The 1984 Revolution: Why NZ should be grateful for Rogernomics
The Employment Contracts Act deregulated the labour market and drew massive union protests, but has largely endured. Photo / Stuff
The 1984 election, 40 years ago this month, marked a momentous shift in direction for a country on the brink of bankruptcy. In this article, one of a multi-part Listener series looking at the political upheaval and economic and social effects of Rogernomics that continue to define New Zealand, Bryce Wilkinson argues that the country should be grateful that it had such a brave and competent government, like the Fourth Labour one, at such a challenging time in its history.
Forty years is a long time. Half of New Zealand residents today were born after 1984. Fewer still will have any memory of the events that led to the foreign exchange and constitutional crisis in 1984.
So, first, some background. The “good old days” of my youth were bleak by today’s standards. No retail weekend shopping. No wine in restaurants. The six o’clock closing time beer swill was no place for women.
The variety of goods in New Zealand was slim. As a high school lad, to buy multi-studded soccer boots I had to repeatedly visit the Post Office to buy the foreign currency. The limit per visit was a mere 10 Australian shillings. I eventually got enough to mail the cash to a Sydney sports shop. Now, we can order from anywhere with a few clicks of a mouse.
In 1984, I was 36, and newly appointed to the position of director of Treasury’s internal economics division, which was responsible for work on the economic outlook and macroeconomic advice. The latter encompassed monetary policy, tax policy, fiscal deficits and public debt.
Treasury had many talented staff, and not just in economics. For some years, it had recruited a stream of new graduates with good honours degrees. All my bosses were experts in economics, with wisdom and experience to boot.
The Reserve Bank also had quality people. This was a major blessing during the foreign exchange crisis. The bank ably bore the brunt of dealing with it.
In the early 1980s, Treasury intensively studied top thinking globally about economic policy. New Zealand was not doing well. Inflation, deficit spending and spiralling foreign currency debt were big problems.
We were extreme among prosperous countries for the stringency of our import and foreign exchange controls. Despite them, the government was having to borrow heavily overseas. New Zealand’s AAA credit rating was increasingly at risk.
To tackle inflation, the government in 1982 resorted to a comprehensive wage, price and rent freeze and capped interest rates. The freeze addressed symptoms, not causes. Treasury advised against it. The question of “what will happen to wage and price increases when the freeze ends” seemed to have only a grim answer. Pain was being deferred.