increase would complicate the battle to get on top of inflation.

“The impact on inflation is negligible. In the 2022 Review, MBIE estimates that an increase of 7 per cent in the minimum wage will have only a minor inflationary impact of 0.1 per cent on the wages portion of GDP,” Hipkins said.

In its sweeping policy reset, the Government has scrapped plans for the RNZ-TVNZ merger and pushed back work on hate speech and its social insurance scheme. The biofuels mandate has been halted and changes to the Three Waters programme will be considered.

- RNZ