A Liberal government establishes the foundation of social welfare in the sovereign, democratic Dominion of New Zealand. Britain retains great influence on government, education, and culture, and is the primary market for New Zealand's tightly regulated "protein exports" of meat, cheese, and butter. William Massey of the Reform Party, conservative despite its name, is elected prime minister in 1912.
New Zealand supports Britain in World War I at a staggering cost: 60,000 casualties out of a total population of 1 million. Public calls for a wartime coalition government force Prime Minister Massey to share power with the Liberals, led by former Prime Minister Joseph Ward. The failure of a general workers' strike prompts the formation of the Labor Party, and three of its leaders enter Parliament.
Ward withdraws from the governing coalition to distance himself from public criticism regarding war casualties, inflation, and poor urban conditions. He woos the left wing with promises of coal mine nationalization. Prime Minister Massey campaigns on a policy of patriotism, stability, and protection of private property. Massey wins reelection in 1922, but with a greatly reduced majority.
The export-led economy begins to recover as export prices improve, state loans establish agricultural banks, and farmers receive tax cuts. Prime Minister Massey, despite failing health, succeeds in taking steps to combat inflation and to increase pensions and spending on public works. Massey dies in 1925.
The Reform Party nominee, Minister of Public Works Joseph Gordon Coates, wins the election for prime minister. But, lacking political skills, he fails to live up to expectations. The economy deteriorates. Ward's new Liberal United Party, stressing free-enterprise policies, attracts many businessmen. Coates resigns, and Ward, with reluctant Labor support, takes office as prime minister.
The economy contracts during the Depression. Prime Minister Ward, in poor health, hands over leadership to George Forbes of the United Party. Forbes alienates Labor and forms a coalition government with the Reform Party. The government devalues the currency, establishes a Central Bank, and increases its intervention in the marketplace. Wage cuts and unemployment cause urban demonstrations.
Michael Savage leads Labor to a sweeping victory in 1935 and is elected prime minister. Government intervention increases community purchasing power, stimulates the economy, and creates jobs. The government introduces a comprehensive social welfare system and compulsory unionism. Savage begins to address the needs of the indigenous Maori population. The Reform Party becomes the National Party.
New Zealand fights on the side of the Allies in Africa and Europe, suffering a very high casualty rate, while American troops train in New Zealand for the Pacific campaign. Peter Fraser, acting prime minister under the ailing Savage, becomes prime minister in 1940. Under his pragmatic leadership, Labor introduces military conscription and an economic stabilization system.
Trade and diplomatic contacts with the U.S. increase. New Zealand is a founding member of the United Nations. A new Department of Maori Affairs addresses urbanization and poverty among the Maori. Years of wartime shortages and controls have eroded support for the ruling party. Sidney Holland's center-right National Party wins control of the government in 1949 and adopts many existing welfare measures.
The inefficient Upper House of Parliament, comprising newly appointed "suicide" members, abolishes itself. Australia, New Zealand, and the United States form the ANZUS mutual-defense alliance. New Zealand supports the U.S. in Korea with naval and ground forces. A boom in wool prices boosts the economy. The government responds to a prolonged dockworkers' strike by restricting civil liberties.
The government lifts some import-licensing and price controls. But a high level of integration between state, business, farming, and workers' unions persists. A prosperous economy conceals a deteriorating balance-of-payments situation. Prime Minister Holland, his health failing, is replaced by his deputy, Keith Holyoake, in 1957 until Labor wins a narrow victory two months later.
Faced with a balance-of-payments crisis, the new Labor government under Walter Nash goes back on campaign promises and implements its "Black Budget," which includes increases in direct and indirect taxes. The public is furious. New Zealand embarks on import-substitution industrialization. Despite progressive social policies, the Nash government loses to National's Keith Holyoake in 1960.
Prime Minister Holyoake, committed to private enterprise, takes a low-key approach to economic management and focuses on civil liberties. The government publishes a searing report on the disadvantaged position of the Maori in New Zealand. New Zealand expands its international contacts in Southeast Asia and enters a limited free-trade agreement with Australia. Holyoake wins reelection in 1963.
In 1966, reelected for a third term, Prime Minister Holyoake makes the controversial decision to send troops to aid United States forces in Vietnam. New Zealand protests French nuclear testing in the Pacific region. Although he wins a fourth election in 1969, Holyoake loses support by 1970 as his government is perceived as care-worn and out of touch with the public. He steps down in 1972.
Norman Kirk is elected to lead the third Labor government. The slowing world economy, the rise in oil prices and government expenditure, and soaring inflation end 25 years of solid economic growth. Britain joins the European Economic Community and adopts its trade barriers to New Zealand's agricultural products. Unemployment rises and strikes are common. Prime Minister Kirk dies in 1974.
Under Prime Minister Robert Muldoon, the National Party government regulates many sectors of the economy and invests in massive and inefficient "Think Big" industrial projects. Overseas money finances budget deficits. His authoritarian leadership and emphasis on traditional social values put Muldoon in conflict with Maori rights organizations, feminist groups, and the environmental movement.
As unemployment and inflation soar, the government freezes wages and prices. The economy is on an unsustainable course, with massive budget and current account deficits. Thousands immigrate to Australia. Minister of Labor Jim Bolger introduces voluntary unionism and pushes for a more balanced approach to the economy. Prime Minister Muldoon begins to lose support in Parliament.
David Lange of the Labor Party is elected to succeed Prime Minister Muldoon. He immediately begins major market-oriented economic reforms, including deregulation. The new government eliminates agricultural subsidies and wage and price controls, lowers tax rates, and begins a program of privatization. Tight monetary policy designed to reduce the government deficit brings down the inflation rate.
Labor adopts an uncompromising anti-nuclear stance. Many Maori tribes are granted financial reparations. In 1987 Labor is reelected, but the share market crashes, and the economy falls into recession. Unemployment and negative economic growth follow. The social costs of reform become apparent in the form of increased inequality. In 1990 the National Party's James Bolger is elected prime minister.
Under Prime Minister Bolger, New Zealand begins an export-led recovery, bolstered in part by a free-trade agreement with Australia. The Reserve Bank increases money supply, fueling stock market activity. After peaking at 15 percent in 1992, unemployment drops. The government reigns in public spending, yet in most respects maintains the welfare state. The National Party is reelected in 1993.
The government continues the deregulation and privatization program initiated by Labor. New Zealand becomes one of the world's most open and competitive economies. A National/Labor coalition government under Bolger and Deputy Prime Minister Winston Peters is elected through a new mixed-member proportional system that replaces the "first past the post" system. Neither party has an absolute majority.
Bolger resigns and is replaced by New Zealand's first woman prime minister, the National Party's Jenny Shipley. The Asian financial crisis and two years of drought lead to slow economic growth in 1997 and '98. After nine years in power, the short recession costs the National Party dearly. Labor Party leader Helen Clark is elected prime minister of a center-left coalition government in 1999.
A low NZ dollar, high commodity prices, and good weather increase exports; unemployment hits a 13-year low. The government buys back a majority stake in failing privatized Air New Zealand. Clark's Labor-led coalition is reelected in July '02. Economic growth slows in line with global conditions; business confidence falls, particularly in agriculture. The NZ-filmed Lord of the Rings boosts tourism revenues.
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