When the Farm Gates Opened: The Impact of Rogernomics on Rural New Zealand

First published 2014

Copyright © Neal Wallace

The moral rights of the author have been asserted.

ISBN 978-1-877578-72-4 (print)

ISBN 978-1-927322-97-0 (Kindle)

ISBN 978-1-927322-98-7 (ePub)

ISBN 978-1-927322-99-4 (ePDF)

A catalogue record for this book is available from the National Library of New Zealand. This book is copyright. Except for the purpose of fair review, no part may be stored or transmitted in any form or by any means, electronic or mechanical, including recording or storage in any information retrieval system, without permission in writing from the publishers. No reproduction may be made, whether by photocopying or by any other means, unless a licence has been obtained from the publisher.

Publisher: Rachel Scott

Editor: Vanessa Manhire

Design/layout: Fiona Moffat

Index: Diane Lowther

Ebook conversion 2016 by meBooks

Cover photography by Stephen Jaquiery

CONTENTS

Front Cover

Title Page

Copyright

Dedication

FOREWORD

Jeff Grant, former chairman, AGMARDT

Preface

CHAPTER 1 Farming in crisis

CHAPTER 2 The rise of the free market

CHAPTER 3 A party desperate to govern

CHAPTER 4 Unsung heroes

CHAPTER 5 It could have been ugly

CHAPTER 6 Out of the kitchen

CHAPTER 7 A region changed forever

CHAPTER 8 Conclusion

APPENDIX

Key schemes and subsidies

Notes

Index

Back Cover

This book is dedicated to my father David Wallace, who instilled in me a love and respect for farming, my mother Mary Wallace, who instilled a love of news and the written word, to my wife Liz for her unyielding love and support, and to my wonderful children Joshua and Grace.

It is also dedicated to rural New Zealanders, who throughout my career have shown me friendship, respect and hospitality and, with this project, enthusiastically opened their lives and their doors to me in the realisation this is a story that needs to be told.

MAGPIES, UPDATED

(with apologies to Denis Glover)

Tom and Elizabeth’s grandsons

bought the farm at a mortgagee sale.

Most of the old pine windbreaks

blew down in a winter gale,

And when they felled the standing pines

the magpies fled.

‘Borrow more money. Diversify!’

the mortgage people said.

Day in day out they laboured

while irrigators spread,

bought a thousand cows on credit,

built a computerised milking shed.

‘Rely on market forces!’

farm advisers said.

The farm’s still there but now it’s owned

by a foreign bank instead.

And I’ve seen two magpies nesting

in that pine tree overhead.

Waiata Dawn Davies

Foreword

New Zealand’s political scene between 1984 and 1990 was marked by the most ambitious and far-reaching economic reforms since European settlement. At the forefront of those reforms was our largest – and in terms of export earning revenue, most important – industry, agriculture. On being elected, the incoming Labour government abolished subsidies and grants virtually overnight. Farmers found themselves caught between rising costs and falling income, under severe stress and questioning if they could survive.

New Zealand farmers endured a lot of hardship during that era. But the period also marked the start of a new chapter for agriculture: farmers learned to thrive or fail on their own merits as they took control of their future and their businesses. As these pages reveal, farming in 2014 is very different from what it was in 1984. Freeing up sectors such as labour and transport certainly made getting produce to markets much more efficient, but changes to the methods of production have been nothing short of spectacular. The reforms were difficult for many farming families and caused significant changes in the way they operated, but they also allowed farmers to import new technology. Information from markets about what consumers require allowed farmers and scientists to develop animal genetics and selection systems, new pasture and crop cultivars and fertilisers to supply those markets. Modern tractors and implements use cutting-edge computerised technology that makes them faster, accurate and more efficient. In short, farms today are biological systems that are much more efficient and productive than those of 1984.

The Agricultural and Marketing Research and Development Trust (AGMARDT) is an independent not-for-profit organisation, established in 1987 by the New Zealand government with $32 million from the wind-up of the British, Christmas Island and New Zealand Phosphate Commissions. Since that time it has invested more than $60 million to encourage innovative ideas, foster research capability and develop emerging leaders in New Zealand’s agricultural, horticultural and forestry sectors. When AGMARDT was approached about funding this book we realised it was the first comprehensive social history on the impact of those landmark political reforms on agriculture. Such was the importance of this period, the book is a perfect fit for our brief of fostering a positive contribution to the primary sector.

Jeff Grant

FORMER CHAIRMAN

Agricultural and Marketing Research

and Development Trust

April 2014

Preface

The faceless men in boiler suits atop ladders, working on telephone lines in a remote corner of Central Otago, were unusual enough to attract attention. There hadn’t been any problems with the telephone service in the days leading up to the men’s sudden appearance on the dead-end back-country road in April 1986. Suspicions over their actions were heightened when the Strath Taieri Hotel in nearby Middlemarch warned a family served by the line that their telephone conversations could be heard over the hotel’s television set.

