Development of Industrial Relations in New Zealand from 1984

Development of Industrial Relations in New Zealand from 1984

The 4^th labour government stays reminded by a lot because it had made many economic reforms and changes in lot of policies. Key person for all these changes were made by the governments finance minister Roger Douglas. The governments main idea was to give more opportunity to the private sectors and the practice of corporate in the state services. Rogernomics the name given to these economic reforms introducing GST, state owned enterprise, corporatization, privatisation, removing the agricultural subsidy.

Three key changes made to the New Zealand economy by the fourth labour government and its impacts on business and population

Restoring the Market Mechanism

After the 1984 election, the government concentrated to cut off the influences that they had in the individual markets. The most conspicuous examples include the rapid abandoning of a myriad of controls in financial markets, the almost complete abolition of price controls, a programme to replace import controls by tariffs and the subsequent substantial reduction of tariff levels, the removal of producer subsidies, and the corporatization of government trading activities. Imperfect regulator occurred in New Zealand’s market competition it can be seen in two ways. First, Closer Economic Relations (CER) made free trade with its neighbour country Australia, secondly the doctrine of contestability though it is not a robust theory made it successful after getting in practice it reduces the barriers for the entry of enhance competitiveness. (Brian Easton, 1994)

Removal of agriculture subsidies

Farmers were given lot of subsidies in the early 1980’s, but after 4^th labour government got in power they took away all the agricultural subsidies and all other benefits gained by the farmers. This made everyone shocked and a question for their life. Rogernomics this reform made a huge impact without the subsidies the farmers could not survive to maintain their farmlands which resulted in decrease in the value of the land. In addition, the pesticides business lost its half of the sales. Farmers were determined to come up facing difficulties with non-subsidy funding government. (Reserve Bank Of New Zealand, 1996)

Introducing GST

Introducing the Goods and Service Tax (GST), an economic reform amendment made in October 1986 has raised the government’s income revenue to a very good extent. GST is a tax to all the goods and services served to the public by a business. (Stats Nz, 2012)

Graph below illustrates that GST has different impacts in the retail, the sales went to the highest level in the month September, $508 million (or 22.9 percent) and in October, sales fell by $752 million (or 27.6 percent), excluding GST ,in November, increasing by only $12 million (or 0.6 percent), before recovering in December (up $244 million or 12.3 percent). (Stats Nz, 2012)

In July 1989, there was increase in GST to 12.5% from 10% and people reacted much when compared when it got introduced, the panic and the decrease in sales lasted for a month but not two from 1986. (Stats Nz, 2012)

(Stats Nz, 2012) 

The rationale behind the changes to the economy by the 4^th labour government                 

State Owned Enterprise Act 1986

State-owned enterprise (SOE) or government owned companies created by the state-owned enterprise act 1986. Early in 19^th century important role for developing New Zealand was relayed on public enterprise. Government has been participated in many commercial actions such as Banking and finance, insurance, farming, forestry, mining, electricity, transport, postal and telephone services and radio and television broadcasting. (TEARA, 2012)

Government participated in this sector because.

-          Can control national assets

-          Create Employment

-          Selling land to farmers

-          Private business competition

-          Encouraging

-          Growth in tourism and other sectors. (TEARA, 2012)

Reason for creation of SOE

Attaining more profits in the public enterprise is the important reason for introducing the State Enterprise Act. The most highlighting fact of this Act is not only to give the profit to the enterprise but also the compensation is given to the companies which are running in loss in the method of subsidy. The body which is responsible for the policy development and lead to this Act is the Treasury, further it also stood for the Government’s liability limitation by the action of bringing up separate legal entities under the Companies Act. The Treasury also talked out about the ministerial intervention in the management of enterprise will be limited once the state-owned enterprise is given the power as the private sector companies. The main outcome of this Act gave the government a very less competitors in the market, for example whole of the New Zealand’s communication sector and power generation all are owned by the government (TEARA, 2012)

State Sector Act 1988

This Act deflects the country economy as

“In 1984 the core public service employed just over 66,000 people. Fifteen years later the number had shrunk to 30,000. In 2017 there were nearly 49,000 staff in the core public service.” (New Zealand History, 1988)

 The implementation of State sector Act 1988, public service commission employed power has been switched to chief executives in fixed term contracts, which matches the private sector policy by employing the staffs directly to the department. This act is responsible for removal of public service employment  career security, new labour relation law was implemented which was already been applied in private sectors and enforced industrial arbitration was removed from the system (New Zealand History, 1988).

References

• Brian Easton. (1994). About Us: Eastonbh. Retrieved from Eastonbh: https://www.eastonbh.ac.nz/1994/10/economic_and_other_ideas_behind_the_new_zealand_reforms/#Table2
• New Zealand History. (1988). About Us: nzhistory. Retrieved from nzhistory: https://nzhistory.govt.nz/culture/the-1980s/1988
• Reserve Bank Of New Zealand. (1996). About Us: rbnz. Retrieved from rbnz: https://www.rbnz.govt.nz/research-and-publications/speeches/1996/speech1996-06-04
• Stats Nz. (2012). About Us: Stats Nz. Retrieved from Stats Nz: http://archive.stats.govt.nz/browse_for_stats/industry_sectors/RetailTrade/historical-impact-gst-introduction-and-increase-on-retail-sales.aspx
• TEARA. (2012, June 20). About Us: teara. Retrieved from teara: https://teara.govt.nz/en/state-owned-enterprises/page-1