For The Labourer is Worthy of His Hire
A Tiger on Your Tail?
In thinking about this opportunity to speak to you
this evening, it struck me how lucky we are to be living
in an era of explosive change. Winston Churchill's
remark about l9th century British Prime Minister Lord
Roseberry having the misfortune to live in "an age
of great men and small events" certainly does not apply
Today change is the norm, and fortune favours the
bold. From Eastern Europe to Latin America to South
Africa, those on the side of radical change are winning.
After decades of graveyard calm, the Australasian model
too is under assault. The challenge for today's leaders
in business and government is to rise to the level
of these events.
Decisive steps have been taken in New Zealand and
Australia away from fortress economies and the combination
of statist and welfarist policies that led to mediocrity
and stagnation. Jim Bolger and Mike Moore in New Zealand
and Paul Keating and John Hewson in Australia all offer
a similar vision of an open, internationally oriented
Australasia, successfully integrating into the Pacific
basin and the world economic system. Nor, as Alan Wood
recently observed in The Weekend Australian,
is there much disagreement about what is needed to
realise this vision:
- "... reduction of foreign debt, tariff cuts, low inflation,
structural reform, labour market reform, high productivity,
higher national savings, social cohesion and trade
and foreign policies aimed at promoting open global
and regional trading systems."
New Zealand seems to attract greater interest in Australia
these days. There are good reasons for curiosity. As
one New Zealand financial analyst recently observed:
- "These are worrying times. The pall of gloom and despondency---that comfortable insecurity blanket---that
New Zealanders have wallowed in for so long seems
to be lifting.
- "Most of the economic news this year has supported
an extraordinary notion: that the ailing New Zealand
economy appears to be on a recovery path."
Some of the government's leading critics in the business
sector---who attracted media coverage never warranted
by their numbers nor the quality of their analysis---have begun to recognise that the future for
their businesses and the economy may be bright.
The same phenomenon is apparent in the farm sector.
Most farm leaders, like most business leaders, backed
the changes of recent years but some, particularly
in the producer boards, kept demanding 'less theoretical'
and 'more pragmatic' policies. Thanks to the government's
steadfast resistance to such calls, the outlook for
agriculture is improving. One of the former critics,
Wool Board chairman Pat Morrison, was recently on record
- "The pain felt by farmers in the past eight years
might not have been in vain ... Never in his life had
agriculture had a better foundation realistic exchange
and interest rates, realistic levels of taxation and
labour market reforms that made New Zealand competitive."
To top it all off, a recent cartoon depicted Winston
Peters, the noisiest dissident within the government's
own ranks, as wanting to end his own life on the grounds
that Ruth Richardson might have been right all along!
I don't want to give you the impression that a universal
constituency for economic rationalism has suddenly
broken out. When he wrote to me about this meeting,
your president noted that there had been a substantial
effort in Australia to show that policies such as the
Employment Contracts Act had brought nothing but misery
and hardship, "the expected outcome of 'New Right'
policy." There are still plenty of economic irrationalists
and other lost tribes wandering around in New Zealand.
Ken Douglas, president of the Council of Trade Unions,
announced in the new year that:
- "In 1991 the last of Treasury, [Business] Roundtable,
Roger Douglas and Ruth Richardson's 'crackpot theories'
was discredited by the practical responses of the real
Prominent CTU member Bill Andersen, another adherent
of the 'true faith', warned against:
- "... the right wing Yeltsin forces that are working
hard to reinstate the 'free capitalist market' that
has wreaked so much damage on New Zealand and other
and professed his undying conviction that the "real
democratic socialist construction" would yet materialise.
Bill Andersen stands out as a member of a very select
group still able to believe that the Berlin wall was
built to keep the West Germans out.
And a like-minded academic, Pat Walsh of Victoria
University, declared that:
- "... there must be growing concern [over the impact
of the Employment Contracts Act] and other policies
of which it is a key component and their contribution
to the nation's progressive slide into a major depression."
