Hon Sir Roger Douglas
Wellington
1 May 2004
It is not my intention this morning to dwell at any length on the economic
policies put in place during the First Term of the Labour Government. These are
generally well-known and if not, there is plenty of literature available.
Rather, I intend to spend most of my time on how we managed to achieve what
we did.
What was important in political and economic terms and to some extent
what was not particularly important.
Political Aspects
- The first important point was that by 1984 there was general agreement
within Labour's economic Caucus team about the programme of reform required.
This agreement did not extend as far as the New Zealand Labour Party Council
and some Caucus members such as Anderton were violently opposed to the policy.
- Treasury and the Reserve Bank with little to do under Muldoon but tinker
had both worked hard to develop a comprehensive economic strategy. In some
ways, more importantly, what needed to be done to implement that strategy.
- The crisis
- By 1984 New Zealand was without doubt in serious
trouble:
- New Zealand's twin deficits were massive.
- Our foreign exchange reserves had been squandered.
- Our creditors were seriously worried about us.
- This presented the new government with the opportunity to implement the
policies we already knew were needed - we were further helped in this process
by the fact that some significant lobby groups were in general agreement (e.g.
Federated Farmers and the New Zealand Roundtable) with what we intended to do.
- The crisis and the way Sir Robert Muldoon behaved on the Monday
immediately after the election allowed David Lange to gain almost instant
credibility in his role as Prime Minister of the country, the comparison of
the two men was there for all to see that Monday night.
- The government was blessed by a young, able and generally remarkably
united Cabinet whose motto became: "We will do the right thing" no matter
what. This also turned out to be remarkably good politics.
- Another important factor was the almost 100 percent agreement between the
members of the finance team of Caygill, Prebble and myself on what needed to
be done and how best to achieve it. This proved to be the case on an ongoing
basis during our first term in government.
- Add the active involvement of Lange and Palmer on some important issues
(e.g. SOE legislation) also de Cleene (on tax) and you had a formidable team.
The importance of the process can not be underestimated - most issues had been
thoroughly tested before they went to Cabinet and then Caucus.
- My practice of having members of my staff including my Press Officer,
Bevan Burgess sit in on the decision making process also helped in that they
understood not only what we were doing but why, including why we favoured one
particular option over another. This helped immeasurably with presentational
aspects of the policy changes.
- Undoubtedly Lange's ability to communicate with Labour voters was at times
vital - his work at the summit also proved invaluable in setting the scene for
my first budget in November 1984.
- Educating or generally bringing up to speed the 17 new members of the
Labour Caucus was another important factor in our success during those first 3
years. A number of those new members heavily influenced by Anderton started
off in opposition to the general direction the government was taking on
economic issues - after attending a number of "Wednesday Club" meetings where
they were exposed to the arguments supporting the policy direction the
government was taking, a substantial majority came wholeheartedly on board.
The work of Peter Neilson and David Butcher among backbench MPs was
particularly important.
- Less important from my perspective but perhaps vital for some was the
nuclear ships issue. All I can say is that with or without, I would have
adopted the same economic approach. Whether the nuclear ships issue distracted
potential critics and made my job easier I will leave for others to make a
judgement.
- The first budget set the programme for the next 3 years, necessary because
of the length of time needed to introduce some new measures e.g. GST
From my perspective, the following approach was important in establishing
economic credibility:
- Clarity about what we wanted to achieve in various areas was critical to
making progress. In other words:
Goals were primary. Until one forms some coherent view about your
destination, it is pointless to plague oneself with questions about how to get
there. In most cases, setting the right goals was not the real problem.
Rather, adopting the means capable of achieving those goals was the real issue
before us.
Having a clear vision of what we wanted to achieve enabled us to think in
new and fresh ways. Without goals the danger is that a particular means can
come to be seen as the primary objective of the exercise, not simply one of
several means to achieve the established goals e.g. I use a current example to
illustrate the point.
For many, tax funded schools and hospitals are the only means of providing
universal service and as such are seen as the primary objective of the
exercise, not quality education or health care for everyone, the means have
become the end.
In the economic area we avoided that trap.
