BY MICHAEL TUCKER
AUCKLAND, New Zealand - As the impact of the economic
downturn in Asia began to hit home, New Zealand's coalition
government came apart in August.
The collapse of the coalition began August 12, when rightist politician and New Zealand First (NZF) leader Winston Peters led a walkout of NZF members from an emergency Cabinet meeting. Two days later National Party leader and Prime Minister Jennifer Shipley sacked Peters from his posts as deputy prime minister and treasurer, while urging other NZF members of parliament (MPs) to remain on the government benches.
By August 18 Shipley had rallied the support of eight of the 16 NZF MPs, enabling her to form a minority, a National Party-led government with the backing of the right-wing party ACT. The defectors include the four other NZF members of Cabinet, who remain ministers in Shipley's new government. The most prominent of them, the Minister of Maori Affairs and former deputy leader of NZF, Tau Henare, has said he plans to form a new party.
Henare was sacked as deputy leader by the New Zealand First caucus in July after coming into conflict with Peters. Responding to that rift and to divisions in her own National party, Shipley had announced unexpectedly that she was considering calling a snap election.
The August 12 emergency Cabinet meeting had been called to finalize a proposal for the sale of the government's 66 percent share in the Wellington airport. Peters had been demanding a deal that guaranteed ownership remaining in New Zealand hands. "There was no sense in staying," he demagogically said, following the walkout. "We will not sell the public assets of this country into foreign ownership, nor will we sell our principles and beliefs purely for the positions of public office."
Following his sacking, Peters declared on national television, "This is not the end. It is a new beginning."
Financial crisis worsens
The sacking of Peters was welcomed in business circles.
With business confidence at its lowest levels since 1991 - a
clear majority of businessmen say they expect the economy to
worsen over the next six months - criticism of Peters' role as
Treasurer had been mounting.
"Survey after survey reveals Mr Peters to be the cause, not the solution, to the low level of business confidence in New Zealand," declared the editors of the National Business Review, August 14.
"Put simply, his anti-foreign ownership and anti- privatization stance is out of step," noted economic commentator Fran O'Sullivan in the business section of the New Zealand Herald that same day.
The previous day, the Herald had reported that "revised economic and fiscal forecasts now being prepared by the Treasury make gloomy reading and there is doubt in National circles about whether Mr Peters is prepared to front the hard decisions the new figures may require."
At the end of June the Treasury reported that the economy had been in recession for the first half of 1998. Expectations of a slight recovery were downgraded in August, with zero or negative growth projected to continue into 1999.
Capitalist production in New Zealand, geared largely around the export of agricultural commodities, is highly vulnerable to falls in prices and world market demand.
Layoffs in the second quarter saw 26,000 full-time jobs lost, the biggest drop in one quarter since 1985. Official unemployment hit a four-year high of 7.7 percent, with up to 20,000 more jobs forecast to be cut over the following nine months.
The value of the New Zealand dollar has dropped by more than 30 percent against the U.S. currency in a little more than a year, hitting a 12-year low of US$0.48 at the end of August. Share prices have followed the dollar. The sharemarket index has fallen from a high of 2501 in July 1997 to 1760 on September 1 of this year, a level only slightly above the low reached in the 1987 stock market crash, when the index dropped by 57 percent from a high of 3969.
The U.S. ratings agency Moody's Investors Service, which downgraded the credit rating for New Zealand in January, is expected to announce a further downgrade.
Trying to sound reassuring, Shipley declared, "We will address measures raised by the Asian crisis," speaking before parliament August 27 on behalf of her new government.
"Both the government and its officials are moving out of denial mode about the extent of the Asian crisis," wrote Fran O'Sullivan in the August 24 New Zealand Herald. She challenged the new treasurer, William Birch, to take "bold fiscal measures."
Birch says he will push through cutbacks in government spending. ACT leader Richard Prebble has called for the government to slash NZ$1 billion from the social wage and to introduce other pro-business measures. Government MPs have talked of initiating a series of new privatizations of state- owned assets and of reintroducing legislation to whittle away at workers' holiday entitlements. A move by the coalition government to do this earlier in the year foundered in the face of union opposition.
An editorial in the August 21 National Business Review called on the Shipley government to "reinvent itself as a government of dynamic reform."
Minister of Defense Max Bradford is campaigning for the purchase of a third new naval frigate as part of moves to strengthen the military in response to "political instability such as we have seen in Indonesia." A brief visit to New Zealand August 1 by U.S. secretary of state Madeleine Albright has raised hopes in ruling circles for the resumption of normal military ties with Washington, severed in 1985 after the New Zealand government banned visits by nuclear-armed or powered warships.
Workers, Maori hit hardest by crisis
A study released in July illustrated the effect on working
people of the capitalist crisis and government policy. While
80 percent of households receive a smaller share of total
income than 16 years ago, the top 10 percent receive more, and
the top five percent substantially more. Over the past decade
the gap has increased between the average incomes of Maori,
the indigenous people of New Zealand, and the rest of the
population.
One recent reflection of this growing class polarization is the outbreak of tuberculosis, diphtheria, and meningitis among children and young people in working-class communities, diseases linked to poverty that were largely eradicated.
A protest organized by the Anglican Church, the traditional church of government and the ruling class in New Zealand, set off from both ends of the country September 1, to converge on parliament in Wellington October 1. The march is demanding jobs, increased social welfare benefits, a reliable public health system, and affordable housing and education.
Over several years in opposition, 1993-96, Winston Peters railed against the "free market" policies of the National Party government, targeting foreigners, immigrants, and prominent business figures as the source of the problems facing "ordinary New Zealanders."
New Zealand First won 13 percent of the vote in October 1996 - giving it 17 seats in the 120-seat parliament - in elections held for the first time under a system of proportional representation.
Peters's entry into coalition with the National Party alienated many of his supporters and the standing of Peters and his party plummeted in opinion polls. NZF MPs were at the center of a number of petty scandals that became a focus of national politics. Particular targets of media scrutiny have been the NZF MPs elected in the five Maori electorates. (In New Zealand, voters who are Maori can enroll to vote in either a general electorate or in a Maori electorate. Around half are enrolled to vote in the five Maori electorates.)
Looking to rebuild an electoral base over recent months, Peters had sought to counter the growing weight of the Maori electorate MPs in NZF, as well as to distance himself from the National Party within the coalition government. The rightist politician increasingly sought to portray himself as the "people's treasurer" defending "the nation's" interests within the government.
Michael Tucker is a member of the Service and Food Workers Union.