By Omar Hamed, Socialist Aotearoa
2025 Taskforce? More like the 1984 Taskforce, if you ask most people. Even Prime Minister John Key has stated that the policies being promoted by former Reserve Bank Governor, National Party Leader and hollow man Don Brash and the 2025 Taskforce in their recently released report are those that opened up the wage-gap between New Zealand and Australia in the first place. Yet the increasing gap between Australian and New Zealand wages and the burgeoning public debt remains a critical issue for young Kiwis and the lack of real public understanding, engagement and discussion with the politics of these issues leaves policy space open to the dinosaurs of the radical right, who even have the gall to tell us,
"The case for any minimum wage at all is questionable."
The crisis in world markets, rising unemployment, the collapse of Government surpluses and the rising tide of climate change will force us to make some tough decisions in coming years. Unless the ideas of Brash et al are challenged and contested by the left armed with a realistic and alternative popular programme, they will gain traction in the media and with an increasingly tax-burdened and wage-poor public. As the Herald editorial said today of John Key and Finance Minister Bill English response to the report, “Both of them would have known the remedy Dr Brash, their former party leader, would prescribe. If they cannot bring themselves to embrace it, they ought to have alternatives to offer.”
The following 5 proposals are offered here up by the author in the interests of presenting New Zealanders with a clear alternative to Brash’s proposed reforms. They do not represent an exhaustive list but merely the beginnings of an alternative program that picks up on the work being done by the Council of Trade Unions to provide an alternative economic strategy and by environmentalists to meet the need for a transition to a low-carbon economy.
1. Lift the minimum wage to $15 an hour and then set it at two-thirds of the average wage
I cannot understand how Dr. Brash and the 2025 Taskforce arrived at their conclusion that, “The case for any minimum wage at all is questionable” and that the Government should slash the minimum wage. Why? Because Australia has a minimum wage of AUD$14.31 hr, while New Zealand has one of just NZD$12.50 hr. When the Australian Fair Pay Commission converted our minimum wage to AUD using purchasing power parity (PPP) exchange rates it came out at $11.76. This proves that our minimum wage workers in terms of their purchasing power are a full $2.60 hr or $5400 pa behind Australian minimum wage workers. If we seek to reduce the gap between our nations incomes we should be seeking to increase our minimum wage by at least 18% to meet this gap between the purchasing power of our minimum wage and that of our neighbours. Australia has a minimum wage that in purchasing power terms is higher than many other OECD countries including Luxembourg, France, Netherlands, Belgium, the UK, Canada and the United States. How can Dr. Brash et al. reconcile this with their report? The reality is they cannot. Lifting the minimum wage to $15 hr and then setting it at 66% of the average wage as the Unite Campaign for a Living Wage aims to do would begin to significantly close the gap between Australian and New Zealand wages.
2. Bring the troops home from Afghanistan and close Waihopai spybase
Around $40 million is being spent each year on New Zealand’s military deployment in Afghanistan to support a US occupation that Afghan MP Malalai Joya describes as having sandwiched Afghans, “between three powerful enemies: the occupation forces of the U.S. and NATO, the Taliban and the corrupt government of Hamid Karzai” where “Life for most Afghan women resembles a type of hell that is never reflected in the Western mainstream media”. New Zealand’s international spying agency the Government Communications Security Bureau and the Waihopai spybase eats up another $40 million each year. So that is $80 million a year that is being spent on supporting the US military’s ongoing quest to control central Asia through tactics like the bombing of Kunduz in September killing 200 civilians.
3. Institute a Capital Gains Tax
A Capital Gains Tax will have a three-fold positive effect on the New Zealand economy. Firstly it will raise a significant amount of tax revenue, secondly improve housing affordability and thirdly discourage speculative investment. Australia has a Capital Gains Tax and because we do not have this tax, we have a taxation distortion about which the Productive Economy Council has said, “The net effect of this taxation distortion is artificial asset inflation, one that reduces productive investment and job creation, increases the national debt and creates one of the lowest levels of housing affordability in the western world.” A study of housing affordability in six developed countries ranked New Zealand second most unaffordable just behind Australia. No urban areas surveyed were considered affordable by the study. The Capital Gains Tax would also discourage property speculation at the expense of investment into productive economic sectors. As the Manufacturers and Exporters Association Chief John Walley says “We need to balance the tax treatment of all gains and income to encourage more investors into the productive sector of the economy where jobs and wealth are really created”.
