In the 1960s, New Zealand was the world’s sixth wealthiest country per capita but by 1980 it dropped to 19th. The annual budget deficit in 1984 was $3 billion and over $8 billion in public overseas debt. In contrast to the above, the 1960s era The country’s economy was in severe trouble; New Zealand’s twin deficits were considerably high. Most importantly, the country was close to bankruptcy and the only possible solution seen at the time was a revolution in both the economy and the state. New Zealand operates amid a reedy conventional political institution. Robert Muldoon, prime minister from 1975 to 1984 procured a temporary, rational tactic to many issues. In 1984, he revealed a wage and price freeze to combat the issues. Critics claimed that Muldoon’s strategy was merely suppressing the increasing prices and it does not solve the core economic problems. The Muldoon government was defeated in a snap election in 1984, it is often considered as the most significant in the modern New Zealand history.
Labour’s success in the 1984 election paved a new polic...
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...s, reduction in staff and transformed investment strategy. The period 1988 to 1992 saw the sale of 22 enterprises amounting to $12 billion, nearly all of this revenue was used to ease public debt.
Reducing the role of the public sector and achieving a neutral fiscal policy was one of the key objectives of the revolution era. This led to an introduction of a ‘user pay’ principle for most state services. Efficiency was a driving influence resulting in the abolishment of several quasi-governmental advisory and operating organisations. These were partly efficacious in reducing the state spending in the mid 1980s, however as growth rate diminished and unemployment soared, attention devoured the social services spending. The reform prompted strict eligibility criteria and overall spending on employment relief, housing assistance, and other social transfers were reduced.
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