PRESIDENT’S WORD
Back to the future New Zealand is famous (infamous maybe!) for the radical reform period it went through from the mid-1980s when – due to the country being bankrupt – numerous government support systems were removed basically overnight, and the country became one of the most liberal in the world when it came to trade policy. Unfortunately, the speed of these reforms was brutal for many and rural communities took years to recover.
By Barry O’Neil President : HortNZ
Thinking back, it’s amazing how interventionist New Zealand was leading up to these reforms. Trade in manufactured goods was restricted, exchange and interest rates were fixed, businesses were heavily regulated, and the state sector was large, very large. In 1984, the public service employed more than 66,000 people. By the end of the 1990s, that number had fallen to 30,000. But it has grown again, and last year was just over 57,000. In the case of agriculture, government subsidies made up an average of 32% of farm income in the early 1980s, which equates to about 4% of the then total Gross Domestic Product (GDP). I’ve always been amused by one piece of legislation, The Margarine Act of 1908, which showed how powerful the agriculture sector was even back then, as the act prohibited the manufacture of margarine in New Zealand due to it being seen as a direct threat to our dairy industry. Motor vehicles were another area that government heavily controlled via import licences and foreign exchange controls. In 1984, before controls were lifted, New Zealand had 14 car assembly plants, and even its own, albeit very inferior, version of a Land Rover called the Trekka! In 1950, New Zealand ranked eleventh in GDP per capita among Organisation for Economic Co-operation and Development (OECD) countries. Growth was strong through to the 1960s and things seemed to be going well. And yet, although the economy was growing, it was growing much faster in other countries. By 1969, New Zealand had slipped to twentieth place, and we are now fifty-second. 2
The ORCHARDIST : MAY 2021
There were also significant events that led to the reforms in the 1980s, including in 1973 when Britain, which was then taking 30% of our exports, entered the Common Market. Around the same time, the first Organisation of the Petroleum Exporting Countries (OPEC) oil shock hit, tripling the price of oil. Collectively, this resulted in annual inflation of up to 17%, rising unemployment, and to make things even worse, a very large debt, servicing of which took 15% of the government’s total expenditure. Agricultural subsidies accounted for nearly 40% of the budget deficit in 1985. Between 1982 and 1985 the government, through the Ministry of Agriculture and Fisheries (MAF), paid out $1.7 billion in Supplementary Minimum Payments (SMPs), mainly to sheep farmers.
When Lange’s government decided to cut agriculture assistance, they estimated that 20% of farmers would lose their farms Something had to change. New Zealand just couldn’t afford to continue down the slippery slope that it was on as there was nothing left in the piggy bank. Also, due to delays in embracing necessary reforms over the previous decades, change had to happen fast if the country was to survive economically.