What is to be done about such people? The answer is
nothing. We should preserve them as international treasures
whose scarcity value will increase as their numbers
plummet in all other parts of the world.
What these commentaries have in common is the fallacy
that the policy changes of the last few years in New
Zealand rather than the legacy of the last 50 years
of economic mismanagement have been the cause of our
problems. The key political difficulty is that the
government has still not got across to enough people
in the community an understanding of why we had become
an economic basket case and why New Zealanders had
no choice but to change. Naturally academics, remote
from the real world, are the last people likely to
be of any help in this task.
I was convinced that New Zealand had reached an economic
milestone when 14 economists from Auckland University
wrote an open letter to the government in mid-1991
deploring its action to reduce government spending
and the deficit in what they saw as the middle of a
recession. You will recall the similar warning by 364
British economists to Mrs Thatcher in 1982, almost
the exact time that Britain began its longest post-war
recovery. Our organisation was signalling an economic
upturn in the second half of last year, and sure enough
subsequent figures confirmed real GDP grew by 1.3 percent
in the September quarter.
I am looking forward to Auckland University's next
performance appraisal of its economics department staff.
As David Clark recently observed in the Australian
- "There is no proposition so nonsensical that at least
one professor of economics cannot be found to support
It goes without saying that views ranging from scepticism
to hostility about the path New Zealand has been following,
including its labour market reforms, go back a long
way. Even within the Business Roundtable, I remember
one member publicly declaring we had a "death wish"
for advocating wholesale changes to labour law. Radio
New Zealand's chief political reporter branded us "politically
naive". The vast majority of our members believed,
on the other hand, that the old labour model could
not work in the new economy, and that the only debate
was about the extent and timing of the creation of
better structures in which management and workers could
respond cooperatively to change.
Sceptics about reform also overlooked the fact that
public opinion, as revealed consistently in polls that
our organisation commissioned, was massively in favour
of letting workers make their own decisions about union
membership, choosing how to be represented and doing
deals with their own employers. Most of us had no illusions
that overcoming vested interests and translating that
support into political action was a long-run process---a minimum of 5 years, our advisers reckoned.
The H R Nicholls Society has had a similar long-term
view, and I am sure the rewards---to Australia
and Australians---are not far away in your case
either. Deep down I suspect most Australians now recognise
that your disappointing unemployment and productivity
statistics will not go away until changes are made.
Both the main Australian political parties are talking
labour market reform. Regrettably, as with the Labour
government in New Zealand, the limited scale and slowness
of changes which the present government is prepared
to contemplate mean that you're continuing to lose
I won't go into any detail about the developments
in the New Zealand labour market over the years leading
up to the Employment Contracts Act. They've been covered
at length in papers at previous meetings. Suffice to
say that a lot of positive change was occurring as
the economy reacted to deregulation and tight financial
policies, as the previous government removed itself
from involvement in industrial disputes and made some
limited changes to labour laws, and as employers and
their workforces got closer together to stay viable
and protect jobs. In this sense the Employment Contracts
Act was not a leap into the unknown but an opportunity
to accelerate a process that had been underway for
The tragedy is that it didn't happen earlier. If the
Labour government had moved quickly to free up the
labour market, curb its spending and reform welfare
arrangements, I believe the inevitably difficult period
of adjustment would have been halved, as would the
rise in unemployment. The blame for these outcomes
lies squarely with those in the previous government
who set their face against such changes and then opted
for a teabreak in the reform process.
By the time the present government came into office
in October 1990, the intellectual battle was over,
the business community was strongly behind radical
change, the government was clear in its thinking about
what needed to be done, and had won a clear-cut mandate
for labour market reform. Despite this, we endured
many weeks of fear-mongering and overblown rhetoric
from vested interests and the chattering classes
as the bill moved through Parliament. Hostility was
fanned in the media by claims that the reforms were
an attack on living standards rather than an opportunity
to raise productivity. It is interesting now to look
at the before and after situation in the light of these
utterances. To give you some examples:
- Editorials in The Dominion predicted
that New Zealand would be plunged into a "dizzying
industrial free-for-all". Columnist John Kennedy said
the Bill "will tear the community apart". The ABC in
Australia was promoting the same rubbish.