Among those served by the phone line was Gill Shaw, one of the organisers of a pending farmer protest against the impact of economic reforms, planned for when Prime Minister David Lange was to open the refurbished Invermay Agricultural Research Centre near Dunedin later that month. Gill also noticed a sudden increase in noise on her telephone line; but the idea of linking that to the anonymous men up ladders, telephone conversations being heard over television sets and her organising of a protest all seemed too surreal in April 1986. ‘We couldn’t say anything or people would think we were paranoid,’ recalls fellow protest organiser Frances Copland.¹

Soon after the rally, normal telephone services resumed; but the incident served to highlight the apprehension, tension, consternation and anxiety that permeated government and rural communities as the most wide-ranging economic reforms in New Zealand’s history, colloquially known as Rogernomics, started to bite following the Lange-led Labour Party’s landslide victory in the 1984 election. Looking back, the protest organisers believe the men were secret service agents, seeking intelligence ahead of the farmer protest.

Certainly rural New Zealand was battered and bruised by the almost overnight ending of price support and production subsidies. Hurting and angry, farmers felt the government had betrayed them. The mood was volatile and irrational, and there was a real fear the protest could turn ugly. Many despised Prime Minister David Lange and his reforming Finance Minister Roger Douglas. This was certainly a view shared by two of my brothers, who, like thousands of others, were finding their livelihoods squeezed as incomes were slashed by a third, land values were halved and expenses rose by a third, driven by interest rates of 18% and above, three times what they had previously been paying. The term Rogernomics would become farmer shorthand for a period of New Zealand history synonymous with pain, anguish and misery – but also a period that would irreversibly alter farming and the structure and attitudes of rural New Zealand.

My parents had retired from farming well before Lange’s election victory, but my two eldest brothers had taken advantage of the various government assistance packages designed to lure young people onto the land. Defeated National Party Prime Minister Robert Muldoon had used these and other production incentives in a well-meaning but fruitless attempt to improve farm exports and drag the economy out of its financial hole. The reality was that these incentives and subsidies were costing more than the export dollars they were earning. Muldoon had created a fool’s paradise, with policies that were sending the country broke.

After the 1984 election, Douglas moved quickly. In his first budget later that year he announced sweeping reform of agriculture. With that I saw my brothers’ excitement – about owning land and farming as a career – replaced initially by hatred, then by fear, pain and anguish, as their lives were thrown into upheaval. Like many others, they had to find alternative work to pay their bills. One returned to shearing, through which he had previously toiled to save money for a farm deposit; the other found employment in a meatworks, while his wife took on office work. My brothers, and thousands like them, were in the eye of the storm as the incoming Labour government abolished a suite of policies that had offered loans at concessional interest rates to buy farms or develop land; subsidies for fertiliser, weed and pest control; and guaranteed minimum prices for the meat, wool and dairy products they produced.

While agriculture felt the chill winds of reality, measures to expose domestic manufacturing to competing – and cheaper – imports and the full force of market economics were considerably slower in coming, much to the consternation of farmers. Adding to farmers’ problems was a collapse in product prices. One of my brothers recalls receiving an $8.50 bill from a meat company after the meat and pelt values for some ewes did not cover the processing costs. The other was paid 50c a sheep for prime stock.

Farmers laid their problems squarely at the feet of the government. They viewed Wellington politicans and bureaucrats with total disdain, and it took little convincing for one of my brothers to join other farmers in protest against the economic policies when Lange opened Invermay. The protest turned ugly when farmers mobbed the Prime Minister’s car, ripping the New Zealand ensign off the bonnet. My brother assures me that while he was close to the action, he was not responsible. But he could well have been, such was his anger and feeling of betrayal by politicians. I also witnessed the associated strain on my parents. Successful and award-winning farmers, they saw their sons put under enormous stress and financial pressure. There were meetings with lawyers and banks, and fresh capital was injected into one farm. It was a scene repeated in farming families up and down the country.

Until the Rogernomics reforms, farmers had been beneficiaries of huge state handouts. The National Party was the farmers’ party. Farmers had political clout and the party viewed farming as a favoured child, inextricably linked to government coffers and policies. It was said that the lobby group Federated Farmers wrote the party’s farming policy and annual budget. Each budget night was filled with anticipation about the size of the coming year’s government handout. Initially there was a sense of disbelief that farmers – who regularly reminded the rest of the country that they were the backbone of the economy – had been hung out to dry by Rogernomics. That view had been reinforced by Muldoon: he saw growing exports as the ticket to returning the country to economic prosperity, and unashamedly picked and supported industries that he considered a sure bet to do just that. In reality we were producing products no one wanted.

