New Zealand's Labour-Alliance Government: a review of the first fourteen months

Rupert O'Shea from Wellington looks at the real record of the Labour Alliance Government in New Zealand which has been presented by some as a 'left' government as opposed to socialdemocratic governments in Europe.

Between 1990 and 1999, New Zealand was governed by the bourgeois National party (with New Zealand First as a coalition partner between 1996 and 1997). Starting at the 1996 parliamentary election, New Zealand MPs have been elected by a form of proportional representation known as Mixed Member Proportional (MMP). This replaced the First-Past-the-Post system (FPP), as still used in Britain, where MPs were elected by getting the most votes in single-member electorates. As result, from 1996 coalition and minority governments have become the order of the day in New Zealand. So in the November 1999 parliamentary election, with 51.6% of the Party Vote, a 13.3% swing to the left compared with the 1996 election, the three left parties got 66 out of the 120 seats between them. Labour and the Alliance got 49 and 10 seats respectively, their total of 59 seats giving them just short of a majority. They formed a minority coalition government, backed by parliamentary support from the Greens with their 7 seats. For more on MMP and the 1999 election, see my article "Elections in New Zealand" (

In that article, written just after the election, I wrote "...are we to expect New Zealand's Prime Minister-designate, Labour leader Helen Clark, to be the Tony Blair of New Zealand, a Tory wolf in Labour sheep's clothing? Clearly, both leaders are committed to working within the straight-jacket of the capitalist system. They are both going to be severely tested if, as seems likely, the biggest world slump since 1933 occurs within their terms of office. But there are some important differences. Unlike Blair, Clark is no bourgeois interloper into the Labour party. She has been a Labour MP for 18 years and on the front bench for most of that time. In her acceptance speech she made after [out-going National prime minister] Jenny Shipley had conceded defeat, she said she would deliver on the revitalisation of the health and education section that working people needed. When interviewed afterwards, she said she still stood by what she said years ago, that Roger Douglas and Richard Prebble [in the 1987-90 Labour Government] had ruined the Labour Party with their monetarist policies. She also said that Labour's nine years in opposition had been a salutary experience, helping the party to get back to its roots."

Clearly, the experience of already having gone through a stage of being a blatantly right-wing government in 1987-90 has pushed the New Zealand Labour party to the left. And Labour is in coalition with the even more left-wing Alliance. So some commentators on the left internationally have held up the Clark government as one that has been prepared to take steps that really benefit the working class, in contrast with the Blair government in Britain. But the proof of the pudding is in the eating: what has been the track record of the Clark government in delivering real benefit to working people? Around the world, all governments of workers' parties that accept the limitations of capitalism are constrained in what they can do by the well-being of the capitalist economy, which they do not control, in their countries. So we need to make our assessment of the Clark government's performance in the context of the New Zealand economy.

The New Zealand dollar hit an all-time low of about US$0.39 in 2000. In 1997 it was worth about US$0.58. Underlying this decline is a balance of payments deficit reflecting the fact that New Zealand's economy has failed to make the degree of transition from agriculture to hi-tech to cash in on the recent international economic boom that has been seen in particular in the Republic of Ireland, which started out with a similar agriculturally dominant economy.

But the immediate trigger for the run on the New Zealand dollar is the collapse of "business confidence" since the election of the coalition of workers' parties to government. Despite or, more exactly, because of the fact that the left parties got a clear majority of votes, it seems that the capitalist want to show us who's boss. The New Zealand dollar had only been declining slowing till the 1999 parliamentary election. It nose-dived after that. The capitalists have been brazenly open in saying that the run on the New Zealand dollar has been prompted by government policies that are clearly "not good for the country" i.e. not good for their profits. Two policies in particular have incurred the wrath of the capitalists: the renationalisation of employment-related accident compensation and the repeal of the anti-union Employment Contracts Act.

Industrial accident compensation had been a government monopoly, with employers paying legally-required contributions to the Accident Compensation Commission (ACC). The previous coalition government, led by the bourgeois National party, allowed capitalist insurance companies to compete with the ACC in tendering for insurance cover for each company. As industrial insurance was still mandatory, this was a nice windfall for the NZ finance industry. With the ACC's monopoly being re-established by the current government, it is not surprising that the NZ finance industry did their part in contributing to the run on the New Zealand dollar.

The Labour-Alliance government has not renationalised any of the other industries privatised by National. Indeed, during the current parliament we saw the introduction, based on legislation passed by the previous government, of a private sector mail service to compete with New Zealand Post, the state-owned service. So we had the ridiculous sight of a second lot of post boxes being put up in city streets, usually right next to the existing New Zealand Post boxes and usually emptied at exactly the same time as the New Zealand Post boxes. How anyone could claim that this would make postal delivery in New Zealand more efficient is hard to imagine. At least it was gratifying to see that National Mail, the new mail company, quickly went bankrupt and that all their new post boxes are now boarded up.

