Labour 'caught off guard' by response to public sector pay freezes - commentator

The Government announced on Wednesday for the next three years, no one in the public service on a wage of more than $100,000 will get a pay rise.
The Government announced on Wednesday for the next three years, no one in the public service on a wage of more than $100,000 will get a pay rise. Photo credit: Getty Images

What Grant Robertson thought people would hear -

'The government's clamping down on those Wellington government pen pushers, about time!'

What people heard -

'Nurses, teachers, police, border workers, all those who kept us safe during lockdown, are being sacrificed!'

The finance minister's announcement of a public servant wage freeze for those earning over $60,000 hit all the wrong notes, sparked an outpouring of outrage from unions and the sectors involved, and drew comparisons of Muldoonism.

"I don't think that Labour was quite prepared for the outpouring from the public and in particular from the unions, '' says RNZ's deputy political editor Craig McCulloch.

"I think it was caught quite off guard by the fury and how quickly the narrative shifted to be about teachers, about nurses, about police officers.

"I think it thought that the message was, for example, that the government was cracking down on the pen-pushers, on the well paid Wellington bureaucrats. I think it thought that it would play well with the median voter, this idea that we're all pulling together, that we're cutting our cloth - and I suspect they have some sort of polling which backs that up."

But McCulloch says what's happened instead is the idea of a responsible government reining in spending has been pushed aside and replaced with an image of a miserly, punitive one.

He talked to The Detail on Monday about what's behind the freeze and how the announcement was handled, and we also get some insight into the financial side of the move.

Sharon Zollner, the chief economist of the ANZ, says last year's massive wage subsidy saw us left with a huge debt for the size of our economy - we have borrowed from the future.

"It's a tightening up - I mean it's inevitable - well, hopefully - that the government is going to spend less in the next 12 months than it has in the last 12 months because that wage subsidy is one out of the box. It was massive. And something would have to go terribly horribly wrong in the economy for us to need to spend that much government money again," she says.

But ...

"I think it would maybe be politically expedient to have some more slicing somewhere else to avoid the impression that one group is wearing this," she says.

We could see that in the May 20 budget.

"Of course the increase in public sector salaries is a pretty small proportion of government spending, which has made this quite a political move."

But, the debt mountain can't be ignored, says Zollner

"Monetary and fiscal policy can't magic up resources, all they can do is shift spending through time. And unfortunately that future can arrive in a fairly lumpy fashion."

It's not just pandemics that could hit - don't forget New Zealand is sitting on a large fault line.

"We do need to run lower levels of government debt than some other countries can get away with."