July 10, 2018 / 2:53 AM / 3 months ago

New Zealand nurses' strike spotlights fiscal challenge for government

WELLINGTON/SYDNEY (Reuters) - New Zealand nurses are planning to strike on Thursday for the first time in 30 years after rejecting a pay rise offer, creating a political and fiscal test for the new government.

More than 30,000 nurses will strike for 24 hours after weeks of failed negotiations, their union said, after rejecting a government offer of a NZ$520-million (268.66 million pounds) package to lift wages roughly 3 percent and add staff.

The strike will disrupt health services nationwide and force all non-urgent treatment to be postponed, Winston Peters, the acting prime minister of the Labour-led government, said on Tuesday.

“This government is committed to working with nurses to address their concerns but we can’t fix everything in one pay round,” he added. “Their frustration and anger has built up over many years.”

The stand-off with its traditional union support base comes nine months after Labour formed a coalition government, promising to pour money into social services and rein in inequality, rising despite years of strong growth.

But it found money stretched in its first budget in May, as it balanced investing in much needed infrastructure with a self-imposed rule to pay down debt and insulate economy from the risk of a shock.

Business confidence has slumped to its lowest in seven years, and there are fears that Labour’s policies, such as a raise in the minimum wage, are leading employers to hold off on investment.

Labour groups and some economists say workers have benefited little from a recent economic boom, as wage growth has remained sluggish despite soaring housing costs.

Yet New Zealand’s fiscal accounts are healthy, even if there is pressure to lift public sector wages, said Nick Tuffley, chief economist at ASB Bank.

“There is more pressure on the government to meet various wage demands in the public sector,” Tuffley said. “So there is a risk of government expenses being a bit higher.”

New Zealand’s fiscal balancing act of increasing expenditure and paying down debt relies, in part, on a lift in GDP growth to a peak of 3.8 percent in mid-2019, from the 2.7 percent pace in the first quarter of 2018.

Peters’ coalition government, led by Labour leader Jacinda Ardern who is on maternity leave, faces growing turbulence as its pay talks with public workers increasingly lead to strikes.

More than 4,000 employees of the inland revenue department and business ministry held a two-hour strike on Monday, while primary school teachers plan a strike in August, their union says.

Reporting by Charlotte Greenfield in WELLINGTON and Swati Pandey in SYDNEY; Editing by Clarence Fernandez

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