security more often preceded those of Australia. From 1938 welfare policy diverged
in areas of health care, retirementincome, and per-child family benefits without
means tests. One important feature of thecomprehensive 1938 social security
reform was the‘universal superannuation’demogrant (Castles 1985, p. 27), pay-
able to persons over 65 not receiving the higher means-tested age benefit.^36
In 1974, New Zealand Labour established an insurance-based earnings-
related pension that would replace universal superannuation (McLure 1998,
p. 191). McClure notes that Labour’s new insurance-based scheme was unlike
anything in New Zealand’s welfare traditions. New Zealand, before 1974, had
never had any form of income support that related positively to past earnings.
This became the big issue of the 1975 election campaign, and contributed
to Labour’s defeat (McLure 1998, p. 193).^37 From 1977, welfare practice in
New Zealand diverged from Australia through the restoration and extension
of universal superannuation in its more generous guise as National Super-
annuation.^38 Labor in Australia, having eschewed universal pensions, imple-
mented, in the 1980s, a workers’funded pension, not unlike New Zealand
Labour’s short-lived scheme.
The language and assumptions of tax and welfare policies vary markedly
between the two countries. Income taxation also diverged from the 1970s,
when New Zealand, in 1974, replaced allowances and exemptions with a
personal tax rebate (Rankin 2006).^39 When the rebate was abolished in
1978, it left an income tax structure that required persons to pay tax on
every dollar earned. Thisflattening of the tax scale at the bottom end was
extended to the top end in 1988 (Rankin 2014a).^40 The sharemarket crisis of
1987 hit New Zealand much harder than it hit Australia, a result of a share-
market bubble reflecting the very rapidfinancial deregulation in 1985.^41
(^36) The 1938 grant was payable to all persons over 65 not receiving the higher age benefit. It was
funded with the help of a 7.5% hypothecated tax, which was merged with general income taxation
in 1967 (Rankin 2014a). 37
McLure commits a whole chapter (‘Generous Years’) to the 1972 Royal Commission of
Inquiry on Social Security which recommended a substantial expansion of welfare support along
the universalist principlesfirst enunciated by Savage in 1938. This commitment, wholeheartedly
embraced by Robert Muldoon (Rankin 2014a), represents a divergence in welfare principles
between New Zealand and Australia. 38
The 1977 National Superannuation payment fully replaced all previous age benefits. But until
1986 payments to high earners were substantially clawed back through marginal tax rates in excess
of 50 per cent. In 39 flation brought many more people into these higher tax brackets.
The current technical name for such a rebate is‘non-refundable tax credit’; a payment that
offsets income tax but cannot exceed liable tax. It effectively extended the tax-free income bracket.
This contrasts with a demogrant, which is an example of a‘refundable tax credit’or‘negative
income tax 40 ’.
In a sense, the exceptionalflattening of the income tax scale at both ends echoes the one tier
political structure created through the abolition of provincial governments and the Upper House. 41
While, in Australia, the liberalization process was more restrained, there was a banking crisis
there, too, in 1990 and 1991 (Rankin 2014b). The Bank of New Zealand failed twice (and was twice
rescued) in 1988 and 1990. The latter failure was due to its Australian operations.
Australia and New Zealand