Page 1: Economic policy and problems
Muldoon, Robert David
Accountant, politician, prime minister
This biography, written by Barry Gustafson, first published online in 2010.
Subsidies and diversification
Faced with severe and ongoing balance-of-payment problems, high internal inflation, high interest rates, and increasing unemployment and industrial strife, the 1975–84 Muldoon government tried hard to increase the production and export of traditional wool, meat and dairy products, through subsidies and tax incentives. Concurrently there was an attempt to diversify the economy through the creation of new industries such as aluminium, steel, forestry, fishing, horticulture, viticulture and tourism, and to develop energy projects to reduce New Zealand’s dependence on increasingly expensive imported liquid fuels.
These expensive new industries and energy projects, which Muldoon called his ‘growth strategy’, became more commonly known as ‘Think Big’. The government also sought to extend free trade with Australia, signing a Closer Economic Relations (CER) agreement in December 1982. Throughout this time, labour relations became increasingly strained and Muldoon would not allow free-range bargaining. He also resisted the abolition of compulsory trade-unionism.
Although Muldoon and National remained in office by winning a majority of the seats at the 1978 and 1981 elections, the Labour opposition won more votes nationally in both elections. This led to increasing frustration and bitterness among Muldoon’s critics and opponents. Within the government’s own ranks there was growing opposition to Muldoon personally and to his economic policies. In October 1980 he only survived as leader because Brian Talboys refused to contest the position, despite other senior ministers organising a majority of National MPs to oust Muldoon in his favour.
Snap election, 1984
In June 1984 Muldoon was struggling to end a government-imposed freeze on wages, prices and interest rates without causing runaway inflation and an escalation of industrial unrest. He was also facing difficulties finalising his budget and resisting advice and pressure to devalue the currency. The Labour Party was revitalised under its new leader, the charismatic David Lange, who was proving more than a match for a tired Muldoon. The last straw, which led Muldoon to ask the governor general to dissolve Parliament and call an early election, was the decision of MP Marilyn Waring to leave the National caucus and vote in favour of nuclear-free legislation being proposed by Labour.