May 21, 2024
Hardly the mother of all budgets more like a miser on the beads and blankets
![Watermark](/wp-content/uploads/2021/05/logo-4.png)
![](https://waateanews.com/wp-content/uploads/2024/05/mntBLOCKSTORAGEhomemasternews_importersrcnicola-willis-gettyimages-_1_Pub.jpg)
Hardly the mother of all budgets more like a miser on the beads and blankets
Matthew Tukaki
It’s been discussed a lot lately as to whether or not Nicola Willis is about to hand down something akin to Ruth Richardson “mother of all budgets” so I thought I’d relive the experience for some context. In the mythology of New Zealand’s economic history, few events have sparked as much debate and lasting impact as Ruth Richardson’s “Mother of All Budgets.” Delivered on July 30, 1991, this landmark budget was a watershed moment that redefined the country’s fiscal landscape. While its legacy is contentious, with fervent supporters and detractors, there’s no denying that Richardson’s budget was a bold and transformative step in New Zealand’s economic journey.
To understand the significance of the “Mother of All Budgets,” it is essential to grasp the context of early 1990s New Zealand. The country was grappling with a severe economic downturn, characterized by high unemployment, sluggish growth, and mounting public debt. The previous decade had seen significant economic reforms under the Labour government, known as “Rogernomics,” which aimed to liberalize the economy. However, these measures had not fully addressed the fiscal imbalances.
Enter Ruth Richardson, the newly appointed Minister of Finance in the National Party government led by Prime Minister Jim Bolger. Richardson’s budget was designed to tackle New Zealand’s economic woes head-on through a combination of austerity measures, welfare reforms, and market-driven policies. Key elements included substantial cuts to social welfare benefits, reductions in government spending, and measures to promote labour market flexibility.
Richardson’s approach was rooted in the belief that fiscal discipline and reduced government intervention were necessary to revive the economy. By cutting public spending and encouraging self-reliance, the government aimed to reduce the budget deficit and foster a more dynamic, competitive economy. Proponents argue that these measures were crucial in stabilizing New Zealand’s finances and setting the stage for sustained economic growth. Māori communities were hit hardest by the welfare cuts and labor market reforms. Historically marginalized and economically disadvantaged, many Māori families relied on social welfare benefits to survive. The sharp reductions in these benefits led to immediate financial hardship, pushing many Māori families further into poverty. This exacerbated existing inequalities and created a cycle of deprivation that has persisted for decades.
The budget’s labor market reforms, which aimed to increase flexibility, often translated into job insecurity and low wages. Māori, who were overrepresented in low-skilled and precarious employment, bore the brunt of these changes. The resulting economic insecurity and job instability further hindered their ability to achieve financial stability and upward mobility.
The long-term effects of the “Mother of All Budgets” on Māori have been profound. Increased poverty and economic hardship have contributed to a range of social issues, including poorer health outcomes, lower educational attainment, and higher rates of incarceration among Māori. The budget’s legacy has been a deepening of the socio-economic divide between Māori and non-Māori, with significant repercussions for social cohesion and equity in New Zealand.
In many ways, the budget succeeded in its immediate goals. The fiscal deficit was significantly reduced, and New Zealand’s credit rating improved. Over time, the economy began to recover, with GDP growth rates picking up and unemployment eventually declining. These outcomes have led some to praise the “Mother of All Budgets” as a necessary and effective response to a dire economic situation.
However, the budget’s social impact was profound. The sharp reductions in welfare benefits hit vulnerable populations hard, entrenching poverty and inequality. Critics argue that the budget prioritized economic metrics over social well-being, with insufficient regard for the human cost of austerity. The reduction in support for low-income families, single parents, and the unemployed led to widespread hardship, with long-term implications for social cohesion. In the years following it appears Bill English attempted to address this through his push into social investment.
The budget also sparked significant political and public backlash. It galvanized opposition from various quarters, including Māori, labour unions, social advocacy groups, and the political left. This discontent contributed to a broader debate about the role of government in providing a social safety net and the balance between economic efficiency and social equity. Its still happening today – Kainga Ora is the latest example.
The “Mother of All Budgets” remains a defining moment in New Zealand’s economic history, symbolizing a dramatic shift towards neoliberal economic policies. Its legacy is mixed, highlighting both the potential benefits and pitfalls of such an approach. On one hand, it demonstrated the importance of fiscal responsibility and the need for economic reform in times of crisis. On the other, it underscored the potential social costs of austerity and the need for policies that balance economic and social objectives.
