New Zealanders and Australians continue to be exceptional today in their
capacity to absorb debt (Rankin 2014b). On public debt in recent decades,
fiscal conservatism has prevailed, however.‘Getting back into surplus’has
become a principal policy commitment made by both National and Labour
parties. Fiscal conservatism was entrenched in New Zealand in 1994 with the
Fiscal Responsibility Act, now embedded within the Public Finance Act. This
quasi-constitutional statute requires governments to prioritize the public debt
to gross domestic product (GDP) ratio over other claims on public revenue.
While New Zealand does not lackfinancially austere people, twenty-first-
century New Zealanders nevertheless have a high propensity to incur debt,
especially (but not only) in the form of mortgages. Both Tasman countries
have currencies that are bought and sold at unusually high levels relative to
the sizes of their economies; the Australian dollar has been thefifth most
traded in the world, and the New Zealand dollar the tenth (BIS 2013; Gaynor
2013). New Zealanders spend substantially more than their per capita share of
creditor nations’savings. This reflects an exceptional degree of optimism, and
Australasian willingness to invest in—and draw enjoyment from—global eco-
nomic growth. And it is an integral part of a very new relationship with Asia.
15.5 Political Economy before the Second World War
Divisions between rural and urban interests precipitated the effective forma-
tion of a party political system in New Zealand in 1890. The Liberals princi-
pally represented the urban interest, while the Reform League promoted the
interests of the growing numbers of farmers, especially those settling on newly
available land in the North Island (Gardner 1966). William Ferguson Massey
would become the early champion of these increasingly numerous farmers
who favoured freehold tenure.^22 The Reform movement, answerable to the
new dairy farmer interest, became the parliamentary Opposition and, from
1912, the government.^23
1906 – 11, minister offinance in the Coalition War Cabinet (from the Opposition benches;
1915 – 19), and again prime minister andfinance minister in 1928–30. Ward was by no means
the only senior politician who had to leave office as a result offinancial scandal. Another,Apirana
Ngata, whose policies helped manyiwi, but his own Ngaˉti Porou more than most, was forced to
leave parliament in 1934 on account offinancial irregularities. Nevertheless, his contribution was
such that he appears on New Zealand’s $50 note.
(^22) This contrasts with the Liberal land reforms of the 1890s, which favoured long-term leases
over freehold tenure (Brooking 1996). 23
See Sinclair ([1959] 2001, p. 215) for further explanation of the creation of both a Country
Party and a Farmers’Union in the early 1900s. The Country Party was soon absorbed into the
broader Reform Party, a freehold-farmers’party, which incorporated urban capital interests.
Gaining power in 1912 through a successful no-confidence vote in a‘hung parliament’, one of
Reform’sfirst actions was to reinstate thefirst-past-the-post electoral system. Elections of 1908 and
Keith Rankin