- The unions threatened industrial mayhem:
Ken Douglas warned that "the munitions factory is having
the chains taken off the door".
- A handful of traditionalist employers joined
in the union criticisms. Typically they wanted more
crutches and props to lean on; one large retailer complained
that "the bill would give workers too much freedom
of choice". Usually those companies were protected
by the system from competition and had never bothered
to manage their labour resources, and they wanted to
keep things that way.
- Many in the news media had a field day highlighting
these "splits in the employer ranks". They saw the
issue as the traditional battle between the employer
movement and organised labour, rather than between
vested interests on both sides and those who saw the
necessity to respond to competition in the open economy.
- Industrial reporters were typically opposed
to the Bill. Patricia Herbert of Radio New Zealand
described it as "a recipe for exploitation". Exploitation
in New Zealand is defined as paying someone less today
than yesterday even if the firm is under water and
the queue for similar jobs stretches halfway down the
main street. Even giving someone a job at a low entry-level
rate of pay can qualify as exploitation.
- Industrial relations academics---a group at risk
of having their human capital written off like many
industrial relations practitioners---provided
a range of dire predictions. Raymond Harbridge of Victoria
University said the Bill would lead to "a proliferation
of industrial disputes", Ian McAndrew of Otago University
said it would make "stable and sensible bargaining
between a firm and its employees virtually impossible",
and Don Clark of the Auckland Institute of Technology
proclaimed that the Bill was "unworkable" and would
need "serious amendment" within weeks of enactment.
- The Department of Labour---the equivalent of your
'fridge dwellers'---was opposed to the reforms,
and even the Reserve Bank said that they "may not engender
the rapid, beneficial outcomes (especially regarding
wage moderation) that may be hoped for".
- The Labour party opposed the Bill, making much of the
evils of voluntary unionism. Now its position is that
compulsory unionism will not be restored.
On the other side of the ledger, I recall the advice
to us of Professor Richard Epstein of the University
of Chicago Law School:
- "Once it is clear that the old hidebound ways of doing
business will result only in joint employer-employee
ruination, they will quickly pass from the scene. Most
employers and employees will quickly adapt to the change
in circumstances and model their behaviour to the new
environment in which production and competition count
for far more than the obsolete work rules by which
New Zealand labour has been hamstrung for so long."
Whose predictions were accurate?
Well, May 15 1991---when the legislation came
into effect---came and went, and there were no
reports of children being sent up chimneys or down
mines. This should have come as no surprise to any
genuine scholar of 19th century industrial history.
Dickens, although a confused social reformer, did not
share the Fabian view of a conflict of interest between
capital and labour. He urged:
- "... the bringing together of employers and employed
... whose interests are identical, who depend on each
other, and who can never be in unnatural antagonism
without deplorable results."
In all probability Dickens would have approved the
Employment Contracts Act, as would the Pope, according
to reviewers of the latest encyclical, Centesimus Annus.
Unfortunately the head of the Catholic Church in New
Zealand did not read the document---or if he did
he failed to understand it and declared the Act to
The Act has now been in operation for almost a year.
The first and perhaps the most pleasing thing to say
about it is that industrial relations are no longer
a headline issue in New Zealand. They have become de-politicised.
For this reason it is not easy to discover and generalise
about what has been going on at a national level---
employment contracts now have much the same status
as other personal and commercial contracts; they have
tended to become private rather than public property.
