3. Question No. 3—Public ServiceGRANT McCALLUM (National—Northland) to the Minister for the Public ServiceQuestion No. 3—Public Service3. GRANT McCALLUM (National—Northland) to the Minister for the Public Service: What recent reports has she seen about public sector pay increases?Hon NICOLA WILLIS (Minister for the Public Service): Earlier this month Stats NZ released the labour cost index for the June 2024 quarter. The labour cost index measures pure pay rises and doesn't include wage increases that reflect a promotion for example or reward better performance at work. The June figures showed very different results for the private and public sectors. Over the past year labour costs in the private sector have risen by 3.6 percent. Over the same period however labour costs in the public sector have risen far in excess of this by 6.9 percent.Grant McCallum: Is this a change from the usual trend?Rt Hon Chris Hipkins: What's wrong with wage growth?Hon NICOLA WILLIS: Public and private sector pay increases for the benefit of Mr Hipkins—Rt Hon Chris Hipkins: I thought you hated wage growth.Hon NICOLA WILLIS: I love wage growth. What I am always conscious of is taxpayers funding public sector wage growth that gets out of step with the private sector. So if the members would listen public and private sector pay increases have tended to follow a roughly similar pattern over time. In the last year or so however they have diverged markedly. Private sector labour cost increases have started to tail off while public sector cost increases have rocketed upwards. I am advised that public sector pay increases are being driven by two main factors: the first is the result of pay equity claims and the second is the effect of the public sector pay adjustment and other settlements agreed by the previous Government.Grant McCallum: Is there a breakdown of these public sector pay increases?Hon NICOLA WILLIS: Yes. For the purposes of the labour cost index Stats NZ divides the public sector into industry groupings. Labour costs in public administration and safety covering both central and local government administration rose 5 percent over the past year. In education and training they rose 7.5 percent. And in healthcare and social assistance they rose a very substantial 10 percent over the past year. I'm advised that an annual pay increase of 10 percent for the health sector is the highest for any public sector industry grouping since at least 2002 when the Public Service Commission's dataset began.Grant McCallum: What is the Government doing to manage high wage growth in the public sector?Hon NICOLA WILLIS: Earlier this month the Government issued a workforce policy statement that sets out how public sector agencies including Crown entities should approach a range of workforce matters like remuneration negotiation of employment agreements pay equity diversity data and information. I should mention that the context for this workforce policy statement is that unlike members opposite this side of the House does not believe there is a magic money tree at the end of the garden. Government agencies should be delivering better public services to New Zealanders but also doing so in a way that is fiscally sustainable and respects the fact that they are funded from taxpayers' money. The Government has for example set a clear expectation that future workforce costs including collective bargaining and pay increases will be funded from within existing agency baselines. My expectation is that public wage growth will start to level off as inflation settles within the band and as implementation of the workforce policy statement influences pay decisions and bargaining.