23 Jan 2023

Incoming Prime Minister Chris Hipkins singles out 'global inflation pandemic' as priority

11:22 am on 23 January 2023
Carmel Sepuloni and Chris Hipkins

Chris Hipkins with deputy Carmel Sepuloni. Photo: RNZ / Samuel Rillstone

Incoming Prime Minister Chris Hipkins has signalled tackling the "inflation pandemic" will be a top priority for his cabinet's slimmed-down work programme.

Hipkins and new Deputy Prime Minister Carmel Sepuloni will take the reins on Wednesday, following Jacinda Ardern's sudden announcement last week she was quitting after a challenging five years in the top role.

It was perhaps the cleanest transfer of power in the Labour Party's recent history, and a far cry from the post-Helen Clark, pre-Ardern years of infighting and headline-grabbing leadership tussles.

"Jacinda Ardern and I are both absolutely committed to providing strong and stable leadership to New Zealand," Hipkins told Morning Report on Monday.

"I think that's what they've seen from the Labour government over the past five-and-a-half years, and that's what they're going to continue to see."

While in 2020 Ardern led the party to the most comprehensive victory of any in the MMP era and still leads polls for the most-preferred prime minister, those same polls suggest Labour's on track to lose the election later this year.

With polls also showing the cost of living and inflation are far more important to voters than the likes of Three Waters reform and merging state-owned media entities, Hipkins said it is time to "run the ruler" over the government's work programme.

"We need to focus in on some of those bread-and-butter issues that New Zealanders are certainly focused on at the moment, including issues like the cost of living, the effects of the ongoing global inflation pandemic that we're experiencing at the moment.

"We just have to make sure that we're putting our resources into the things that are going to make the biggest difference and that are the most important."

Asked if tackling inflation could come in the form of "tax relief" or toning down the Labour government's rapid increases to the minimum wage, Hipkins said he would not make up policy "on the fly", but would be careful to make "sure that the policy settings that the government has aren't going to make the inflationary problem worse".

But he hinted those on the lowest incomes wouldn't be a target for reining in inflation, which - as he noted with the phrase "inflation pandemic" - is a global problem.

"People on the lowest incomes often feel the pinch from higher inflation more than most because they don't have a lot of extra disposable income to meet those additional costs."

That won't please BusinessNZ chief executive Kirk Hope, who told Morning Report he would like some "moderation" in future minimum wage hikes.

"We need a reset in some of the industrial relations area. We've had a massive shift in minimum wage - it will contribute to inflation as business costs rise, so we really need to have a reset in the industrial relations area.

"I understand it's the Labour Party, and that's fine, but we've got to keep having that conversation."

The minimum wage typically goes up on 1 April. This year's increase, if there is one, has not been revealed yet.

Currently at $21.20 an hour, it's gone up 34 percent since Labour took power in 2017 - ahead of inflation of 19 percent over that time period.

"That will feed into inflation and have an impact," Hope said.

"There's no doubt that the labour market is tight and wages are rising. What we would say to the government is to have a very, very sharp critical focus on policies that enable productivity and enable wage growth in that way, rather than pushing wage rates up through things like fair pay agreements and minimum wage increases."

A spokesperson for Minister of Workplace Relations and Safety Michael Wood told RNZ there was no evidence its minimum wage hikes have had any significant impact on inflation.

"When the government considered the latest increase to the minimum wage, analysis by MBIE estimated there would be only a 0.15 percent inflationary impact," they said.

Richard Wagstaff, head of the Council of Trade Unions, said he expects Labour to keep pushing ahead with minimum wage hikes.

"Basically trying to even up the playing field so that it's there for working people and disadvantaged people," he told Morning Report.

"We would expect Labour to do that - that's their DNA - and we would expect them to keep doing that. They've got a strong platform and we expect them to carry on."

Wagstaff dismissed speculation Hipkins would pull the party a bit to the right, not expecting any sudden "U-turns" on policy.

"We think [the minimum wage] needs to continually rise to keep up with the cost of living. We hope the government will commit to that - so far they've had a very good record."

As for public servants, many Hipkins said were in pay discussions at present so he could not comment.

Another global issue New Zealand has not been immune to is the worker shortage. Hipkins said he would not "simply rely on immigration as being the only answer" to that particular problem.

"They want more skilled workers, but they also want to know that their sons and daughters, and their classmates and so on, are also going to find productive, gainful employment… I don't think it's and either-or…

"We've got thousands of young New Zealanders at the moment who aren't doing anything. We're going to have to have a bigger focus on making sure we activate that potential labour force, which at the moment isn't there."

'Take a breath'

Asked if the Ardern-led government had moved too fast on social issues, Hipkins said while "worthy and valuable, we can't always progress them all at the same time" and it was time to "take a breath".

But he would not say which programmes might be scaled back or scrapped, having yet to meet with his new Cabinet.

Opponents of the Three Waters reforms however are likely to be disappointed - Hipkins saying that will still go ahead.

"Some of the rates increases people could see without further reform in this are could be … thousands of dollars a year extra on their rates if we don't do something to address this issue. I'm not going to walk away from that. But I will run the ruler over what we're currently proposing to make sure that we're focused in on the right issues."

A few pieces published over the weekend suggested Hipkins' political views were to the right of Ardern. On having that put to him, Hipkins said labels like that "don't mean a lot".

"I'm a Labour politician. I believe in the role of government to support New Zealanders, to make sure that they have opportunity…

"I absolutely believe in the values the Labour Party was founded on, which is that we are here for people who are working hard to get ahead and create a better life for themselves and their families."

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