For contemporary policymakers, the budget offers valuable lessons. It underscores the importance of considering the broader impacts of economic policy decisions, particularly on vulnerable populations. It also highlights the need for a comprehensive approach that integrates fiscal discipline with measures to protect and support those most affected by economic changes.
Ruth Richardson’s “Mother of All Budgets” was a controversial attempt to address New Zealand’s economic challenges – it was a purist art in pontification “We are National” and we know what’s best for you. Bollocks. While it achieved significant fiscal improvements and set the stage for economic recovery, it also brought considerable social costs – in other words we aren’t really interested in all you vulnerable population folk. Balancing economic reform with social equity is a complex but essential task, one that requires careful consideration and a commitment to the well-being of all citizens.
So now to the perennial question of our time – how does all this weigh up against what we can expect from Nicola Willis?
1. Slogans in full swing – tick that box – just as in 1991 the lead up to the budget had more slogans than a drunk looking for a bottle of tawney port.
2. Targeting the vulnerable – what is different these days is the focus of National on what they called “the squeezed middle” – tax cuts for a new class of those now identified as vulnerable. National voters (or those National hope vote for them and not ACT). If you’re on a bene or really low income – you’re no longer as vulnerable.
To be honest it’s a mean budget on the offing but its weak on addressing the underlying issues in New Zealand society and chances on anything in it for Māori? Where oh where has that little sheep gone?
Gross Domestic Product (GDP): The early 1990s saw sluggish economic growth. The GDP growth rate in 1991 was quite low, reflecting the economic difficulties the country was facing. The economy was still recovering from the effects of the economic reforms of the 1980s and the global recession of the early 1990s.
Unemployment: Unemployment rates were alarmingly high. In 1991, the unemployment rate peaked at around 11%, one of the highest rates in New Zealand’s modern history. This was partly due to structural adjustments in the economy and the impact of previous economic reforms.
Inflation: Inflation was relatively controlled compared to the high levels seen in the late 1980s. By 1991, inflation rates had come down significantly, which was a positive outcome of the tight monetary policies implemented in the preceding years.
Government Debt: Public debt was a major concern. The government debt-to-GDP ratio was high, necessitating fiscal consolidation efforts. Reducing the budget deficit and public debt was a primary objective of the fiscal policies implemented by the National Party government.
Fiscal Deficit: The fiscal deficit was substantial. The government aimed to reduce the fiscal deficit through significant cuts in public spending, particularly in social welfare programs. This was a central feature of Ruth Richardson’s “Mother of All Budgets.”
Social Welfare: Social welfare expenditure was significantly reduced. The budget introduced deep cuts to social welfare benefits, affecting unemployment benefits, family support, and other forms of social assistance. These measures were intended to curb government spending and encourage self-reliance but had severe social repercussions.
External Debt: External debt levels were also a concern, as New Zealand had accumulated significant foreign debt. Managing this debt was part of the broader economic strategy to stabilize the economy.
Current Account Deficit: The current account deficit was another issue, reflecting the country’s trade imbalances and reliance on foreign capital. Efforts to improve export performance and reduce the current account deficit were ongoing.
Comparing 91 with 2024:
As of the 21st of May 2024, New Zealand’s economy is displaying signs of recovery and growth, driven by several key factors. The GDP growth rate is projected to be around 2.7% for the year, up from 1.4% in 2023, indicating a positive trend following the global economic disruptions of recent years (OECD) (Stats NZ). This is largely fuelled by a rebound in net exports, particularly due to the relaxation of mobility and border restrictions in China, New Zealand’s largest export market (Fitch Solutions).
Inflation remains a challenge, with consumer prices expected to rise by approximately 3.5% in 2024, though this marks a decrease from the higher rates seen in the previous year. This moderation in inflation is partly attributed to improved supply chain conditions and stabilizing commodity prices (Site homepage).
Unemployment is anticipated to remain relatively stable, hovering around 4.0%, which reflects a robust labor market. The government’s fiscal policies continue to support employment through various initiatives aimed at upskilling workers and promoting job creation in key sectors such as technology and green energy (Stats NZ)
Matthew Tukaki
Radio Waatea and its board would like to advise that the opinions expressed in this article are those of Matthew Tukaki and not necessarily the views of Radio Waatea, its Management or its Board.