Sir Roger Douglas
In July 1984, [I was 2 months old then] "New Zealand was well on the way to becoming a poor nation. The newly-elected government, the Labour Party accepted the challenge to reverse the process.
Prior to 1984, the New Zealand government owned and managed a major portion of the nation's economic enterprises. The rest, it constantly regulated, often by decree. High taxes, excessive borrowing and deficit funding produced the nation's income which the State then handed back to its own employees and to various vested interests.
The change process began with the unwinding of privilege. The government moved to identify the best uses for the nation's resources. It became consumer-driven. The question asked, what was in the best interests of the consumer? The answer was simply, competition. A competitive, risk-prone environment is no place for government, so the Labour government, privatised.
The Labour government wanted to create an economic environment in which individuals could become self-reliant. They wanted citizens to have the opportunity to display and develop their abilities and to work within a system which provided fair rewards and reasonable penalties according to individual contributions.
For a decade, 1985 to 1995 though the years were difficult New Zealanders and New Zealand enterprise in particular accepted the challenge. An enterprise economy became established which welcomed growth, progressive thinking, enlightened investment and an outward looking view of the world.
This was an 'astonishing experiment' and New Zealand was left "in the best shape it had ever been in" In those 10 years, the country had gone from a deficit equivalent to 10 per cent of GDP (Gross Domestic Product), to having a surplus of 8 per cent of GDP.
The birth of this new 'commercial infrastructure', was created. The social and educational infrastructure, however still needed building.
The reforms affecting the New Zealand economy had been so extensive over the ten year period, from reform of the tax system, corporatisation and privatisation of former state trading operations, abolition of controls over interest rates, floating of the exchange rate, the Fiscal Responsibility Act, the Employment Contracts Act, and many more. One could not single out any one single measure as in some way which of the reforms was the 'most important' In my research, I think all these reforms had huge beneficial effects upon the perfomance of the New Zealand economy in those former years.
Within that total change process, the Reserve Bank Act of 1989, occupied a special place. That legislation - with its requirement that monetary policy focus on the single objective of achieving and maintaining price stability with its grant of operating autonomy to New Zealand's central bank and with its requirement that government must inform the public precisely what its intentions for the inflation rate was - what profound effect not only on the inflation rate in New Zealand but also on New Zealanders' confidence about future inflation rates.
New Zealand had one of the worst inflation records in the OECD, during the seventies and eighties, but had moved to being one of the best inflation performers in the nineties. From having 10 year bond rates fully 10 percentage points higher than comparable bonds in the US in the mid eighties, the New Zealand government was borrowing for 10 years at rates below those at which the US Government was able to borrow at times during the first half of 1994. Both these achievements would not have been possible without the Reserve Bank Act of 1989.
The Reserve Bank itself, was not without its crtics of course, but it was significant that some six years after the Act became law, 95 out of a total of 99 Members of Parliament belonging to political parties were committed to maintaining the Act in its present form, while in 1994 Parliament passed the Fiscal Responsibility Act with the explicit intentions of making fiscal policy as accountable and transparent as monetary policy had become.
New Zealand enacted the western world's most compelling economic success story. It effectively rebuilt its economy. International magazines such as the The Economist and Fortune described the country's commercial renaissance, as the 'New Zealand experiment' and the 'New Zealand experience'.
Investors, politicians, policy makers and many of the world's most successful enterprises today consult the architects of this programme for advice and inspiration. In the fields political, economic and commercial endeavour New Zealand sometimes reluctantly but nevertheless consistently, embraced the spirit of change and innovation which was a prerequisite to competing successfully in the rapidly emerging information age.
The introduction of a floating exchange rate, the deregulation of the finance market, the reconstruction of the nation's agricultural sector minus its producer subsidies, the overhaul of the manufacturing industry underpinned entirely by protective tariffs and duties, a taxation revolution, the privatisation of former stse-owned enterprises, the relaxation of overseas investment controls, the unshackling of an impossibly controlled labour market, the liberalisation of trading hours and the introduction of some fiscal management legislation, which according to The Economist, " the best anywhere in the world".
The rebuilding was not however, without pain and some casualties. Key sectors such as health and education were still embroiled in the difficult process of transition - as they are in virtually in every country upon the global estate. These were the truly complex issues of modern society - the politically sensitive and high cost services of caring for the body and educating the mind.
The sources of the infrastructural overhaul brought with it, other dividends. New Zealand, always sensitive to its global minuteness and remoteness, responded positively to its new-found international recognition. New Zealand began achieving on the global stage in more arenas than commercial endeavours. The nation's citizens consistently and to this day also notch up personal achievements in everything from the international sporting arena - The national football team, the All Whites (acknowledged with the country's highest sporting award, the 'Halberg award') and also 2 Knighthoods for the national coach, Ricki Herbert and All White captain and Blackburn Rovers English Premier League) club captain, Ryan Nelsen...My favourites as well as Siggy (Ben Sigmund) who won the Best Player award from his club the Wellington Phoenix Football Club...There have been many KIWI's who have preceded the above forementioned, I pay homage to them as well.
I would like to conclude (because by now your bored, and my brain and finger tips are beginning to part ways), with a statement made by Aubrey Begg, The Labour MP for Awarua, 1972 - 1975...
"Free marketing and deregulation are not right-wing policy stances. They are the policies of those
who believe in individual liberty and the availability of choice in a competitive environment.
Right and left wings are of the same political ilk. They believe in controls and dictatorial
government. There was, for example no difference between...Hitler and Stalin".
Hei kona me Po Marie kia koutou katoa (Stay well and Good evening to you all).
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