WHAT can New Zealand's successful economic reforms teach Hawaii, I asked myself on a visit there last month. New Zealand’s
economic reformsConsider: A 1991 right-to-work law called the Employment Contracts Act broke monopoly union power in both the private sector and government.
Employees now may choose whether to bargain personally with employers or through unions. National employment has gone up by 220,000 since then. This is a figure larger than the number of unemployed when it was enacted, though other factors probably also contributed.
Increased openness or "transparency" in government. It may be a contributing factor to the assessment of international business people that New Zealand is the least corrupt of 54 countries on a scale on which the U.S. is ranked 15th.
Both budgets and post-audits must follow generally accepted accounting practices to reduce flim-flammery. "Unambiguous accountability" is the goal. Results are public and seem to be stimulating improvements. A shift is being made to accrual accounting, which takes a broader look at the government's financial condition.
Their profits are taxed and tendencies to slip back into inefficiency are curbed by competition. Among the services now private are the railways, which used to be used for government payroll-padding at election time, telecommunications, some of the largest financial and insurance institutions, Air New Zealand, and a national hotel chain. Energy resources and forestry soon will follow.
One of the remarkable government changes is national, not something a state could copy. A Reserve Board was created just to control inflation. It is considered the most independent in the world though still subject to government target-setting.
The inflation target was 2 percent or less, now going up to 3 percent. Reserve Gov. Donald Brash, hired by the government on a five-year contract, since renewed for five more, is at the heart of this. He has independent power to raise interest rates or take other steps to rein in inflation. Failure could bring mid-term dismissal.
PRICE stability is his sole focus. No social policy concerns, like employment, are added. The belief is that low inflation is long-term good social policy.
Government operations have gone from annual debts of around 9 percent of gross domestic product to surpluses that got as high as 7 percent and are projected to stay above 2 percent for the next three years.
The new coalition government's commitment to remove a surcharge on old-age pensions starting next year will cost nearly $2 billion a year by 2000. It has brought a one-year delay in $1 billion tax cuts scheduled for this year and 1999.
Overall national debt once exceeded 50 percent of the gross domestic product. It is estimated to drop to 18.7 percent by 1999/2000.
Fifth article of a series. SATURDAY: An education break-through?
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