Newsroom Pro's 8 things at 8: Big pay equity deal; migration tweaks coming

The government, ACC and some aged care residents will all chip in to meet the increased pay costs for aged care workers. Photo: Lynn Grieveson

In today's email we detail what the pay equity deal might mean for the Budget as well as for aged care workers - and the residents they look after.

1. Still plenty in the kitty

The Government's surprisingly large TerraNova pay equity deal has reduced its pre-election flexibility for a Budget spend-up on May 25, but not as much as the headline figure of $2.058 billion over five years might suggest.

The cost in the first year will be just $303 million and Treasury has already included 90 percent of the settlement costs in its Budget forecast in December.

It also says the TerraNova settlement will not be included in the Budget 2017 operating allowance, which was forecast in December at $1.5 billion.

For a lot more detail on the scale of the pay increases and the winners and losers, have a look at my piece from yesterday on Newsroom Pro.

2. ACC and richer residents to pay

A big chunk of the $2.058 billion is also not being funded by the taxpayer directly, which leaves a bit more room for some big ticket items in the Budget.

About $422 million in extra costs will have to be absorbed by ACC over the next ten years, which may mean higher levies at a later date - although not until well after the election.

A significant part of the funding for the wage hikes for aged carers will come from wealthier rest home residents themselves. The deal includes a six percent increase in fees or $66 a week for those in nursing homes who still have their own assets above the threshold for subsidies. It amounts to over $55 million over the next 18 months for the 11,000 residents who pay for their own care because they have assets covered by means testing.

So not all the cost is being absorbed in the Government's Budget, leaving plenty of room in a fast-growing economy for more to be announced on May 25.

Prime Minister Bill English agreed that it could reduce the Government's flexibility a little, but he was careful not to rule out any of the things already suggested for the long-slated families package.

I asked him at the post-cabinet news conference if the deal reduced his flexibility for a package of tax cuts, Working For Families changes and a higher Accommodation supplement.

"Of course it reduces the potential if you've got debt targets, but you take any Budget in the round," English said.

"We wouldn't say there was a trade-off between this and any other item of spending," he said.

"A significant sized settlement like this does affect your range of choices, there is no doubt about that. It is one of the reasons why you negotiate to settle it but within reasonable parameters."

See more on the political implications in my piece on Newsroom.

3. Legislative scramble

The Pay Equity deal will also spark a legislative scramble ahead Parliament rising on August 17 for the election on September 23.

Health Minister Jonathan Coleman said the Government would progress both the TerraNova settlement legislation and the separate Equal Pay Amendment Bill before the election.

The legislation specific to TerraNova will have to shifted quickly because the pay increases specified are due to kick in from July 1. Legislation is required to ensure that the extra rest home subsidies being paid by the Government to aged care operators will be passed directly on to workers in the form of pay increases.

The separate issue of the Equal Pay Amendment is also needed as a basis for future negotiations by other Government workers such as nurses and teacher aides. Coleman said the exposure draft for that legislation would come "soon" and he agreed that the Government planned to pass it before the election.

"We want to get that done shortly because there are other groups obviously who are looking at this," he said.

4. 'A high hurdle'

The next question is how big a bill the Government might have to pay for other parts of the state-funded workforce that are predominantly staffed by women, including nurses and teacher aides.

English attempted to dampen expectations in the post-cabinet news conference for those other professions, and also for other sectors dominated by private sector employers.

"The hurdles would be pretty high," he said.

"This is a fairly unique set of circumstances, it's not readily or easily applicable outside of government, for instance."

English said other Government workers could should not necessarily expect pay increases under the Equal Pay framework to be legislated before the election.

"We expect there will be others who want to make claims, but as we said, under the framework, the hurdles are reasonably high," he said.

5. Inflation infusion?

The pay increases are substantial for up to 55,000 workers or the equivalent of 29,300 full time equivalents.

Some of the most experienced workers will see their wages rise 71 percent from the current minimum of $15.75/hour to $27/hour within five years.

The deal affects a full two percent of the workforce, raising the question of whether it might boost wage inflation in a way that perks up wider inflation, which has remained stubbornly below the Reserve Bank's one to three percent target band in recent years.

BNZ's economists warned of a "non-negligible" effect on inflationary pressures, but Kiwibank's Zoe Wallis saw only a 0.1 percentage point rise in inflation due to the deal, with a combined increase over five years of 0.6 percentage points.

For those looking for a longer read to understand the dynamics of pay in the aged care sector, this report from 2012 by the Human Rights Commission, Caring Counts, is excellent primer.

6. Migration tweaks coming

Another smaller surprise to come out of yesterday's post-cabinet news conference was news that Immigration Minister Michael Woodhouse is due to announce changes to migration settings in a speech later this morning.

English was asked if the Government would be doing anything like Australian Prime Minister Malcolm Turnbull's announcement yesterday that his Government would scrap its 457 visa programme for skilled migrants.

"The fact remains Australian workers must have priority for Australian jobs. We will no longer allow 457 visas to be passports to jobs that could and should go to Australians," Turnbull said in a video posted on Facebook.

English referred to last year's announcements of changes to the residency programme, adding: "and the minister is making a speech tomorrow about further adjustments."

Asked if it would be an announcement about a further tightening focused on shortages, he said: "I think pretty similar to what you just mentioned there with the Australian objectives. We want to be able to control the flows and to get a good match between the skills we need because we certainly have skills shortages and we need to fill the gap and make sure we just get the right mix of people coming in. And we've got a system now where we can tweak it in order to achieve those things."

He declined to give details, but later said: "It's intended to control the flows and get the mix right. You've got political parties talking about having big cuts in immigration. When you get into the detail, it's quite difficult to do that without having a big impact on the availability of skills in the economy and work that is getting done."

We will have more details from the speech from Shane Cowlishaw on Newsroom Pro later today.

7. Inquiry into prison mental health?

Our National Affairs Editor Shane Cowlishaw interviewed Chief Ombudsman Peter Boshier yesterday and discovered Boshier is considering whether to launch an investigation into mental health in prisons.

Boshier’s comments come after his office released a scathing report last month about the use of tie-down beds and restraints in prisons. He described the general management of at-risk prisoners across the country as substandard and detrimental to their well-being.

The use of excessive restraint was also in breach of the UN Convention Against Torture.

It also comes on the eve of the launch later today of the People's Mental Health Report.

Here's Shane's broader profile piece from the interview into what makes Boshier tick.

8. Relocatable homes for South Dunedin

And finally, here's our Editor Lynn Grieveson's piece on how the Dunedin City Council is dealing with rising sea levels.

It is grappling with the same issues around residents' expectations that bedevilled the Kapiti Coast District Council and the Christchurch City Council. One of its solutions is a planned requirement to make new homes relocatable.

Find out a lot more in Lynn's piece on the issue on Newsroom Pro.