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However, his praise came with some criticism.
''While the jobs part of the policy would be unlikely to grow more jobs - with difficulties including more taxes, interventions in monetary policy and more rigid employment laws - the skills part is more promising,'' he said.
Labour leader David Cunliffe announced the policy in Christchurch, saying Labour would create an employment and skills strategy in consultation with employer groups and unions.
Labour would continue the New Zealand Apprenticeship Scheme which began last year and create new apprenticeships in the creative, ICT and conservation sectors.
The already announced $183 million youth employment package would make sure 24,000 young Kiwis under the age of 20 were in work, education or training.
It included the Kick Start Apprentices which would pay a $9100 subsidy, the equivalent of the dole, to employers willing to offer young unemployed people a permanent job.
The $200 million regional development fund would partner government with communities in projects to boost jobs and create an economic change in their areas, Mr Cunliffe said.
Mr O'Reilly said Labour's skills policy included some overly restrictive and unnecessary elements but it did focus on some key areas for New Zealand's skill needs.
The proposal for intensive support for young people who had been out of work or training for six months after leaving school would help address the key problem of numbers of young people not in employment, education or training, he said.