Updated: Jul 19, 2020
This is a three part series discussing how the Labour Government of 1984-1990 came to power in the election of 1984 .
Artwork by Julia Jarzyna.
When the fourth Labour Government in New Zealand’s history came to power after a long spell of living in the shadow of the conservative National Government, reforms shook the country to its core. Personally, the effects of these reforms I believe still linger today, but that is for another time.
Today I would like to continue my analysis of how the Fourth Labour Government won the election in 1984. I recently discussed the first reason for its victory (see here), I now discuss my second reason behind this triumph.
The deteriorating economic situation in New Zealand played an important role in National’s eventual defeat at the 1984 general election.
Upon being elected in 1975 the National Party failed to manage the economic consequences of both the first ‘oil shock’ of 1973 and the implications of the United Kingdom membership of the European Economic Community. Between 1975 and 1984, New Zealand terms of trade had fallen by 34 percent, while inflation had risen to 21 percent in 1984. By 1983 the unemployment rate was 10 percent compared to 1973 when it had been less than 1 percent. When the UK joined the EEC a market for 40 percent of New Zealand’s agricultural exports was effectively closed. GDP growth per capita averaged below 1 percent during the 1976-84 period and in addition, the agriculture sector saw significant decreases in farm income between 1973-83 of up to 40 percent.
By 1984, the New Zealand electorate had grown tired of the Muldoon government’s “authoritarian approach to the management of the economy” and its reliance on more protectionism and interim measures. In order to reduce inflation rates, for instance, the National Government implemented a wage/price freeze in 1982, an approach at odds with the National Party’s values of “individual freedom and private enterprise” which became a recurring theme in National’s approach to managing the economy. Moon observes Muldoon’s economic management were “the actions of an autocrat vainly trying to hold back the inevitable”, the inevitable being the economic problems New Zealand would soon face. That assessment is shared by historian and political scientist Gustafson who argued that the difficulties the Government was stuck and lacked new ideas or initiatives to manage emerging economic risks, such as the threat of hyperinflation.
Other economic challenges included the wage-price freeze and rising interest rates which imposed additional burdens on home-owners. This resulted in regulations 14 for maximum interest rates at 11 percent, while interest rates for “second mortgages” were to remain fixed by the central Government at 14 percent.
These controls on interest rates, as well as wages and prices, were resisted across the political spectrum, and particularly by the Government’s own supporters. There was widespread resentment and frustration at this seemingly “out of touch” government that had “deserted its fundamental principles of individual freedom and private enterprise”.
Many New Zealanders were drawn to opposition leader David Lange who stated, ‘this country hasn’t had a policy from the National Government since 1975.” The Labour Party understood that to sustain its increasing electoral support it simply needed to play up the Government’s perceived lack of ideas. Consequently, rather than explicitly stating its own economic agenda to counter National’s, it deliberately focused its manifesto on social and foreign policy issues, rather than on economic policy. Economist Brian Easton underlines this point observing that ahead of the 1984 election, the Labour Party produced “a substantial document of 103 pages” of which “only 5 pages [were] on ‘Economic Policy’”. Unsurprisingly the Labour Party’s official history fails to mention this point, though it was widely commented upon at the time.
In fact, the Labour Party’s own approach to the economy was undergoing its own transformation. Labour’s shadow finance minister and eventual Finance Minister, Roger Douglas, did not intend to resuscitate the economy through the approach taken by “previous Labour governments” because this was already the approach being taken by the Muldoon-led government. A more radical approach, focused on a greater emphasis on the market and on neo-liberal economic policies, would be adopted. In fact, it was unnecessary in purely political terms to articulate an alternative economic agenda given the disillusionment with the National Government’s approach. There was a sense in the electorate that almost anything would be better than the existing economic approach.
Labour was therefore able to present itself as the opposite of the Muldoon government, without needing to go into details, thereby getting the necessary support that would eventually win them the General Election of 1984.