A dinner organised by the parliamentary press gallery some weeks ago to mark its 150th anniversary was attended by quite a number of past MPs. There was one I was particularly glad to see.
Ruth Richardson was looking older but still trim, lively and happy. I was glad the gallery had invited her and glad she had come. She has barely said a word in public since leaving Parliament, taking her advice behind the scenes of other places where governments needed to find some spine.
She has rarely received the recognition she deserves for her contribution to New Zealand’s economic turnaround, receiving almost nothing but abuse for it, but she is not one to harbour a grudge. After we chatted briefly she spotted Jim Bolger who fired her as Finance Minister just before she brought in the first fiscal surplus of our lifetime. She went straight to him and greeted him as old colleagues do.
She treated Grant Robertson’s claim to be undoing her work in the Budget he delivered last week with the contempt it deserved. She would be more worried about his Budget’s version of St Augustine’s prayer: “Lord, give me the strength to bring down the debt but not yet.”
Dame Ruth – which she is not but should be – stands second only to Sir Roger Douglas among the founders of our modern economy. She picked up his baton and carried it further into the labour market, health and social welfare than a Labour Government was willing to go.
(Douglas has a different prescription for health and social welfare, one more like the compulsory insurance scheme tentatively proposed in Robertson’s Budget.)
Richardson was our first, and still only, female Minister of Finance, not that she would make much of that. She has a lot in common with Baroness Thatcher but a better sense of humour. When she borrowed a phrase from Saddam Hussein for her 1991 Budget, she didn’t know how accurate the description would be.
It’s a tribute to its enduring influence that the “Mother of all Budgets” haunts Robertson three decades on. The Budget was radical on several fronts and not all of them survived. Hospital charges were an early casualty and medical staff eventually defeated “Crown health enterprises”.
But the so-called benefit cuts (actually a genuine reform that switched money to grants for proven need) gave the country social welfare it could afford and induced beneficiaries to work if they could.
Needs-tested benefits have become even more important for those facing the 21st century’s housing costs. An accommodation supplement is based on recipients’ income and their rent, which would seem to mean an increase in basic benefits will reduce the supplement and leave them no better off.
The real radicalism of the 1991 Budget, though, was to reduce public spending in a recession, defying the post-war Keynesian consensus. Academic economists predicted disaster and indeed the recession deepened severely through 1992.
Richardson was mainly intending to help Don Brash bring down inflation. “Monetarism needs mates,” she said. She was prone to pithy slogans. The Reserve Bank governor was also defying convention by raising interest rates through the recession. Working together, monetary and fiscal restraint brought inflation down to the bank’s 0-2 per cent target in 1992 and kept it there.
More interestingly today, the economy recovered astonishingly quickly from the recession. In 1993 we were seeing, for the first time in my working life, non-inflationary economic growth.
In 1994 we had a Budget surplus. You need to be getting on a bit now to appreciate how astonishing that was. We’d never heard the words “budget” and “surplus” in the same sentence. Budgets were always in deficit, through good times and bad.
But it was too late to save National from near defeat in 1993. The Government survived by one seat on a recount. It had dared to apply a needs test to national superannuation, breaking one of those promises parties make irresponsibly in Opposition.
Richardson paid the price. No longer Finance Minister, she remained in Parliament just long enough to write fiscal responsibility rules into a law that guided her successors, Sir William Birch, Sir Michael Cullen, Sir Bill English.
Their budget surpluses, especially Cullen’s, reduced government debt to levels that enabled their successors to face a global financial crisis, a major urban earthquake and a pandemic with a solid fiscal cushion.
National increased basic benefits in 2017 after a rapid recovery from crises, four years of economic growth and budgets in surplus again. Robertson, in deficit, is boosting benefits now as a stimulus we may not need.
If he must look back 30 years, he should note how quickly the economy recovered from Richardson’s medicine. It was indeed the Mother of all Budgets. She should wear that title herself. It’s not the only one she deserves.
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