Nevertheless it is possible to build up a fairly clear
picture of what has happened---and it is a dramatic
one. As the National Business Review's industrial reporter---who was none too sympathetic to the changes---wrote late last year:
- "The only surprise of the nearly six months since
the Act was introduced is that so much has happened
so quickly. The widespread expectation of anything
up to 12 to 18 months of general inertia has proved
misplaced, as a radical reshaping of working conditions
has got underway."
So much for academic theories that the labour market
is sluggish in responding to change. People with international
business experience have commented that change can
be accomplished in New Zealand very quickly and I suspect
the same is true in Australia as well.
A brief listing of some of the changes goes something
- Occupational and multi-employer awards have become
virtually obsolete. The Engineers Union tried to promote
a revamped metal trades award, formerly a major document
covering thousands of employers, but found only thirteen
takers, none of them significant. The overwhelming
majority of collective agreements have been at the
level of individual enterprises, business units or
- The thrust has been to eliminate or reduce
uneconomic penal and overtime rates, change hours of
work, introduce performance-related pay based either
on output or skill levels, and scrap inefficient work
- There has been a big swing towards individual
contracts. Workers are again being recognised as people
with personal needs and aspirations rather than standardised
commodities. Virtually the entire workforce of 1,200
at Comalco's South Island aluminium plant are now on
individual contracts, only 5 percent belong to unions
and the unions are no longer active on site. All pay
is performance-related; there are no automatic across-the-board
increases. Such arrangements will continue to spread
provided people feel their interests are well served.
- Union membership has fallen rapidly. This
trend owes far more to worker choice than to any pressure
by employers. It is in line with international trends
when workers have freedom of choice. Staff in Lion
Nathan's Deka chain, a national retailer, were offered
a choice and 70 percent decided to opt out. The CTU
has lost 20 percent of its members and Ken Douglas
has predicted a loss of a further 20 percent in the
coming year, which would reduce the unionised section
of the workforce to around a quarter.
- Some unions, such as the previously significant
clerical workers union, have been wound up, others
have merged, new enterprise unions have broken away
from occupation---or industry-based unions, and
groups of workers have switched to other unions for
bargaining purposes. Unions are learning that they
must either serve the interests of local members or
wither away. The ability of central power brokers to
beat up on intimidated workforces or politicians has
- The Act is not anti-union but it does place
existing shop stewards and union delegates under pressure.
Many have failed to perform, with the result that new
bargaining agents have entered the market. Of the first
190 collective contracts involving over 20 workers
analysed by the Department of Labour, around half were
negotiated by agents other than unions.
- Contrary to all the predictions of industrial
disruption, strikes are at an all-time low. I expect,
however, that we shall see some last ditch efforts
to preserve the old order, particularly in the public
sector, before we settle into a pattern of nondisruptive
behaviour more like Switzerland and Japan.
- There have been fewer alleged cases of 'exploitation'
than might have been expected by some---confirming
that most employers are not inherently nasty---
and there has been no collapse in wages. There has
been a greater spread of settlements, but real wages
on average appear to have slightly increased.
- Industrial relations is no longer a separate
discipline. The prospect of actually having to manage
a workforce has been daunting to many managers. Middle
managers with a new set of skills have been in strong
demand. Often new agents have been needed to build
trust, overcome historical tensions and speed up the
transition to the new order.
The end result has been to shift the focus of decision-making
decisively to the local level. Managers and workers
have mutual incentives to demand better performance
of each other. The conflict model has been exposed
as irrelevant; the mould has been broken for all time.
Humpty Dumpty will not be put back together again.
Of course, some old habits are dying hard. In the
cleaning industry, the cleaning contractors have combined
to negotiate a national contract. This has been explicitly
organised with the union to ensure that collusion on
price in the service market is underpinned by collusion
on price in the labour market. Interestingly, the government-owned
cleaning company has stood outside this arrangement.
The chances of the cartel surviving for long in the
new environment are close to zero. To speed up the
process, scrutiny of labour market arrangements should
be brought within the scope of our Commerce Act.
Generally, however, such stories are few and far between
and accounts of the revolution which is occurring now
that the focus is at the enterprise level abound. A
Port of Los Angeles executive was reported last month
as saying the changes in labour conditions will place
New Zealand at the forefront of the world shipping
- "I have been astounded," he said. "It's been a real
eye-opener for me... You are going very well at the
moment but you guys are going to be great guns when
the economy picks up."
A recent story about a clothing firm in a provincial
town summed up for me what the Employment Contracts
Act is all about. The firm was a CMT (cut, make and
trim) operation, employing 50 staff, and 95 percent
of its costs were labour costs. It had been losing
money for more than 2 years and at the end of last
year the bank decided to pull the plug. The management
and staff decided to abandon standard wage rates and
to move to a piece rate system under which workers
would receive 65 percent of the CMT price. Within a
month, output had doubled, the firm was in profit,
the workers' jobs had been saved, instead of taking
home the award wage of around $320 per week they were
taking home around $430, and the company has had to
take on more staff.
We have seen the same kind of transformation in my
own company, Lion Nathan. In the Auckland brewery back
in 1983 workers used to drink on the job (as well as
before and after), there were mattresses on the floor
for them to doze off on, we had 16 complex awards which
expired in December and a strike before Christmas was
as predictable as Christmas itself. Today we have a
health and leisure centre for staff and families at
the brewery, no drinking, one enterprise collective
agreement, a thorough going commitment to training,
there have been no strikes for five years, our total
wage bill is down but our individual pay rates are
up, and productivity has increased by 300 percent.
A recent open day was held with shift workers acting
as tour guides. It attracted 8,000 visitors. Production
on the day was the highest in the history of the brewery.
The single biggest problem we have had to address
as a company in recent years is raising the quality
of management. In my experience real progress can only
be made with changing work practices when managers
accept the need for fundamental changes in their role.
Some have not coped. In Deka, for example, 20 percent
of store managers have been replaced, the impetus for
change often coming from shop employees. Even more
interesting, many of the new managers are being promoted
from the ranks of employees.
Today I spend two thirds of my time on people management
compared to next to nothing a few years ago. In those
days treating staff as people rather than commodities
bought on the basis of awards could make no difference.
We never bothered to actively recruit graduates. Chief
executives could get away with giving staff a ritual
vote of thanks in the last paragraph of their annual
report---if they remembered to include it at all.
In the new environment you have to worry about people's
aspirations, their training and their career paths
all the time because if you don't, you won't be competitive.
This year we have spent a total of $10 million on training,
much of it devoted at this stage to management. We
have to attract and keep smart, energetic, focused
people, provide them with authority and accountability,
and step them up with training to more complex jobs.
This is giving us higher output, and greater rewards
You can imagine what developments of this type mean
for overall economic productivity. Productivity figures
are the most important economic statistic. Productivity
growth determines a country's long-term economic health.
As recent newspaper articles in the United Kingdom
surveying the Conservative government's period in office
have observed, the most enduring legacy of the 1980s
has been the improvement in labour relations and productivity,
the curbing of trade union power and the fostering
of a supportive business climate, allowing British
industry to compete effectively once again.
The contribution of the Employment Contracts Act has,
as yet, barely shown up in the aggregate statistics
in New Zealand. It will come on top of the average
annual rate of growth of labour productivity of nearly
6 percent over the past 3 years. This compares with
OECD estimates of labour productivity growth in Australia
of 0.9 percent per annum over the period 1979-90. How
Australia proposes to achieve 4 to 5 percent rates
of growth with this rate of improvement in productivity
is something I am still trying to figure out.
The combination of low nominal wage growth, large
productivity gains and a lower currency due to cuts
in government spending and borrowing taking pressure
off monetary policy have brought about a much healthier
competitive position. The real exchange rate is now
at a level similar to that achieved after the 20 percent
devaluation of 1984, and the cost advantage relative
to Australia appears to be as great as 20 to 30 percent
in many activities. More importantly these gains, for
once, look sustainable.
