Politicians tend to close their minds as long as they can to the need for structural reform, because they believe that decisive action must inevitably bring political calamity upon the Government.

As their country’s economy drifts closer to crisis and structural problems are no longer deniable, they persuade themselves that action within a relatively short time of an election would give the advantage to their political opponents.

They convince themselves that this stance is justified by pretending that the opponents are deceitful and interested only in their own gain, not the country’s well-being.

When the economic situation is serious enough to arouse public concern, in many cases, both parties may seek to evade the issue by offering electoral bribes to distract voters from the real problems.

The current South Australian election is a typical example. The Liberals offered a package subsidising interest rates on home mortgages. The Government trumped it with a still bigger package.

This paper argues the contrary case: Political survival depends on making quality decisions; compromised policies lead to voter dissatisfaction; letting things drift is political suicide.

My aim is to show that politicians can take practicable and politically successful action to benefit the nation, without waiting until economic or social disaster has forced their hand.

It is no part of my intention to argue that the Government got everything right in New Zealand since 1984. We need to learn from our own inadequacies, as well as from our considerable successes.

Where we implemented quality policies in that period, the polls show on-ongoing voter approval. Wherever we stopped short of quality, the polls show rising disapproval from the public.

To assist overseas delegates, this section very briefly summarises New Zealand’s economic situation in 1984, and the progress made since then to achieve better structural balance.

In the decade to 1984:

In the 25 years to 1984:

Those adverse trends culminated in a run on the New Zealand dollar during the July 1984 election compaign. Labour took office with the doors of the banks closed to foreign exchange dealings.

After the 1930s depression, New Zealand aimed to insulate itself from international economic shocks and boost urban employment by raising substantial barriers against international competition.

Manufacturing subsequently developed a high cost structure, which precluded it, in large degree, from export activity. The costs thus imposed on the economy, over time, reduced the competitiveness of our agricultural exporters.

Those problems were intensified by British entry into the EC and the oil shocks of the 1970s. Balance of payments problems became endemic.

Instead of facing the real problems, the Government began to subsidise farmers to compensate for those costs, and subsidised uncompetitive manufacturers into the export business.

Public money was used to underwrite multi-billion-dollar energy projects, which the private sector had correctly rejected as bad commercial risks. Returns proved to be zero or negative.

In 1982, as the imbalances worsened, prices, wages, interest rates and rents were all subjected to direct controls by a conservative Government in a vain attempt to tell the tide to turn back.

The distortions in New Zealand’s resource allocation, which had caused our problems in the first place, were thus compounded. By 1984, the situation was no longer sustainable, and a run on the New Zealand dollar brought it to crisis point.

The new Labour Government set aside traditional myths and went back to fundamentals.

New Zealand is a trading nation. We earn our living standard by selling for commercial profit against competition on the world market.

To achieve that, our producers had to be just as efficient and innovative as their competitors. New Zealand needed economy-wide reforms designed to: