Out-of-control state-sector wages going to become an issue

Rob Hosking writes at NBR: Quote:

That touches on another dubious projection in the budget: the state sector wages bill.

That grew 3% in the 2016 financial year, 3.8% in the 2017 year, and is projected to rise 4.7% for the current year before falling back to a 3% increase in 2019.

Oh, and then throttle back to a sedate 0.8%, 2%, and 0.2% increase in each of the following years.

Those assumptions appear more than just heroicthey are Charge of the Light Brigade suicidal insanity. They did not happen in years former finance minister Bill English was running his ?zero budgets? and the idea they are going to happen at a time of an expansionist, state sector-oriented Labour-led government appears as likely as a tsunami in the Sahara.??

The Labour party, which these days is pretty much the provisional wing of the teacher and public-sector unions, is never going to be able to keep an annual increase down as low as is projected in these figures ? especially at a time of large scale expansion of state sector activity and an already low unemployment rate.

That state sector expansion is going to drive a great deal of the growth over the next few years.

Whether it will be as stellar as the growth being forecast in the budget ? above 3%, most of the next few years ? is a bit more dubious.

It does depend not just on an expansion of state sector spending but on those firms being prepared to hire and invest.

And they are nervous, less about what was or was not in the budget and more about the effect of employment law changes already under way. The decision to end oil and gas exploration also had an effect ? not directly on most businesses, but many have made a note of the way the decision was made.

And its caused a touch of the collywobbles.

While there is little in this budget to add to those collywobbles, neither is there much to settle them down. End quote.

State-sector wage demands are going to be massive. The teachers and nurses are muscling up big time, and then there will be the predictable claims for pay equity, which the government will be unable to oppose due to their support of such dubious claims while in opposition.

Eventually, this government are going to run out of other people’s money to spend.