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dismantling of the Australasian model

converting New Zealand funds and credits to foreign currency, and then back to a larger
quantity of New Zealand dollars.
Remember Andy Krieger?
The reformers argued that the speed with which the reforms were made was due to the fact that New
Zealand had not adjusted to Britain’s abandonment of the empire, and had to move quickly to ‘catch
up’ with the rest of the world. Douglas claimed in his 1993 book Unfinished Business that speed was a
key strategy for achieving radical economic change: "Define your objectives clearly, and move towards
them in quantum leaps, otherwise the interest groups will have time to mobilise and drag you down".
Political commentator Bruce Jesson argued that Douglas acted fast to achieve a complete economic
revolution within one parliamentary term, in case he did not get a second chance. The reforms can be
summarised as the dismantling of the Australasian model of state development that had existed for the
previous 90 years, and its replacement by the Anglo-American neoliberal orthodoxy based on the
monetarist policies of Milton Friedman and the Chicago School. Remember this??
The financial market was deregulated and controls on foreign exchange removed. Subsidies to
many industries, notably agriculture, were removed or significantly reduced, as was tariff protection.
The marginal tax rate was halved over a number of years from 66% to 33%; this was paid for by the
introduction of a tax on goods and services (GST) initially at 10%, later 12.5%, and a surtax on
superannuation, which had been made universal from age 60 by the previous government.
Furthermore in New Zealand, as in Australia, it was the Labour Party that initially adopted "New
Right" economic policies, while also pursuing social liberal stances such as decriminalisation of male
homosexuality, pay equity for women and adopting a nuclear-free policy. This meant temporary
realignment within New Zealand politics, as "New Right" middle-class voters voted Labour at the New
Zealand general election 1987 due to approval of its economic policies. At first, Labour corporatised
many former government departments and state assets, then emulated the Conservative Thatcher
administration and privatised them altogether during Labour's second term of office. However,
recession and privatisation together led to increasing strains within the Labour Party, which led to
schism, and the exit of Jim Anderton and his NewLabour Party, which later formed part of the Alliance
Party with the Greens and other opponents of New Right economics.
However, dissent and schism were not to be limited to the Labour Party and Alliance Party alone.
During the Labour Party's second term in office, National selected Ruth Richardson as Opposition
finance spokesperson, and when National won the 1990 general election, Richardson became Minister
of Finance, while Jenny Shipley became Minister of Social Welfare. Richardson introduced
deunionisation legislation, known as the Employment Contracts Act, in 1991, while Shipley presided
over social welfare benefit cuts, designed to reduce "welfare dependency" - both core New Right policy
initiatives.
In the early nineties, maverick National MP Winston Peters also came to oppose New Right economic
policies, and led his elderly voting bloc out of the National Party. As a result, his New Zealand First
anti-monetarist party has become a coalition partner to both National (1996–1998) and Labour (2005- )
led coalition governments. Due to the introduction of the MMP electoral system, a New Right
"Association of Consumers and Taxpayers" party, known as ACT New Zealand was formed by ex-
Labour New Right-aligned Cabinet Ministers like Richard Prebble and others, and maintaining existing
New Right policy initiatives such as the Employment Contracts Act, while also introducing US-style
"welfare reform." ACT New Zealand aspired to become National's centre-right coalition partner, but
has been hampered by lack of party unity and populist leadership that often lacked strategic direction.
As for Labour and National themselves, their fortunes have been mixed. Labour was out of office for
most of the nineties, only regaining power when Helen Clark led it to victory and a Labour/Alliance

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