4. Tax on very-high incomes
The Council of Trade Unions has called in a recent document for a new tax rate of 45% on incomes of over three times the average wage, currently $150,000. In 1988 households sitting at the 80th percentile (households with exactly 80 percent of household incomes below and 20 percent above theirs) had 2.24 times the income of households at the 20th percentile ((households with exactly 20 percent of household incomes below and 80 percent above theirs). By 2008 the 80th percentile households had increased their income to 2.59 times more than 20th percentile households, an income inequality increase of 14.5%. The highest income inequality increase in the OECD over that period, the CTU tells us. “The richest 10 percent own over half - 51.8 percent – of the country’s wealth owned by residents.” An increase of the tax responsibility on those earning over $150,000 could allow further tax-credits to be set aside for low-income households especially those with children. Or alternatively we could do as John Minto has suggested in the wake of CEO increases for corporate sector bosses and wage cuts for their staff and legislate a maximum wage. As Minto wrote, “My pick would be to set the maximum income at 10 times the minimum wage. This would mean a maximum income of $250,000. The easiest way to enforce this would be setting a 100 per cent income tax rate for the combined income from all sources (including share allocations, allowances etc) above this level.” Again this new tax responsibility could be used to alleviate our awful levels of child poverty. 1 in 5 New Zealand children grow up in families of sever or significant hardship and 20,000 school children go hungry to school each week because of not enough food at home.
5. Ban the import of illegally-logged timber and paper products
In 2007 the NZ government estimated that the import of illegally logged timber products cost the New Zealand forest industry NZ$266 million a year in lost revenue. Recent redundancies in the forestry sector show how the New Zealand forestry sector is being undercut by those who import illegally logged timber including for use in decking and furniture. Of these illegally-sourced wood products sold in New Zealand 80% is Kwila, a tropical rainforest hardwood from Indonesian occupied West Papua, Papua New Guinea and Malaysia used in decking and outdoor furniture but also on the International Conservation Union’s red list of threatened species. The import of Kwila and other rainforest hardwoods into New Zealand accelerates rainforest clearance and thus climate change. As the Rainforest Action Network reminds us, “Scientists agree that the world's rainforests are the best natural defense against climate change because they store vast amounts of carbon. For example, Indonesian old-growth rainforests store almost 750 tons of carbon dioxide – the equivalent of 620 flights between New York and London – per acre. When cleared, rainforests release that carbon into the atmosphere, furthering global warming rather than curbing it.” Rainforest destruction is the number one cause of climate change. Banning the import of illegally logged timber products, as Green MP Catherine Delahunty’s Private Members Bill recently tried to do, would not only boost the economy by a quarter of a billion dollars a year but also go some way to ending New Zealand complicity in rainforest destruction.
Unfolding an alternative vision and strategy for income growth and lowering public debt levels is essential in the times. The Key-English Government and any future governments will have to make tough decisions about New Zealand’s economic trajectory. If the only options on offer are a renewal of the failed policies and programmes of the neo-liberal assault on our welfare-state then they will gain currency. The five proposals above will not be enough in and of themselves to close the income gap with Australia or reduce public debt but they would be a step in the right direction and left-wing blogs, organisations, unions, parties and movements should encourage further debate on more advanced policy options. These could include some uptake of the Green Party’s Green New Deal which calls for state investment and regulation in the areas of energy efficiency, transport efficiency, waterways protection, state housing and community sector initiatives. It could entail some degree of rental price control to deal with overcrowding, a move towards public recontrol of Telecom and the electricity sector as the CTU has suggested or a ban on pokie machines outside of casinos to remove a major drain on low-income communities. We could even look forward to a ban on the import of clothing and footwear products made in sweatshop conditions, a move that could significantly bolster the cause of unionisation and campaigning for workers rights in developing nations. There are plenty of alternatives to Brash’s cup of sick, but it will require boldness to take leaps in new directions.