The Role and Functions of New Zealand Government

The New Zealand Government has made significant changes to the economy throughout the last 15 years. The operation and organisation of business activity in New Zealand has been affected by this changing economy. All aspects of the New Zealand Government have been altered. The reason for this change was to improve the performance by being more efficient. The key reforms are privatisation and corporatisation of State Owned Enterprises (SOEs) and restructuring government agencies.

The most significant change was the election of the Labour Party in 1984, which ended the Muldoon Administration. At this time, New Zealand was in a rut because of poor economic management by the previous Government. Unemployment was high in 1983 and still climbing, real GDP was only 1.15 between 1976 and 1984, and international debt was at 41% of GDP in 1984. The United Kingdom (the major New Zealand export market) had join the European Union in 1973, and since had to endorse a quota where they could only import a certain number on overseas products. Under the National Government, New Zealand was close to self-sufficiency because the government refused to import products from overseas. The public were to losers in this situation as there were a limited number of products offered for sale, and they were also quite expensive too. This called for some desperate transformation.

When the Labour Party was elected under David Lange, they immediately changed the sectors that they thought needed urgent attention. They were Capital Markets, Financial, Industry, and International Trade. Other reforms occurred in 1985 (Monetary), 1986 (Tax and Corporatisation), 1988 (Privatisation), 1989 (Public Expenditure), 1990 (Labour Market), and 1991 (Resource Management and Social Services). In fact all state sectors underwent some sort of alteration at some stage. The period from 1984 – 1994 was dubbed “a period of radical change.” These reforms occurred simultaneously and some are still being refined now. From 1995 onwards there was a second period of “slower paced evolutionary” activity. (1999, OECD Government Reform)

The key idea in the reform process was to “roll back the state” – in other words focus more on what a government should do which is, governing the people. Defining a government’s core business can be difficult because in every country it is different, even in New Zealand. It is also difficult to set limits as its role is constantly changing; however, the main consistencies are those of Health, Education, Defence, and Welfare. Some restructuring and reforms affected these sectors.

The New Zealand Government owned many enterprises such as State Insurance, Air New Zealand, New Zealand Rail, The Bank of New Zealand, and Telecom. In 1987 most of these assets were sold. By doing this it meant the Government could pay off large accumulated debts and allow these companies to become more efficient. After the sale of these SOEs that the New Zealand Government has become more efficient too, they can focus on their primary task by providing essential services. Some of these services include public hospitals, education, benefits, and emergency relief.

From the reforms came a radical change in New Zealand trade. In 1984 the Government devalued the New Zealand Dollar by 20%, then in 1985 introduced a floating exchange rate. Along with that, the removal of agricultural subsidies and import tariffs. It allowed New Zealand to be a fairer country to trade with. As a direct result, the trade competitive index jumped from 0.72 on 1985 to 0.98 in 1987. Foreign investment increased as the New Zealand Dollar strengthened against the ‘green back’ and the pound. Consequently, importing and exporting firms benefited from the change in policies.

The services that the New Zealand Government provides have ongoing restructuring (which means altering an already established department) in the State Sector. The State Sector Act 1988, “which departmental Chief Executive is fully accountable for managing their organisations efficiently and effectively, and changed the role of the State Services Commission from employer to manager of public service to employer of Chief Executive and Advisers to the Government about the management of the State Sector.” (1999, OECD Government Reform) Restructuring of this sector is eliminating inefficient staff positions, creating more high-ranking positions as overseers and advisers for a more effective business activity. It could even mean closing factories or offices not required any more. Centralising corporate headquarters from Warkworth to Auckland, or closing a freezing works in Masterton and moving operations to Takapau is another example of restructuring. It removes the burden from the government so they can concentrate on other areas.

In 1991 the Employment Contracts legislation allowed unionism to become voluntary instead of compulsory. This meant their power over employment negotiations weakened. Then in 2000, the Employment Relations Act amended small pieces of the Employment Contracts Act. Employees had to be registered in the union to take advantage of the rights the legislation offers. The union must register at the Department of Labour under the following conditions: they must be independent from the employer, and be a democratic organisation. While unions have reduced its influence, many “traditional organisations became more active supporters of the reform process.” (1999, OECD Government Reform)

Of the radical reform period, consultation and communication with the general public has been minimal. As new bills were passed, the general public needed to be informed of the changes. As time moved on, more publicity was made when changing major legislation, or adding new acts. During the Employment Relations Bill the media had in-depth interviews and reports about the possible changes (ONE News, Face The Nation, and 3 News). Another example of this is when the Inland Revenue Department removed the Income Tax Return forms (IR5s). Television advertisements and mailed brochures informed the public about the change.

Two parts of consultation with the public relating to amending acts or the addition of new ones, involves pre government approval. This is where key interest groups are consulted during the developmental stages of new legislation. The other is when a Select Committee who studies any public submissions made; adjusting the report before it is voted upon in the House of Representatives. (1999, OECD Government Reform) This means the general public is able to have a say in the bills that are passed through Parliament and are informed of the outcome. Businesses can take advantage of this and appoint representatives to understand the new laws and acts. In addition, they can help the government change legislation in order to help their business flourish. By doing this they are discussing legislation with the people who change it. This can enhance the performance of New Zealand businesses by letting them know about any changes to their economy, such as exporting agreements and sales tax changes.

The changing role of the New Zealand Government has let to a change in operation and organisation of business activity. Ever since the SOEs were sold off (State Insurance for example) the companies have been more efficient, and therefore more competitive. The customers have reaped the many benefits of the privatised and corporatised companies. The products of better quality, more focused and expert customer services, and cheaper prices. Sales staff are now more helpful and have a better product knowledge. The other companies (like National Insurance) have responded to this by offering similar incentives to resecure their customers. They have also done some restructuring to maximise output. As a result, the economy has grown, and the level of business activity has increased.

These two combined changes have resulted in many different outcomes. The inflation rate has dropped down 17.3 percentage points in a short space of six years from 18.2 in 1986 to 0.9 in 1993. (1996, A study of Economic Reform) This result is one of the many factors and reforms the New Zealand Government have worked on during that period. But there is the down side, the unemployment rate rose quickly in the same period. From 4.1% in 1987 to 10.2 in 1993, that’s 6.1 percentage points in 6 years. The sale of SOEs and restructuring of existing enterprises has both positive and negative results.

The Employment Contract Act 1991 and the Employment Relations Act 2000 has enabled employees or unions to bargain or negotiate with the employer over agreements. This has caused employers to provide better employment packages for the workers, such as health and ACC.

In conclusion, the New Zealand Government has changed its roles, scope and functions over the past 15 years. As a result, it has affected the operation and organisation of business activity in New Zealand. The purpose of a government is to govern the people, and not the economy. Since 1984 the Government have sold off many assets from different parts of the economy. They have altered every aspect of the state sector. Government Departments that still exists has been restructured to become more efficient. They have done this by removing staff positions, shutting down factories and offices and relocating them somewhere else. New legislation has changed the employment contracts and unions in 1991 and in 2000. All the changes to the State and Public Sectors have brought about a better and brighter future for us all in the long run.

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