New Zealand's free market nig.htmare


By Peter Boyle

The attempt of the embattled Victorian Labor government to scare voters with accounts of the consequences of the New Zealand economic experiment has raised a dispute: How bad (or good?) are conditions in New Zealand really?

According to the World Economic Forum (a business research group based in Singapore), New Zealand is the developed economy with the "government policy most conducive to competitiveness". New Right politicians see this as approval for the policies of National Prime Minister Jim Bolger (who polled a record low 7% support just one year after he was elected).

But in this free marketeers' nirvana, most New Zealanders are not celebrating.

* Official unemployment is 10.8%, and more than 25% among Maoris and Pacific Islanders. The NZ Reserve Bank expects unemployment to rise to as high as 14% in the next few months.

* Pensions and unemployment benefits have been slashed by NZ$15-$27 a week. People who lose their jobs have to wait 10-26 weeks before they can get the dole.

* Public housing rent increases have left some poor families NZ$36-$72 a week worse off. Public hospital patients have to pay NZ$50 a night.

* A large chunk of the public sector has been privatised and the rest ruthlessly cut back.

* The top income tax rates have been reduced from 66% to 33%, while the poorest have been the hardest hit by a 12.5% consumption tax introduced by the last Labour government. The Nationals are now

considering raising the tax to 15%.

Paul Frater, one of New Zealand's leading economic forecasters, told the Melbourne Age that the Kirner government's TV advertisements are accurate in depicting the plight of many New Zealanders but omit the fact that the previous Labour government shares the blame.

New Zealand's "free market" experiment began under the Lange Labour government. A program of deregulation and privatisation was begun in 1985. Labour brought in the consumption tax and implemented the tax cuts for the rich.

When an angry electorate threw Labour out in 1990, the National government deepened the New Right experiment. In December 1990, it introduced the Employment Contracts Act, which abolished awards and forced workers to negotiate employment contracts with their employers. Only a minimum wage of NZ$245 (A$174) for a 40-hour week (no minimum for workers under the age of 20), five days a year for sickness, bereavement or domestic needs and three weeks' annual leave are guaranteed by law. Everything else has to be renegotiated with employers.

There is no recognition of unions — only "bargaining agents" who could just as easily be commercial agents or lawyers. Union officials cannot even enter workplaces without the employer's consent.

The combined effect of welfare cuts and the Employment Contracts Act has been estimated by the NZ opposition to be a 30% cut in the spending power of most working people.

Some workers are being forced to accept pay cuts or to work more than 40 hours a week with no penalty rates. Privatised Air New Zealand, for instance, sacked 160 catering staff when they refused to accept a 30% pay cut.

The Council of Christian Social Services has begged the National government to reverse its welfare cuts. A church survey of social conditions in January found that queues are growing at "food banks" the churches have set up. Children are turning up to school without breakfast. Up to 40 people are living in houses designed for families of five.

Tangible economic benefits of this free market medicine have yet to appear.

Inflation is down to 1% from 20% in 1987, but only thanks to prolonged recession. According to the OECD, in 1991 New Zealand's real output per head was nearly 3% lower than it was in 1985. The foreign debt remains at NZ$60 billion

According to Australia's media monopolies, the Kirner government's warnings of the New Right experiment in New Zealand are "Kiwi bashing". But if the Kiwis have been bashed, it's the economic "rationalist" politicians and big business that have been doing the bashing.


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