Carpe Diem! New Zealand’s Fiscal Squeeze, 1990–1993:
Carpe Diem! New Zealand’s Fiscal Squeeze, 1990–1993:
Economic Problems, Welfare Reform and Political Consequences
In 1990, New Zealand’s newly elected National Party government, led by prime minister Jim Bolger, faced what it portrayed as an unexpected fiscal crisis. In response, finance minister Ruth Richardson seized an opportunity to launch the most radical revamp of the country’s welfare state since the social security system’s development and consolidation under the first Labour government of 1935–49. This chapter outlines the immediate background to this case of ‘hard’ fiscal squeeze. It examines the main components of the economic and social policies adopted by the government from 1990 to 1993, assesses their short-term effects, and draws links between these policy initiatives and later political and social outcomes. Foremost among these outcomes were the reform of the electoral system in the 1990s (replacing the first-past-the-post system with proportional representation), world-leading legislation (notably the Fiscal Responsibility Act) making fiscal management more transparent and accountable, and substantial challenges to New Zealand’s egalitarian tradition.
Keywords: New Zealand, fiscal squeeze, Jim Bolger, Ruth Richardson, welfare reform, electoral reform, egalitarianism, Fiscal Responsibility Act
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