Politics in the 1870s revolved around development policies – men differed chiefly on the extent of such policies, whether they should be prudent in scope, or adventurous. Within Parliament Ministries earned support by distributing favours in the form of public works, for Parliament itself allocated funds to specific projects. Vogel himself temporarily quitted the colonial scene in 1876, to become Agent-General in London; his successor, H. A. Atkinson, scaled down the level of borrowing and spending during his 12-months' ministry. This made him vulnerable to any opposition which promised a return to booming mid-seventies, especially as prosperity began to waver. Sir George Grey, who had withdrawn into private life at the end of his governorship, embarked upon a political career in 1876 to defend the provinces, placing himself at the head of a disaffected coalition – expansionists, radicals, provincialists. Grey was premier from 1877 to 1879; his radical reforms fell flat, but under the guidance of two Otago expansionists, James Macandrew and William Larnach, the borrowing and spending spree was spiritedly revived. Grey was not a notable premier – his oratory remained unrivalled, but his grip upon affairs was slight. He fell out with his two ablest new men – Robert Stout and John Ballance – partly because he suspected their political integrity; and he ended his term in financial chaos.
In 1879, after an election and a shift of votes within the House (for in the election Grey had actually gained), Grey was replaced by Sir John Hall. Under Hall from 1879 to 1882, and Whitaker from 1882–83, and then Atkinson from 1883–84, a group of politicians who could best be designated “prudent” endeavoured to grapple with what had become the problems of acute depression. For from 1879 on, without any intermissions till 1895, the country knew hard times: declining prices for its exports of wool, a diminishing output of gold, a high level of indebtedness, both private and public, low and falling wages, unemployment, and destitution in the towns. No resolute answer was given; ministers hesitated between retrenchment and taxation on the one hand, and renewed if reduced borrowing upon the other. For once borrowing had become established, it was hard to control; half-completed works prevented an absolute cut, and borrowing could still appeal as a miraculous panacea. So much was this so that the old magician, Vogel, could return to power in 1884, in alliance with Stout as premier, upon a promise to borrow and spend on the grand scale once again. Within three years it became clear that the magic had faded; 1887 brought Atkinson and “caution” back, and saw an end to overseas borrowing for the best part of a decade. An era in New Zealand life was over.
The development policy, besides bequeathing a load of debt, had greatly altered the country. In the course of the 1870s the population doubled to 500,000, transport and communications were immensely improved, and if no new resources had been found, at least industry had grown under the stimulus of low wages, and resources like timber, gum, and flax had been more intensively exploited than before. In the South Island, Christchurch, Dunedin, and Invercargill were linked by a trunk railway, and there were a number of feeder lines, some of which were never to justify their existence economically. North Island railways remained fragmentary with lines centred upon Wellington, Palmerston North, Napier, New Plymouth, and Auckland; Maori possession and engineering difficulties, together with hard times, reserved the construction of the North Island trunk system for the twentieth century. Overseas shipping and cable connections were also improved. A large share of the new settlers had congregated in the towns (93,000 in all had been assisted, some came “free”) but some, including many Scandinavians, had been located in special rural settlements in the North Island.
Compared with economic depression, the recurrent problem of the 1880s, other political concerns are less significant. A few, hesitant steps were taken by William Rolleston's legislation in 1882 and 1885 for small leasehold farms to settle men on small farms where they could at least raise food for their families. Rolleston, too, made the first move towards moderating the brutal speed with which the Maori and his land were being separated. In 1880 Hall, taking over an Electoral Bill which Grey had shelved, brought in a franchise which, together with a degree of plural voting based upon property, amounted to universal male suffrage. One of Grey's few completed measures had given, in 1878, a legal basis to trade unions, which, together with secondary industry, grew significantly in the larger towns during the 1880s. Taxation policy was also widely discussed, the advocates of a tax upon land (a proposal linked with an animus against the large owner) contending with more conservative advocates of a tax upon all forms of property. In all these ways, the 1880s prefigure the Liberal era and the reforms of the 1890s.
By the end of the 1880s, hard times seemed to have come to stay: in 1887–90 more people left the country than arrived. Large-scale farming did not supply enough jobs to defeat unemployment – though it had seemed, up to 1883, that intensive cereal (chiefly wheat) farming in Canterbury and Otago might provide part of the answer. But in the later 1880s, as virgin soil was exhausted, output and exports dropped sharply. Nor did the boost given to the pastoral industry by the successful export of frozen carcasses to England in the years after 1884 hold out much hope for the small man. Sheep farming did not absorb labour. Town industry, and such rural occupations as gum digging, timber milling, flax processing, together with coal mining, certainly grew, but not sufficiently to counter unemployment; nor, for that matter, were wages and conditions in secondary industry of a decent standard.
Atkinson's 1887–90 ministry turned an important corner. On the one hand he made an end to borrowing; on the other he attempted, rather half-heartedly, to bolster up local industry by tariffs, while small-scale land settlement continued. At the same time stringent governmental economy was applied. In brief, Atkinson was attempting to keep a depressed New Zealand going by using what she had – her land and her small factories – and not by relying upon what she might borrow. John Ballance's Liberal ministry, which came to power in 1891, was to apply such remedies with much greater vigour and thoroughness.