At last, some major policy announcements. And not just any old BPAs, but arguably the biggest ones of all -- savings and wages. Two sides of the same indebted coin and at the heart of building a prosperous New Zealand

It's the day of the 'big policy announcements' (BPAs). The major parties at least must be confident of an All Blacks victory, as they both seem to have decided that we're capable of ignoring the rugby for a few minutes at least.

So National is announcing its KiwiSaver plan, Labour its wages policy. John Key, in case you've forgotten, said there was nothing more important than savings when he spoke to the opening of parliament this year, and, well, wages are what Labour parties like best, aren't they?

National moved its KiwiSaver release forward and pipped Labour's announcement by 15 minutes, ensuring it got top billing on the websites. Its promise is to put its money where its mouth is and auto-enrol every worker in KiwiSaver. It's the compulsory saving you have when you don't have compulsory saving.

As it stands, you're automatically enrolled in KiwiSaver when you change jobs and you have to go out of your way to opt out. Under the extended scheme, every worker would be enrolled in one fell swoop, still with the ability to opt out.

The catch is that National won't do this until the country returns to surplus. It says that will be 2014/15; much of the rest of the world thinks that's a pipe dream. So it could be a while before this kicks in.

Why wait? Well, the $550 million it estimates auto-enrolment will cost has to come from somewhere. National can hardly spend the next month bashing Labour as the party of "borrow and hope" if it was promising to borrow another half billion dollars. So we wait.

I was going to say that it also matches the government's promise to resume contributions to the Super Fund when we're back in surplus, but I note in today's press release that contributions will only resume when the government returns to "sufficient surplus" -- sufficient is an interesting qualifier.

Getting the majority of New Zealand workers saving can only be good for us -- addressing household debt is one of the biggest issues facing this country.

National accepts the details won't be sorted until next year. One of its core concerns must be how the lowest paid workers are compensated and cared for. Will it be easy for low income workers to opt out? And if they can opt out, do we create another poverty gap -- between the save and save-nots?

Some suggest a tax incentive for the low paid, or perhaps greater contributions from employers. What about owning your own home? The implications are many. And with Labour set to back at least auto-enrolment and probably a fully compulsory scheme, these questions need to be carefully considered.

As a country we need more savings and less debt, but families need to be able to pay their way whilst saving.

Talking about addressing household debt, Labour is approaching the problem from the other side today, by trying to increase wages.

For me, wage growth is probably the most important issue for New Zealand -- it solves or influences just about all the other big economic questions, from welfare reform to talent loss to Australia. Problem is, while it's easy for governments to change taxes and even incentivise savings, it's tough for them to grow wages.

The tragedy is that, in contrast, is damnedly easy for governments to lower them. Just look at the Employment Contracts Act. If any one act of stupidity created the wage gap between Australia and New Zealand, that was it. We became a low wage economy in a moment. Rebuilding, however, is a long road.

Labour's solution? Well, naturally enough it involves growing union membership. It's hardly sexy politics, but there's little doubt that in developed economies, union membership does drive higher wages. It's logical really -- if you have a strong negotiator arguing for a larger group of people, more in that group are likely to do better.

But it's equally logical that those wages have to come from somewhere, so you risk lower macro economic growth and under-investment in other areas.

So like all politics, it's a question of priorities. And if you want sexy, Labour's mondayising of ANZAC Day and Waitangi Day gives you all the eye-fluttering you can desire. That's part of its policy that anyone -- other than business owners -- can understand and love in an instant.

But the most significant takeaway from Labour's BPA is the introduction of something similar to what used to be called national awards. Now it's calling them Industry Standard Agreements, stressing that they're voluntary and arguing that if they're good enough for Australia, they're good enough here as well.

And ISA would mean negotiating a minimum wage and conditions across an industry. If that industry has a range of diverse occupations within it, a range of standards could be set.

I suspect such agreements would help boost wages; the criticism will be the cost to employers, complexity and that old chestnut, flexibility. And lo and behold, even as I write this sentence the press release has arrived from Business New Zealand:

Chief Executive Phil O’Reilly says the proposal for Industry Standard Agreements – where central bargaining agents would set the pay rates for entire industries – is not much different from National Awards, which in the 1970s and ‘80s were responsible for the highest number of strikes ever recorded in New Zealand.

“National Award-type systems make it impossible for enterprises to respond flexibly to business opportunities or threats, and would make our businesses less competitive.

So I was partly right, at least.

This will be a tough sell for Labour. It's certainly a victory for the union wing of the party -- I wonder whether Helen Clark would have been a fan. For all that it's one of those things that might just work, the ghost of 1970s strikes is enough to put the frigheners up lots of folk over 50.

At least the parties are now talking about the issues that matter -- savings and wages, the two sides of the crucial coin. At last, even before the launches yet have been rah-rahed and the rugby is won, the campaign is rumbling into life.

Labour's got a long way to go before it can hope for a close election. But it's increasingly clear that voters will be offered a clear choice this time.

Comments (4)

by Brendon Mills on October 18, 2011
Brendon Mills

Employers in this country have the same attitude that plantation owners in the antebellum south had.

Plain and simple.

by alexb on October 19, 2011

Lets not forget the third big economic issue, unemployment, which only the Greens are talking about with any substance.

by Gareth Ward on October 20, 2011
Gareth Ward

The catch is that National won't do this until the country returns to surplus.

Which means they value ALL other current Government spending and their revenue track above this.  Which kinda contradict's Key's statements about it's importance.

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