Transport Minister Michael Wood announced yesterday that the money — allocated in this year's Budget — would be spent over four years to lift base wage rates towards $30 an hour for urban services and $28 an hour for regional services.
A reduced bus timetable has been in place in Dunedin and Queenstown since July, the regional impact of a national shortage of about 800 drivers.
In Otago, there are 2000 people who do not work as drivers in spite of being qualified to do so.
Union president Alan Savell said the the Government plan sounded "great" and was recognition of the important work done by drivers.
"Any solution, be it wages or conditions, that will get drivers back behind the wheel, is more than welcome," Mr Savell said.
However, he also cautioned a step-by-step attitude.
The Otago Regional Council said in a statement at the end of September it had agreed to increase all its contract bus driver pay rates to the median wage of $27.76 per hour.
While he was confident the increase would come, he did not know when, Mr Savell said.
"Let’s get the $27.76 first, and then we can maybe celebrate the $30."
In a joint statement made yesterday, council chairwoman Gretchen Robertson and interim chief executive Dr Pim Borren said they were delighted with the funding announcement.
It would help the council and ratepayers to fund the pay increase to $27.76 an hour, the statement said.
This was a 17% increase, raising the hourly rate from the living wage set by the council earlier this year of $23.65.
“We’re happy that we are being supported with the potential of getting closer to $30 per hour next year,” Dr Borren said.
Mr Wood said bus companies had been forced into a "race to the bottom" situation in competing for the lowest-cost contracts to get business.
This was one of the reasons behind Fair Pay Agreements legislation, which allowed the negotiation of minimum standards of employment and wages to apply across an entire sector of workers, he said.
"Improving the conditions of drivers will make it easier to recruit and retain the workforce, allowing frequent and reliable bus services," Mr Wood said.
Waka Kotahi NZ Transport Agency would work with public transport authorities and operators to implement the policy in each region if they contributed to the wage increases, and continued to index wage rates.
The funding could also be used to support split-shift allowances of $30 an hour or penal rates of 1.2 times the hourly rate for work after 9pm.
New driver terms and conditions would be supported by the Sustainable Public Transport Framework, announced in August, Mr Wood said.
