Earnings Up

Average earnings in New Zealand have risen sharply in the past two years, a study of Statistics New Zealand figures has found.

Real after-tax earnings have increased 8.7% since September 2008 – a significant improvement on the 3% total growth over the previous nine years.

Trends had fluctuated markedly over the past 20 years, Finance Minister Bill English told Parliament recently.

The figures use data on average weekly ordinary time earnings per full-time employee (FTE) from Statistics New Zealand’s Quarterly Employment Survey – this official series is also used to calculate the wage floor for New Zealand Superannuation.

The figures have been adjusted to account for income tax and inflation, giving a true picture of changes in New Zealanders’ spending power.

Between 1990 and 1999, real after-tax earnings increased 15.5%.

Between 1999 and 2008, real after-tax earnings increased by a meagre 3% – an average of just 0.3% a year. Within this period, there was virtually no increase between 2005 and 2008, as inflation and creeping income tax wiped out wage and salary increases.

“This is quite staggering, given that it was a time of economic prosperity around the world”, Mr English said.

“Appearances of a strong New Zealand economy during this time were clearly quite deceptive.

“Growth came from all the wrong places, such as government spending and excessive debt, and hard-working New Zealanders paid the price through anaemic real take-home pay increases,” he said.

Since September 2008, real after-tax earnings have increased 8.7%, despite the 2008-2009 recession, reflecting two rounds of income tax cuts and lower inflation.

“This is a good start, but we have plenty more to do to keep raising New Zealanders’ earnings,” Mr English said.

“As a next step, across the board personal income tax cuts on 1 October will further increase after-tax earnings – the average household will be about $25 a week better off, and the average wage earner about $15 a week better off – even after the increase in GST,” he concluded.

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