Kiwi wages slip further behind

New Zealand wage earners have fallen further behind Australia in the past year, despite Prime Minister John Key's much-lauded promise that his government would close the gap.

According to OECD data, New Zealand wages lag around 30% behind Australia's when adjusted for cost of living. But in the past 12 months Australian wages have climbed faster than New Zealand's, nudging the gap still wider.

Labour leader Phil Goff said the figure showed Key's promise to close the gap was "reckless and dishonest".

According to Statistics New Zealand data, between December 2008 and December 2009, the average New Zealand wage increased 2.86% after being adjusted for inflation, up from $891 a week to $934 a week. In Australia, from November 2008 to November 2009, the average wage went up 3.6% from $1159 a week to $1226.

This comes on top of a forecast last week that indicated the trans-Tasman wage gap would continue to widen this year. International accounting firm Grant Thornton surveyed 250 Australian and 180 New Zealand businesses and found 78% of Australian businesses intended to increase wages in line with inflation or higher, compared with only 55% of New Zealand companies.

New Zealand's unemployment rate was also heading in the wrong direction, jumping to 7.3% last December, the highest in 16 years, while Australia's jobless rate dropped to 5.3%.

Last month, in his first major statement of the year, Key admitted he was finding it hard to deliver on his promise.

"I want to close the wage gap with Australia. We haven't yet kept the promise I made to New Zealanders in 2008 that we would increase New Zealanders' incomes to those of Australia."

Economic thinktank the New Zealand Institute of Economic Research (NZIER) said Key should never have raised expectations that wage earners here could catch up to Australia.

The institute's principal economist, Shamubeel Eaqub, told the Sunday Star-Times that aspirational goals were important but if the government was "unwilling to administer the necessary bitter medicine, then these goals will remain unrealised".

Eaqub said it was not an impossible goal but New Zealand "will be hard-pressed to catch up with Australia by 2025".

"New Zealand can catch up with Australia, but it will require big changes and time, in the absence of, say, a major oil find or technological breakthrough specific to New Zealand. The regulatory changes in the mid-80s to early 90s put New Zealand on a better growth path, but not enough to catch up with Australia. Without those New Zealand now might have been 40% behind Australia instead of 30%."

Goff was disparaging of Key's promise to close the wage gap between Australia and New Zealand.

"He was undertaking to the New Zealand electorate that he had a secret plan whereby he could catch up with Australia, and the truth is he had no such plan. And, far from catching up, New Zealand has fallen further behind."

Goff also believed it was not impossible to catch Australia but "there is nothing that John Key's government is doing now that would give any hope that the gap would be closed".

A spokesman for Key declined to comment on Goff's criticism.

- © Fairfax NZ News