The new Employment Relations Act, which replaces National's Employment Contracts Act, has restored the right of all workers to be party to a collective employment contract negotiated by a union. This is undoubtedly strengthens workers. Under the Employment Contracts Act, many workers were forced off collective contracts onto individual contracts. Now many new collective contracts are being negotiated and union membership is rising. But some restrictions on workers' rights remain unchanged under the new legislation. It is still illegal to strike other than in the period in which a collective contract is being negotiated. And the only legally allowed reason for a strike is to support claims made in the negotiation of a collective contract. So, for example, it would be illegal to strike against redundancies or unfair dismissals. And striking in support of another group of workers is right out. The new legislation even takes some backward steps, so far as workers' rights are concerned. It is now required that workers in "essential services" such as the health service, give forty days notice of a strike. This gives the employers lots of time to organise scabs, who, during a recent hospital workers' strike, were paid triple time and even given free meals. Prime Minister Helen Clark said that the Employment Relations Act "is about, workers' rights, not union rights". As if the two could somehow be surgically separated. It seems Clark is still worried about and to a certain extent pandering to perceived voter prejudice against unions.

Over the last couple of months, the New Zealand dollar has made a modest comeback. It is now at about US$0.45. This reflects the fact that the most intense period of the run on the New Zealand dollar was in the period when the Business Round Table, the NZ capitalists' main political lobby group, was making submissions for amendments to the proposed Employment Relations Bill. That is now a done deal of course. And some of the reactionary clauses that found their way into the Employment Relations Act, as eventually passed, can be attributed to the use made of the run on the New Zealand dollar by the Business Round Table to put pressure on the government. "Business confidence must be restored" said Helen Clark at the time. Of course the partial recovery of the New Zealand dollar is also in large part due to the decline of the US dollar as confidence in the potential profitability of US new technology companies crumbles.

How has the Labour-Alliance government performed in restoring public services, which had been savaged by relentless cuts in expenditure over the nine years since Labour was previously in government (and, for that matter, by the Labour government before that)? Of course, like the Blair government in Britain, Labour were careful "not to promise too much" in their election campaign. Only the Alliance campaigned for free health and education services. And they are only very junior partners in the coalition, due to the relative strengths of the two parties in parliament. So neither of those two good things is going to happen under the current government. More money has been put into health and education, but it is not nearly enough.

We still have all the usual horror stories that will sound familiar in comparison with the decline in public health services in other countries. For instance, people in pain wait years for operations and sometimes die before they get them. I talked to Steve, a nurse at Wellington Hospital, a large state-owned general hospital. "Working at the hospital is demoralising." says Steve. "We are so short-staffed and under-resourced that we are set up in advance to fail. Every day we have so many jobs to do that we know we cannot possibly do all of them well and that things are going to go wrong." The hospital is so short-staffed that there are not nearly enough relief staff to cover for workers who go off sick. And hospital workers are so stressed-out that they take lots of sick leave. Steve frequently gets phoned at home on his rostered days off by hospital administrators begging him to work an extra shift to cover for someone who is off sick.

It is a similar story in education. I got the following statistics from "Secondary Teaching in New Zealand: An endangered profession" by Graeme Macann, President of the Post-Primary Teachers' Association (PPTA), New Zealand's secondary school teachers' union. Macann's report can be downloaded from the PPTA's web site ( The report is dated September 2000, but I do not think there have been big changes in the figures since then.

"There are currently around 15,000 full time teacher equivalents in secondary schools. ... New Zealand teachers work an average of more than 52 hours a week and are in contact with their classes for an average of 22 of those hours. This is a high contact level by international standards. In addition, there are relatively few teachers in our schools compared to overseas countries. ... To reach the OECD international averages we would require 5500 more teachers right now.

"... Excessive workloads are driving teacher stress levels to unacceptable heights. In the 12 months to August this year around 29% of teachers had taken stress-related sick leave. 43% of all paid sick leave was stress-related. 12% had taken unpaid sick leave and 62% of this was stress-related."

Macann's concludes that "The teacher supply problem is rapidly threatening to degenerate into a UK-like crisis in many of our secondary and area schools."

Finally, what has the Labour-Alliance government done to address the financial needs of the poor, particularly the long-term unemployed? There has just been a national food bank conference. New Zealand food banks are as busy now as they have ever been. This shows that many unemployed and other state beneficiaries still cannot live on the income provided by the state. As one delegate to the conference said, "government policy is still not working".

It is the same old story as is happening elsewhere in the world where workers' parties are in government. They take the capitalist economy as a given fact that cannot be changed. As a result, even in what passes for an economic boom these days, they are not even close to restoring the public services that were fought for by workers in the post-war period.