Cullen snipes at Brash over pay rise

By JOHN ARMSTRONG political editor

Finance Minister Michael Cullen expects the Reserve Bank Governor, Don Brash, to show the same degree of wage restraint when it comes to his own salary as he expects from the country's workers.

Dr Cullen's pointed remark was made in Parliament in the fallout from Dr Brash's warning that unless there is wage restraint New Zealand risks "stagflation" - a combination of inflation and a shrinking economy.

Dr Brash's warning infuriated senior ministers, who consider it has unnecessarily heightened economic jitters.

But until his aside yesterday, Dr Cullen had strictly avoided criticising the central bank Governor publicly, saying that the Finance Minister could not be seen to be jeopardising Dr Brash's independence.

Praising the restraint shown by trade unions, which were settling pay rounds at around 2.5 per cent to 3 per cent, Dr Cullen told Parliament: "I trust that those on very high incomes will show the same restraint in the near future."

As another MP took the call, parliamentary microphones picked up Dr Cullen muttering the words, "Governor of the Reserve Bank."

An optimistic note on the economy sounded yesterday with the release of figures showing retail sales rose for the fifth month in a row and were 8.9 per cent above August last year.

The figures suggest that the economy may rebound from its recent slump.

But the good news on consumer spending did not take the spotlight off Dr Brash.

Details of his salary package are due to be revealed in the next week or so when the Reserve Bank issues its annual report.

That figure will cover the 12 months to last July. The Governor has signalled that he does not expect a pay rise of more than 3 per cent in the current year - a point he made in August when he warned that interest rates would rise if workers negotiated pay increases above 3 per cent. That level of increase would still give him at least $14,000 more a year on his 1998-99 salary of around $470,000.

During his previous five-year contract, Dr Brash's base salary remained unchanged. But he received a completion-of-service payment of $282,000 after annual adjustments were carried forward. His salary is now reviewed annually.

While the country waits to find out how much more he was paid in the past 12 months, Parliament was told yesterday that the country's top public servants received an average pay rise of 9.5 per cent last year.

The figure was revealed by the State Services Minister, Trevor Mallard, who described it as "most unhelpful."

He warned that it should not be regarded as setting any benchmark expectation for big wage increases in the public or private sectors.

"I think salary earners generally have to look at the demands they are making and the effect of that on long-term jobs," said Mr Mallard, who is also Associate Finance Minister.

The Engineering, Printing and Manufacturing Union says it is negotiating claims of between 2.5 and 4 per cent. A multi-employer contract in the plastics industry struck this week included a rise of 2.75 per cent.

Wellington nurses, however, represented by the Nurses Organisation, recently got an increase of 7 per cent.

MPs are expected to be awarded a pay rise by the Higher Salaries Commission in another month or so. It will be backdated to July.

Sheffield Consulting Group Ltd, a company which specialises in recruiting executives and senior managers, said changes in employment legislation, tax and the low dollar made it difficult to to predict future trends in salary increases.

The company reported an average 3.8 per cent pay rise for chief executives and 4 per cent for senior executives in the 1999 year. It found 500 of the country's managing directors, chief executives and general managers earned between $140,000 and $250,000. Five per cent of that group earned more than $500,000 a year.

Baycorp chief executive Keith McLaughlin said his company would base its increases on productivity. "Increases are not based so much on external factors. Just because Don Brash comes out and says something doesn't suddenly change our direction."

Council of Trade Unions president Ross Wilson said increases for workers in the past few years had been very modest and often below rises in the cost of living.

Workers involved in wage bargaining liked to take into account what higher earners were receiving.

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