The clothing industry story also indicates the role
of the new regime in preserving and creating jobs.
One recent report in a business magazine suggested
the Act was a failure because it had not restored full
employment a full 9 months after it had come into effect!
But to those not afflicted by such economic illiteracy,
the portents are promising. Employment is growing again
and the unemployment rate---which is much the
same as Australia's---declined marginally in the
December quarter, though it may rise again for a while
Forecasters are not expecting most wage increases
in the next couple of years to exceed 2 percent, and
in some cases wages are likely to decline. The labour
market is now much more sensitive to supply and demand.
The idea that there is a risk of wage blow-outs in
a deregulated and competitive market is nonsense. At
present, there is an ample labour supply and we are
seeing precisely the adjustments that occur in all
well-functioning markets to balance supply and demand.
Lower pay rates for new or less experienced employees,
for example, have become quite common. As the labour
market tightens and shortages appear in some skills,
industries and locations, competition between employers
for staff will force wages up. The more competitive
market will quite properly give priority to employing
the unemployed rather than grant wage rises to those
currently in work.
We still have a major problem at the low skilled end
of the labour market. As one Wellington manufacturer
recently put it:
- "In my opinion, most of the unemployed [in New Zealand
now] are there because they have, in effect, priced
their labour off the world markets."
We've got over the calls for manipulated currency
depreciations from people who didn't realise that if
depreciations count for anything it is as a means of
cutting real wage costs---in a very blunt and
inefficient way. Instead there have been renewed calls
recently for wage subsidies to get the young unemployed
into work. What these at least recognise is that the
combination of the prevailing pay rates and the level
of productivity of these workers makes them too expensive
to be hired without subsidy. However, wage subsidies
do not create more employment overall but only shuffle
round the unemployment pack. We would do far better
to acknowledge honestly that the price of labour for
this category of workers needs to fall, and to supplement
incomes where necessary through the tax and transfer
There is still a great deal the government can do
if it wishes to get serious about tackling unemployment.
Wages for the low skilled are kept well above social
security safety net levels by the statutory minimum
wage, thus causing a loss of many thousands of jobs.
The absence of any time limit on the dole (following
which people might be obliged to undertake training
or qualify for restricted assistance) reduces the pressure
on wages to adjust to competitive levels. The new Employment
Court is continuing to operate on a basis which is
fundamentally at odds with the freedom of contract
philosophy of the new Act; it's becoming known as the
Unemployment court because of decisions which are raising
the costs and risks of employment. In the public sector
we still have national awards for groups such as teachers,
nurses, police and the fire service which are rigid
and unresponsive to the excess supply of people qualified
to enter those occupations. Editorial writers and other
commentators are now calling for these to be scrapped
in favour of the more productive arrangements operating
in the rest of the economy. And there is a raft of
possible micro reforms ranging from trans-Tasman shipping
to occupational licensing to privatisation of government
businesses which could lower costs and create jobs.
We have yet to see whether the government is capable
of pressing on and capitalising on the gains it has
made. So far, and despite some shortcomings, it has
done a good job, and this is starting to be recognised
with a recovery in the polls. It is well within reach
of its targets of achieving inflation below 2 percent,
single digit home mortgage interest rates and a growth
rate of 3 percent by the end of its term. We're seeing
a lift in retail sales, dwelling permits and commodity
prices; rising business confidence, capacity utilisation,
investment intentions and export growth; a fast improving
trade balance; and strong rises in the share prices
of a number of companies that are benefiting from the
improved economic fundamentals. I'm not aware of any
economy that has failed to grow after successfully
curbing inflation. And the New Zealand economy has
always moved strongly when it achieved---temporarily
in the past---a competitive edge.
