By 1News

The Government this afternoon announced the hourly minimum wage will go up to $22.70 from this April - a 7% increase.

That's an increase of $1.50. The existing minimum wage is $21.20.

The increase is in line with inflation and means a person in full time work on minimum wage currently earning about $715 a week will now bring in $756.

The announcement was made by Prime Minister Chris Hipkins at a post-Cabinet press conference today.

Hipkins said when he became Labour leader he promised the Government would "do more to help families with the cost of living".

"With this in mind, Cabinet today also set a new minimum wage in line with CPI," he said today.

“Cabinet has agreed to lift the minimum wage by $1.50 – to $22.70 per hour. It will apply from April 1, 2023. The Starting-Out and Training minimum wage rates will be maintained at 80% of the adult minimum wage.

“In tough times, it’s critical to support those who struggle the most to make ends meet. Those on low incomes make impossible trade-offs between food and medical care, dry homes and a pair of shoes. These families need our support now more than ever and an inflation-adjusted lift in the minimum wage will means thousands of New Zealanders do not go backwards.

“We’ve tried to find the right balance. Analysis from the Ministry of Business Innovation and Employment (MBIE) that fed into our decision suggests this increase is unlikely to have a significant impact on unemployment, because it is broadly in line with existing average wage growth across the economy.

“The impact on inflation is negligible. In the 2022 Review, MBIE estimates that an increase of 7% in the minimum wage will have only a minor inflationary impact of 0.1% on the wages portion of GDP," Hipkins said.

The annual rise comes as Finance Minister Grant Robertson says inflation appears to have peaked - though its impacts will continue to be felt.

Earlier, National's finance spokesperson Nicola Willis said previous minimum wage increases in the Government's term had been a "great shame" and that there was a "very careful balance" involved.

"The great shame is that Labour increased the minimum wage so much in previous years, but what you've seen has happened is that they have not been able to increase it as much in these inflationary years because they know it will be passed on," Willis told RNZ.

"Every year National was in government, we increased the minimum wage - we think that is the right thing to do - but how much you do that by is a very careful balance.

"Because what we don't want is workers, on the one hand, being paid more, but on the other hand having to pay so much more in costs at the supermarket, on rent and other things that their wages just get eaten up."

At the end of January, the Act party said one way to improve business confidence was to pause minimum wage increases.

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