Rogernomics (a portmanteau of Roger and economics modelled on Reaganomics) were the neoliberal economic reforms promoted by Roger Douglas, the Minister of Finance between 1984 and 1988 in the Fourth Labour Government of New Zealand. Rogernomics featured market-led restructuring and deregulation and the control of inflation through tight monetary policy, accompanied by a floating exchange-rate and reductions in the fiscal deficit.Dalziel, Paul in Easton, Brian ed The Making of Rogernomics Auckland University Press 1989 p. 53
During the early 1980s, Douglas transitioned from a traditional Labour politician advocating for economic interventionism to a proponent of neoliberal economics. After the Labour Party won government in 1984, Douglas and his associates implemented major policies including a 20% devaluation of the dollar, corporatisation of state-owned business, removal of subsidies to industries (particularly agricultural subsidies), reduction of tariff protection, and a significant overhaul of the tax system. Tax cuts were implemented, and a Goods and Services Tax (initially set at 10%) was introduced.
Rogernomics represented a sharp departure from the post-war political consensus that emphasised heavy interventionism, protectionism, and full employment. Instead, it embraced principles of small government, balanced budgets, and free market policies influenced by the Chicago school of economics. Douglas' adoption of policies more usually associated with the political right (or New Right), and their implementation by a government formed by the historically left-leaning Labour Party, became the subject of lasting controversy. While proponents argued that Rogernomics brought about positive changes such as single-digit inflation and reduced tax rates, critics highlighted social challenges, including rising poverty and unemployment. The legacy of Rogernomics continues to shape discussions on economic policy in New Zealand.
Etymology In February 1985, journalists at the New Zealand Listener coined the term Rogernomics as a portmanteau of Roger and economics. It echoes "Reaganomics", similar neoliberal economic policies promoted by United States President Ronald Reagan in the 1980s.
Douglas and the development of economic policy, 1969–1983 Douglas became a Labour member of Parliament at the 1969 general election. He showed his interest in economic policy in his maiden speech, in which he argued against foreign investment in the domestic economy.New Zealand Parliamentary Debates Vol 365 pp. 123–128 His case for external protection of the domestic economy and government involvement in investment was characteristic of the Labour Party of the time. From 1972 to 1975, Douglas was a junior minister in the Third Labour Government, where he won a reputation for his capacity for innovation.Bassett, Michael The Third Labour Government Dunmore Press 1976 pp. 24–25 This government followed a broadly Keynesian approach to economic management.
As a minister, Douglas was innovative in the context of the public sector. As Broadcasting Minister he devised an administrative structure in which two publicly owned television channels competed against each other.Bassett 1976 p. 31 He was among the government’s leading advocates of compulsory saving for retirement, which he saw not only as a supplement to public provision for retirement but as a source of funding for public investment in economic development.Bassett 1976 p. 82 The superannuation scheme he helped design became law in 1974, but was disestablished by Robert Muldoon almost as soon as the National Party won the 1975 election.
Douglas maintained his interest in economic issues in opposition. He framed his chief concern as the deep-seated problems in the structure of the economy that had contributed to deteriorating economic performance, and a standard of living that was slipping in comparison to that of other developed countries. In 1980, he described New Zealand as a country living on borrowed money, unable – in spite of the record efforts of its exporters – to pay its own way in the world.
The post-war political consensus had produced stability but Douglas came to view this as being at the cost of innovation.Easton, Brian The Commercialisation of New Zealand Auckland University Press 1997 pp. 6–8 Both major political parties maintained the high levels of protection introduced by the First Labour Government from 1936 onwards, and since 1945 both parties had aimed at maintaining full employment. However, beneficiaries of the regulated economy had flourished in both public and private sectors.Bayliss, Len Prosperity Mislaid GP Publications 1994 pp. 42–45
Douglas argued that only radical action would improve the economic outlook. In 1980, he published an "Alternative Budget" that attacked what Douglas called the Muldoon government's "tinkering" with the economy. He wrote that twenty years of pandering to entrenched interests had dampened productive investment. The Labour leadership saw his proposals and their unauthorised publication as unfavourable comment on Labour policy. The Labour leader Bill Rowling publicly rebuked Douglas.Douglas, Roger and Callan, Louise Toward Prosperity David Bateman Ltd 1987 p. 16 Douglas then published his thinking in the form of a book.Douglas, Roger There's Got to Be a Better Way Fourth Estate Books Limited Wellington 1980 Alongside far-reaching proposals for reform of taxation and government spending, it advocated a twenty per cent devaluation of the dollar to increase the competitiveness of exports. Although radical, it took an eclectic approach and did not hint at the abandonment of Labour's Keynesian policy framework.Oliver, W H in Easton, Brian ed The Making of Rogernomics Auckland University Press 1989 p. 13
