Minimum wage to be increased in line with inflation

The minimum wage is being increased in line with inflation.

Prime Minister Chris Hipkins announced on Wednesday that it would rise by $1.50 to $22.70 an hour from April 1. The Starting-Out and Training minimum wage rates will be maintained at 80 percent of the adult minimum wage. 

The current rate is $21.20 per hour. It has been set there since April 1, 2022, after increasing from $20.

In January, StatsNZ said the annual consumer price index - annual inflation - in the December quarter was 7.2 percent. That was the same as in the September quarter and only slightly down from the 7.3 percent figure for the June period. 

"In tough times, it's critical to support those who struggle the most to make ends meet," Hipkins said.

"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.

"We've tried to find the right balance. Analysis from MBIE that fed into our decision suggests this increase is unlikely to have a significant impact on unemployment, because it is broadly in line with existing average wage growth across the economy."

Hipkins said the impact on inflation would be "negligible". 

"In the 2022 Review, MBIE estimates that an increase of 7 percent in the minimum wage will have only a minor inflationary impact of 0.1 percent on the wages portion of GDP.

"These decisions are a start and show the new direction of our Government. Increased support for business, increased support for those on low incomes and a reprioritisation of our work programme to shift it to the bread and butter issues New Zealanders want us focused on."

The announcement was made alongside Hipkins' policy refocus. That included the axing of the public media merger and biofuels mandate. The social insurance scheme will also not proceed as planned. Hate speech is being pushed over to the Law Commission for guidance.