1984, Roger Douglas: Strong medicine for the economy

Roger Douglas (right) was the driver of Labour's economic reforms; PM David Lange (left) later distanced himself from them. (Paul Estcourt, NZ Herald Archive)

At a snap election the National Government of Sir Robert Muldoon was swept from power to be replaced by the third of New Zealand's great reforming governments.

But unlike Seddon's Liberals of the 1890s or the Savage Government in the 1930s, the Labour Government of the 1980s aimed to reduce rather than increase the role of the state.

It was led by the larger-than-life figure of David Lange, but the real driving force of the reforms was finance minister Roger Douglas whose name became synonymous with the controversial changes: Rogernomics.

Douglas' agenda was to tackle New Zealand's economic woes - high inflation, big budget deficit, overseas debt and an overvalued currency - with the strategies devised by the neo-classical school of economics.

In practice this meant de-regulation, an end to tariffs, subsidies and tax breaks as well as the privatisation and sale of state assets. It also meant the introduction of GST, the biggest tax reform since PAYE was introduced in 1957.

For embarking on this ambitious programme to transform and revive the economy, the Herald probably would have chosen Roger Douglas as New Zealander of the Year for 1984. It described his budget that year as "meaty", but there was a note of caution on GST.

"Such a consumption tax, not by nature progressive, clearly hits the poor hardest," it said. "That effect, plus the intention to apply much of the yield to income-tax relief for richer citizens, may reinforce Mr Douglas' reputation as a right-winger of whom the original National Party might be proud."

IN HINDSIGHT

Roger Douglas later went to form the Act Party, focusing on free market economics. (NZPA)

The question of social fairness remains at the heart of the controversy about Rogernomics.

Although the economy is in much better shape than when Labour took over in 1984, critics argue there has been no trickle-down and the gap between rich and poor is growing.

Specific arguments for reversing Rogernomics in the 21st century have included that GST should be removed from food, that the Reserve Bank should be used to raise employment and reduce the dollar's value as well as control inflation and that asset sales should be stopped.

Yet the essential pillars of Rogernomics remain firmly in place: the Reserve Bank Act, free trade, the floating dollar.

With hindsight, then, Roger Douglas is still our New Zealander of the Year for 1984.
His reforms may not be viewed with the same kind of affection that applies to the Savage and Seddon changes, but there is no denying their profound influence in shaping the economic and social landscape we live in today.

From the Herald archives:
'Leader who enriched the nation', NZ Herald online

Further reading:
'Economy: Roger Douglas, July 1984', Te Ara Encyclopedia of New Zealand

'Treasury: Roger Douglas reading the Budget, 1984', Te Ara Encyclopedia of New Zealand

Further viewing:
Revolution, Television, 1996 (Documentary, Series), NZ On Screen