State-owned enterprises are born

1 April 1987

Selling electric power, 1988 (Alexander Turnbull Library, EP/1988/1693/20a)

The State-Owned Enterprises Act 1986 – the key provisions of which took effect on 1 April 1987 – heralded a major overhaul of New Zealand’s state sector. A number of government departments became commercially oriented organisations with an emphasis on efficiency and profitability.

The SOEs were a cornerstone of ‘Rogernomics’, the dramatic liberalisation of the New Zealand economy which followed the election of the David Lange-led Labour government in 1984. The name derived from Minister of Finance Roger Douglas, the main driving force behind the controversial initiatives.

For decades governments had used the state sector to minimise unemployment. But the new SOEs were to be run along private sector lines, which in many cases meant drastic cuts in staff numbers. These were painful times and things got worse following the October 1987 sharemarket crash. By then Lange and Douglas were at odds over the pace of change in economic policy.

When Lange famously recommended ‘pausing for a cuppa’, Douglas insisted that the crisis was an opportunity to move even faster. Eventually Lange sacked Douglas and his key ally Richard Prebble. When caucus invited both men back into the fold in August 1989, Lange resigned as prime minister. A little over a year later Labour suffered its worst election defeat since 1931 as the National Party swept back into power.