Jacinda Ardern has revealed why the Government will not be using its $5.5 billion surplus to increase the pay settlement offered to primary school teachers.
Primary school teachers and principals rejected the latest three-year collective agreement which included an increase to base salaries by 3 percent each year, and another nationwide strike could be on the horizon.
The Prime Minister has defended the offer, saying it is equivalent to what the last Government made across three pay cycles. She told The AM Show the offer is "over half a billion dollars, and so I really do hope, of course, that the teachers give it serious consideration".
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"[Striking] is obviously their prerogative, but the case that I need to make on behalf of the Government is that the issues that they asked us to deal with straight off the bat like getting rid of National Standards, we've done."
The Government is sitting on a healthy $5.5 billion surplus, and with collective negotiations with teachers and police currently underway, the Government is under pressure from lobby groups to spend that surplus.
But Ms Ardern says the Government cannot spend the surplus on increasing the offer to teachers, telling The AM Show some of the surplus is "under-spend" and that it "goes as soon as we roll into 2019," and that some of it has already been allocated.
Ms Ardern pointed to the Government's $57 billion of debt - an amount that's "relatively low compared to others," but still a "significant amount".
"This is not a pot of money that's just sitting waiting to be spent," Ms Ardern said, adding that when it comes to pay deals, it's important to keep in mind that the funding needs to be available and sustainable for future years.
"Given that we are moving into an international environment where there are some pretty grey clouds on the horizon, we do need to make sure that we're prepared," she added, echoing Finance Minister Grant Robertson's call to hang onto the cash for a rainy day.
"We are working hard to address some of the other issues [for teachers]," the Prime Minister told The AM Show. "Things like freeing up [teachers'] time in the classroom by putting more resources into teacher aides and special needs."
"We know there is more to do; we just can't do it all at once."