Vernon Small

The Government is considering a revamp of personal grievance laws. The moves include a crackdown on frivolous claims and new rules to control "no win, no fee" advocates who have been seen as ramping up claims against employers.

But unions are concerned that the Government is using the review to reduce employees' rights when they are sacked, including claims based on unfair process.

Labour Minister Kate Wilkinson said she had an open mind on whether changes were needed but a discussion document and questionnaire, yet to be approved by the Cabinet, would canvass what changes were needed. In some areas the law had tilted too far against employers.

Prime Minister John Key has said the Government "shares concern from many quarters about the fairness and consistency of personal grievance claims".

Ms Wilkinson said she wanted to ensure the regime was fair to both sides. "You hear stories anecdotally from employers who say, `Oh well, it's just too hard we will just pay some money to make it go away.' And that's not justice." She had also heard that some of the "no win, no fee" industrial law advocates "know their way around the procedures so well that, whatever the merits of the case, the employer might pay out".

Some employers who had a poorly performing employee, or one who was not working out, did not know how to resolve the issue. It was difficult to judge, because many cases were settled, paid out or withdrawn before they reached the Employment Relations Authority.

Of 2500 applications lodged with the ERA each year, only about 1000 go on to the first-stage investigative meeting.

She was also concerned that some cases might be "frivolous" and were clogging up the system.

She had consulted the Council of Trade Unions and Business New Zealand on the review. She said industrial relations law was generally working well, and did not need wholesale changes.

CTU president Helen Kelly said "no win, no fee" advocates tended to operate among non-unionised workers and moves to regulate them would not concern the CTU. But it had major concerns about other elements of the document. She said the Government saw procedural fairness and natural justice as an impediment when an employee was dismissed.

The remedies won through personal grievances were too low, she said. Surveys had found the average cost to employers was $5000, of which compensation paid to workers averaged $2800.

Thousands of employment relationships ended unfairly and employees did nothing about it, so a lot of employers got off lightly. The number of grievance cases was low, considering that about 600,000 people left their jobs each year.

Business NZ chief executive Phil O'Reilly said businesses had complained for years that the system was too bureaucratic and seemed to "emphasise form over substance". They were also concerned about "ambulance-chasing lawyers" that lodged claims with no real justification to pressure employers.

The Government is also reviewing the law covering vulnerable workers, mostly in cleaning, catering and laundry companies, whose jobs are protected if a contract changes hands.

A quick start on a replacement for the Kopu Bridge near Thames and a big boost for state house building and refurbishment are set to be key parts of the Government's $500 million infrastructure package announced today.

In the first parliamentary sitting of the year, Transport Minister Steven Joyce signalled that an announcement on the one-lane Kopu Bridge would be in the package aimed at preserving jobs and easing the impact of the recession. The bridge is expected to cost more than $32 million.

Prime Minister John Key said the package would include spending on state highways, school property, and state housing. "They are projects that will be ready to start and get under way as soon as possible."

The Transport Agency had set a start date of mid-2011 for a 500-metre-long Kopu replacement bridge, though Labour had said it would bring that forward to 2010.

Mr Joyce said last month that he wanted to get the project going possibly before the end of next year a move that could be particularly popular among Aucklanders wanting faster access to Coromandel. Queues up to 10 kilometres long backed up at the 82-year-old bridge during the Christmas break.

Mr Key indicated again yesterday that a big push would be made on insulating and upgrading state housing, which the Government believes will help retain jobs across the regions and improve the health of tenants.

In response to Greens co-leader Russel Norman, who has criticised National's dumping of a $1 billion house insulation plan, he said today's package would cover insulation, energy efficiency and climate change. "We will be creating jobs in our economy and they will be jobs that not only have a consideration for economic growth and providing good wages for those who are in them, but also will have an eye to ensuring that environmental responsibility is taken seriously by our Government."

Housing Minister Phil Heatley said last year there was up to $2 billion of deferred maintenance on Housing NZ's books. He also indicated an increase in the number of state houses.

Further roading projects, including extensions to the Waikato Expressway, and the Puhoi motorway north of Auckland, are likely to be included in another package this year.

Labour leader Phil Goff said Mr Key was bragging about his plans while not acknowledging that Labour's 2008 Budget and other measures proposed by the previous government made up three-quarters of the stimulus package.

Finance Minister Michael Cullen has given his strongest call yet for a fundamental change to monetary policy, saying it is harming long-term growth by discouraging investment in exporting.

"The accepted consensus has been that ... monetary policy helps keep the economy stable by moderating economic cycles, without impacting on the sustainable rate of growth of the economy.  My overriding concern is that this view no longer holds," he said in notes for a speech to accountants Ernst & Young yesterday.  "We need to look seriously at the monetary policy framework and whether it can be made more effective at curing the inflation disease without killing the patient in the process."

He later told The Dominion Post he and the Reserve Bank were at odds.  "Oh yes, I have doubts about that consensus. I think it is probably the view the Reserve Bank would still hold but it's not a view that I would share."