In the early days of the Rogernomics reforms there were reports of increased suicides, by those who could not handle the pressure of witnessing their businesses and livelihoods sinking under a sea of rising debt and shrinking incomes. There were also reports of heavily indebted farmers forced by banks to walk off their farms. Such was the potential scale of farmers having to abandon their land, there was a risk land prices would also plummet, leaving farmers with negative equity and banks with worthless assets. This forced banks to work with farmers to ensure they both survived.

Muldoon’s largesse ignored the fact that New Zealand was on the brink of financial collapse: long ago we had ceased being Britain’s offshore farm. Britain joining the European Community in 1973 was the first unequivocal message that we had to adjust the economy to survive on our own merits. Instead, successive governments adopted precisely the opposite approach: the policies they implemented paid subsidies and supported prices that were not market related, but in fact cost taxpayers more than the extra exports were earning. Worse than that, markets did not want everything farms were producing: in the early 1980s sheep meat was rendered because it could not be sold, and the quality of wheat was also poorer than could be bought internationally. Tough economic decisions that should have been made in the late 1970s and early 1980s were ignored in the name of political expediency and it was left to the fourth Labour government, which inherited an economy on the verge of bankruptcy, to administer an economic medicine of market forces.

Manufacturing, transport, the state sector, labour markets – virtually every part of the economy that had been cocooned by government assistance and protection – would eventually be reformed. Initially the Douglas-led political troika that included Richard Prebble and David Caygill drove those changes; then, when the party lost both its reforming appetite and the 1990 election, the changes were continued by incoming National Prime Minister Jim Bolger and particularly his Finance Minister, Ruth Richardson. In his autobiography, My Life, Lange dismissed claims his government was hijacked by Douglas’s right-wing policies. Rather, he saw Douglas as someone with fresh ideas, capable of reshaping and modernising a party that had failed to dominate the treasury benches: ‘We needed fire and he provided it.’

Rogernomics was a defining era, not only in the history of New Zealand agriculture, but also in the nation’s broader history. Economic policies introduced by Douglas between 1984 and 1987 remain the foundations of our economy 30 years later. Today, New Zealand farmers run multi-million-dollar businesses without any direct government financial assistance or influence. Their decisions are based on what the market requires and what will benefit their businesses and their farm’s environment. But for those caught in the Rogernomics era, getting to this point was far from smooth. Many fell by the wayside; others hung on through sheer bloody-mindedness – and determination not to be beaten by some shiny-arsed Wellington politicians. Three decades after Lange came to power, one of my brothers is still farming, while the other has created a successful career in rural service industries. They are among thousands who remember Rogernomics as a period of pain, depression and stress – a daily struggle not only to keep their farms viable, but to feed and clothe their families. Rogernomics changed forever the structure of New Zealand’s most economically important industry, as well as the social structure of farms and of rural New Zealand. But also, and most importantly, it reshaped the people in those communities.

This book does not aim to provide an in-depth economic analysis of the lead-up to the 1984 election and the years that followed. Economists and analysts have done that, and their work is referred to here. Rather, it is a social history, in which those involved – farmers, farming families, farming leaders and politicians – recall this history-changing era. Unfortunately, key players such as Sir Robert Muldoon, Federated Farmers leader Sir Peter Elworthy and farmer advocate Collis Blake have passed on. Age and illness have faded the memories of others, and records have been lost – in some cases intentionally, to bury painful memories of that period.

As far as possible, the claims, facts and figures included in this book have been verified as true and accurate. I am indebted to AGMART for their generous finacial assistance to enable me to write it.

I have a personal interest in this era, given my family’s involvement and the timing of my journalism career, which began just prior to the 1984 election. But more than that, Rogernomics is a landmark, a turning point in New Zealand farming history, and I feel it is important that the experiences of those involved be recorded. This is their story.

CHAPTER 1

Farming in crisis

Twenty-five years after the event, Beverley McCaw still doesn’t know what drew her to walk around the farm truck parked in an Otago paddock. Maybe it was instinct that something was amiss. Before she started searching, she recalls thinking nobody was nearby. Despite that doubt, that initial impression that nobody was around, something drew her to look, to be fully satisfied she had checked it out.

Beverley was wrong. Sitting on the truck’s running board was a depressed, dishevelled, unshaven and agitated man with a rifle resting across his knees. She would learn from a chance meeting several years later that the man had been just minutes away from taking his life, unable to cope with watching his family, farm and business wilting away from a deadly combination of drought and four years of economic reform. He told her that her timely intervention and support had saved his life.

Many farming families – like that Otago farmer’s – were hit twice. In 1988–89 the South Island east coast was ravaged by an extreme drought. Coming less than four years after the most wide-ranging economic liberalisation and reform of monetary and fiscal policies ever undertaken by an OECD country, this had been instigated by Finance Minister Roger Douglas following the 1984 election of the David Lange-led