Douglas became increasingly frustrated by what he saw as the Labour Party's reluctance to deal with fundamental issues of economic policy. He claimed in 1981 that Labour had an image as a party that would promise the public anything to be elected. He argued that the party should agree on its economic policy before it agreed on anything else, and allow economic reality to play a part in its decision-making. Unable to convince Rowling of the merit of his case, a disillusioned Douglas decided to stand down from parliament at the 1981 election.Douglas and Callan 1987 pp. 21–27 One of those who persuaded him to stay was Labour’s deputy leader David Lange, who offered to make Douglas minister of finance if Lange was prime minister after the 1984 election.Lange, David My Life Viking 2005 p. 143
Events after the 1981 election After Labour's narrow loss in the 1981 election, Douglas found a growing audience in the parliamentary party for his view that Labour's established approach to economic policy was deficient. His colleague Mike Moore claimed that there was a public perception that Labour policy sought "to reward the lazy and defend bludgers".Oliver 1989 pp. 28–29 Douglas's case for a radical approach was strengthened by the belief among many of his parliamentary colleagues that the economy's deep-seated problems could only be solved by extensive restructuring. It was understood that some restructuring must follow the Closer Economic Relations agreement with Australia, which took effect in 1981 and reduced barriers to trade between Australia and New Zealand.Oliver 1989 p. 31 At the same time, many economists were arguing for the greater use of competition as a tool of policy, and expressing concern about excessive or inappropriate regulation of the economy.Jesson, Bruce Fragments of Labour Penguin Books 1989 pp. 39–40 In 1983, Lange succeeded Rowling as Labour leader. He gave Douglas responsibility for economic policy and made it clear that economic policy would determine other policy.Oliver 1989 p. 30
Although Douglas was innovative in his approach, and his open disregard for Rowling had earned him a reputation as a maverick, he remained within the mainstream of economic thinking in the parliamentary Labour Party.Oliver 1989 p. 35 He argued in 1982 that the government should actively support small business, and intervene to stop the aggregation of assets by big business. In his view, the government should use the tax system to encourage productive investment and discourage speculative investment. Until the end of 1983, Douglas saw exchange rate, tax and protection policies as means of actively shaping the business environment. In August 1982 he supported a contributory superannuation scheme as a means of funding industrial development and in February 1983 he wrote a paper called "Picking Winners for Investment" which proposed the establishment of local consultative groups to guide regional development. In a paper dated May 1983, Douglas argued that an unregulated market led to unhealthy concentrations of market power.Oliver 1989 pp. 13–15
A new direction, 1983–1984
At the end of 1983 there was a marked change in Douglas's thinking. He prepared a caucus paper called the "Economic Policy Package" which called for a market-led restructuring of the economy. The key proposal was a 20 per cent devaluation of the dollar, to be followed by the removal of subsidies to industry, border protection and export incentives. The paper doubted the value of "picking winners" and saw only a limited place for government funding of economic development.Oliver, 1989 pp. 19–20 His colleague Stan Rodger described the paper as a "quite unacceptable leap to the right". It immediately polarised opinion in the Labour Party.Oliver 1989 pp. 42–43
Douglas characterised the policy package as restrained and responsible, and an appropriate response to the country's economic difficulties.Douglas 1987 p. 36 He acknowledged the contribution to the package of Doug Andrew, a Treasury officer on secondment to the parliamentary opposition, among others.Douglas 1987 pp. 29–30 W H Oliver noted the close alignment of the package and Economic Management, Treasury's 1984 briefing to the incoming government.Oliver 1989 p. 19 His assessment was that Douglas was predisposed towards the Treasury view because its implementation required decisive action and because greater reliance on the market solved what Douglas saw as the problem of interest-group participation in policy-making.Oliver 1989 pp. 42–44
Division in Labour over economic policy crystallised when a competing proposal was submitted to the Labour Party's Policy Council. Its proponents included Rowling and others who had resisted his replacement as leader. It argued for a Keynesian use of monetary and fiscal policy. It was sceptical about the ability of the private sector to promote economic development. Economic restructuring was to be led by the government, which would act within a consultative framework. In this way, the social costs of restructuring would be avoided.Oliver 1989 pp. 43–45
There was stalemate in the Policy Council. As the 1984 election drew closer, Labour's deputy leader Geoffrey Palmer drafted a compromise that contained elements of both proposals. The Palmer paper was broadly worded, and it made no mention of devaluation. It anticipated some form of understanding between government and unions about wage restraint. It allowed for extensive consultation about economic policy and stated that necessary structural change would be gradual and agreed.Oliver 1989 pp. 48–49 When Muldoon unexpectedly called an early general election, the Labour Party adopted Palmer's paper as its economic policy. Lange said that Labour went into the election with an unfinished argument doing duty as its economic policy.Lange 2005 p. 164
Minister of Finance, 1984–1988