Despite the dollar's recent fall, it was still much higher than was justified by medium-term fundamentals - and had been for much longer than in previous economic cycles, he said.  "That can have an effect on how people see the long-run returns to exporting and there's a risk that people decide that exporting or investing in exporting is simply not worth the effort."  He expected the current select committee inquiry into monetary policy to look at the issue.

National finance spokesman Bill English has rejected options for change, including a mortgage levy and ring-fencing losses on investment properties.  He has suggested the current interest rate tool would be sufficient.  However, Labour probably sees political capital in opting for change, leaving National to defend the status quo at a time when exporters are being hit by a high dollar and interest rates are pushing up housing costs.  Both main parties have identified affordable housing as a key election battleground.

Dr Cullen said yesterday that his cash surplus for the past financial year would be higher than forecast on Budget night, reinforcing the view that he was running the tightest fiscal policy of any party.  "When you add up government spending and subtract taxation, and the investment we are making in the New Zealand Superannuation Fund, the Government is removing demand from the economy."

KiwiSaver would also reduce pressure on monetary policy.  "If we save more, we consume less."

Mr English said the improved cash surplus signalled Dr Cullen was preparing an unprecedented election year spend-up.  "It's called lollynomics."  He said Dr Cullen continued to blame others for high interest rates and high inflation caused by his economic management.

Save now - spend later. Finance Minister Michael Cullen's eighth Budget has turned an economic necessity into a political gamble, with a promise of sweeteners to workers if they save for their retirement and the hint of a carrot next year in the form of tax cuts.

But employers will have to carry some of the weight. The Government rushed legislation into Parliament last night to force businesses to contribute to workers' KiwiSaver accounts. Those contributions start at 1 per cent of each worker's wage next year, rising to 4 per cent by 2011.

The KiwiSaver pill will be sugared by a 3 per cent cut in the corporate tax rate and a Government subsidy to business of $20 for every worker who signs up to the savings scheme.

It will be matched by a $20 top-up from the Government, straight into workers' accounts, more than doubling the retirement nest eggs of those who make the minimum contribution - and doubling what they can expect to get from the state pension now.

The changes will deliver about an extra $60 a week to someone on a salary of $50,000 and about $100 a week to someone on $100,000.

But the stick is that workers will have to forgo income now to become eligible for the subsidies.

They also face local government petrol levies to fund road and rail projects in Auckland and Wellington, and pressure from the Government and employers to limit wage demands as a tradeoff.

Dr Cullen has raised the stakes even further by whipping away his 2005 "chewing gum" tax cuts - which were to be worth between 67c and $10 a week and were pencilled in for next year.

Senior Labour ministers are touting the Budget as the Government's boldest yet. But it is a huge political gamble that fixing the country's savings crisis will not spark a backlash over the Government's failure for the eighth consecutive year to deliver tax-rate cuts.

The last attempt to legislate for compulsory savings was roundly rejected by voters in 1998.

But Dr Cullen has laid the groundwork for an announcement on tax cuts before the next election. He has admitted that the long run of large government surpluses - worth an estimated $22 billion over the next four years - is unsustainable.

He said tax cuts now would only stoke an overheated domestic economy and housing market.

Meanwhile, bold action was needed to reverse New Zealand's dismal savings record. "In my view, the choice was not a difficult one. Every dollar saved today is worth more in the future. A small tax cut now would be spent and then gone."

Dr Cullen today told Radio New Zealand there did not need to be a "huge tradeoff" between wage bargaining and employers' compulsory contributions to Kiwisaver.

He said the Government expected to contribute about 2 per cent of the 4 per cent compulsory contribution employers would make to their workers' Kiwisaver schemes after four years.

A "fairly ambitious" 50 per cent take-up rate would mean an employer's "total wage and salary bill would be 1 per cent higher after four years than it otherwise would be".

So, if there was just 0.5 per cent foregoing a total wage increase over that period, that would halve again the net cost to employers, Dr Cullen said. "So we're not talking about dramatic foregoing of wage increases and I think there's some sort of hysteria around industrial confrontation that's just getting a little bit silly."

Employers would get a lot out of Kiwisaver, Dr Cullen said. "Employers get structurally lower interest rates, they get stronger capital markets in New Zealand, they get greater employee loyalty and I think they'll also get a great tendency for New Zealanders to stay in New Zealand once they're saving into Kiwisaver and locked into savings," he said.

"Even a small trade off at the margin will mean that this is a fairly small net cost to employers and out of that they get a great deal over the long term."

Dr Cullen said it was likely that few low income would opt in to Kiwisaver but when someone took on a new job, their Kiwisaver contributions would be automatically deducted.

"The question at that point is whether they can stay in that position and continue to forego that income, not having had it in the first place, given now the enormous advantages. "Because for a person on a low income their savings effectively can be trebled by means of the change in Kiwisaver."

National Party leader John Key said the Budget was a cruel hoax on business and a blow to those on the breadline. "Fifty per cent of New Zealanders will not take this up and I'll tell you who (they) are - they are the people who can't afford to, who don't earn enough," he said.

"And ... they're now being told, `Don't ask for a pay rise'. The lower-paid workers of New Zealand have to give up their pay rise so higher-paid workers can get a cut from KiwiSaver."
- With NZPA