But there is at least another difficult year ahead
before the improvements are likely to be apparent to
the community at large. This remains the key political
problem. Can the government dig deeper where it has
not yet done enough and stay on course for long enough
to persuade the electorate that the gains are worth
the pain? Will we move forward to consolidate our position
now that things are looking up or will we ease off
and still be taking in water when the next wave hits
us from offshore?
The risks are not so much of policy reversals or U-turns
as of a loss of momentum, teabreaks, and a reluctance
to take on controversial issues which upset powerful
interests. This seems to be happening in the United
Kingdom, where some in the Conservative party were
fearful at the time of the leadership change that they
had sent a boy to do a woman's job. In New Zealand
the government has been putting out signals in recent
weeks that "the hard decisions are behind us", "we
are now in calmer waters", "this year's budget will
contain no surprises" and so forth. Too often in the
past these have been code words for complacency or
policy paralysis which has brought us repeatedly back
to the economic brink.
The reality is that New Zealand is still a very vulnerable
economy. We still have a very high debt burden and
a fiscal deficit that is running at over 3 percent
of GDP, much of which is structural. If it were to
remain at that level for the next 2-3 years, a further
downgrading of our credit rating would be a near certainty.
And despite the evidence of massive improvements in
performance in all activities that have been deregulated
and opened up to competition, we still have a fresh
argument every time vested interests in a new one are
threatened. At present we have one such debate going
on over health sector reforms, and the howls of outrage
from education unions facing moves away from national
awards and automatic promotion to local contracts and
performance pay are matched only by those from the
producer boards whenever questions about their statutory
monopolies are raised. And there must remain real concerns
about the corrosive effect of years of welfarism and
the acceptability of not working. The welfare state
could still take the economy out.
While arguments about these issues go on, the rest
of the world is not standing still. Even Argentina,
a country which fell further and faster than New Zealand
and Australia, is now deregulating, privatising, dissolving
agricultural producer boards and reforming labour laws---and under a populist president. We travelled
a long way down the protectionist road and we got what
we asked for. There is still much to be undone.
This point was made by The Economist in respect
of Britain in a recent leader:
- "The plain truth is that Britain still needs a lot
more deregulation, competition, opportunity; in short,
a lot more economic radicalism."
I believe many New Zealanders accept that that truth
holds for us too. There is no constituency for turning
back the clock on GST, tariffs, corporatisation of
state enterprises, shop trading hours and a host of
other reforms that were fiercely contested at the time.
I am sure the same will be true of the labour reforms.
The Labour party has dropped its idea of going back
to a "negotiated economy" or compact---a model
once described as a rusty version of an Accord.
Opinion polls have indicated strong support for lower
government spending, the 0-2 percent inflation target
and greater choice and competition in education. A
recent survey by Massey University reported that New
Zealanders have over twice as much confidence in business
and industry as they do in parliament and government
departments, and that 89 percent are very happy or
fairly happy with their lives.
These are promising findings. Politicians should remember
them when they are getting beaten around the ears by
lobbyists and vested interests who are given so much
airspace on our television channels and national radio
The fact that New Zealand has had a hard time of it
in recent years should be no surprise. We are not,
as many would have it in Australia, an experiment that
failed---unless they are thinking of the experiment
of the last 50 years. By the early 1980s, as John Stone
used to point out, New Zealand was well on the way
to becoming a banana republic, whereas Australia has
only more recently contemplated that prospect. It is
no exaggeration to say that the economic transformation
needed was approaching the scale of Eastern Europe.
The previous government started out boldly, accomplished
a lot, but never got a coherent programme together
and ended up by throwing in the towel. The present
government has had the courage to tackle the main outstanding
issues, and its policy framework is now fundamentally
It has been hard for many people, though nothing like
the traumas Eastern Europe is facing, and we are
not yet an economic tiger, just as we are not world
champions at cricket. But recent experience with cricket
should be a reminder to Australians not to write New
Zealand off. Provided we don't lapse into complacency,
I am quietly confident that we shall contribute a lot
more to the trans-Tasman relationship over the next
Why HR Nicholls?