The Muldoon Legacy

Chapter 1 illustrated how New Zealand’s economic performance deteriorated sharply in the wake of the 1973 oil-price shock, while arguing that, relative to other developed economies, it had performed poorly over most of the post Second-World-War period. The underlying weaknesses in the economy, which had been apparent for some time, were sharply exposed by the oil price rise and the international recession that followed. In order to understand why such a radical reform programme was undertaken by the fourth Labour government after 1984, and indeed why there was fairly widespread support for such a programme, it is necessary to give some consideration to the policies pursued during the previous decade. Following the first oil-price shock in 1973 the budget deficit increased significantly, as fiscal policy came to be identified as a means of shielding the economy from adverse external developments, and as a means of sustaining employment in the face of such shocks. Disillusionment with the policies of the incumbent Labour government resulted in the National Party being swept to power in the November 1975 election. The National Party was to remain in power for the next nine years and its leader, Sir Robert Muldoon, was to exercise a dominant influence on economic policy over much of that period.