Social democracy and market reform in Australia and New Zealand

Abstract

Social democratic governments in Australia and New Zealand adopted policies of radical free-market reform, including financial deregulation, privatization, and public-sector reform in the 1980s. Because of the absence of institutional obstacles to government action, reform was faster and more comprehensive in New Zealand than in Australia. The New Zealand reforms were associated with increasing inequality and generally poor economic outcomes. There is nothing in the New Zealand experience to support the view that radical free-market economic policies are consistent with social democratic welfare policies or with social democratic values of concern for the disadvantaged. The Australian reforms were less radical, and were accompanied by some refurbishment of the welfare state. Economic performance did not improve, as anticipated by advocates of reform, but was considerably better than that of New Zealand.