The Listener’s ranking of the best and worst finance ministers reveals the cavalier, the timid and those who just got lucky.
Being a finance minister is probably both dream and nightmare. The dream is spending billions of dollars acquired by political diktat, not by toiling away in the marketplace.
The nightmare is having to pay for another person’s decision, cop the blame if it goes wrong and defend it in public even if it’s a bad idea.
In addition, finance ministers are pestered for money for other ministers’ pet projects, even if they are unaffordable and might not work. Sir Michael Cullen found such requests could be for double the amount of money that was available. But ministers would still give it a go, and Cullen would have to play the Grinch.
Then there is the chronically bad press. To borrow from US economist Art Laffer’s quote about congressional spending, a finance minister is worse than a drunken sailor – who at least spends his own money. According to another American, sardonic commentator HL Mencken, “No politician has ever benefited from saving money, only by spending it.”
However, a finance minister probably deserves more than sarcasm and throw-away lines. It is a deadly serious job. Its impact can be deep and long-lasting – it’s often argued New Zealand has still not fully recovered from the authoritarian 1970s-80s rule of Sir Robert Muldoon.
It’s also said that the easy-going years of Sir Keith Holyoake and his first finance minister, Harry Lake, in the 1960s allowed New Zealand’s economic strength to erode drip by drip.
However, it would be flippant to apply Mencken’s cynical assessment of politicians as spendthrifts to all of this country’s finance ministers. So the Listener set out to rank their performance – good, bad or indifferent.
In the Listener’s “best to worst” assessment of New Zealand’s prime ministers last November, the three political historians who contributed awarded points across set measures. Ranking finance ministers was more challenging, and the results from the experts consulted were complicated. The tumultuous years of Sir Roger Douglas got high marks for their revolutionary upheaval, but so did the careful decision-making of Bill Birch. Cullen thrived but was also noted as being blessed with good luck. The 1930s minister Gordon Coates did well in terrible conditions. And Ruth Richardson got both an A+ and an F for fail in three short years (1990-93).
At the bottom of our list is Muldoon, who was notorious for his expediency, his intolerance and his brutal treatment of his adversaries.
But if Muldoon emerged as a sort of Dickensian headmaster who would give the boys a sound thrashing as a starting point, Grant Robertson (2017-23) is viewed as a kindly vicar who would say “Of course, my child” to most requests for cash.
Despite their privileged position as resident money bags, finance ministers don’t have an easy life. They must understand a problem, propose a solution, get support from their caucus, withstand attacks from the opposition, make the whole thing work in practical terms and hope it isn’t derailed by disasters from out of the blue, such as war, pandemic or tariffs.
If New Zealand’s state finances comprise the good, the bad and the ordinary, they are models of enlightenment compared with the worst excesses of history.
Some ancient rulers wouldn’t bother running an economy at all, but would attack neighbouring countries to seize their wealth. Others would plunder religious minorities or tax vulnerable targets such as a peasant’s herd of goats. The Roman empire once taxed both weddings and prostitution, which earnt its rulers more wrath than revenue.
Tax & spend
Caligula raised money by confiscating the assets of wealthy people under threat of execution or imprisonment. King John did something similar in England.
In contrast, most current economies follow well-established patterns of revenue and expenditure. According to research body Worlddata.info, all but 20 countries have income tax. Most countries have some sort of sales tax, and many have a capital gains tax. In addition, only elected parliaments are entitled to decide how this money is raised in many countries. Usually, the way this money is spent also requires parliamentary approval, at least in broad outline.
And therein lies the rub. Broad outline is way too broad, and leaves room for error or omission. It allowed the US president Calvin Coolidge to wile away his days while the seeds of the Great Depression were germinating. And it allowed George W Bush to cut taxes and start a war, which bathed Washington in red ink.
Here in New Zealand, the issues are clearer, but finance ministers can be undermined by their own leader, threatened by a powerful rival, blocked by a coalition partner or tormented by a razor-thin parliamentary majority. If they fall victim to these pressures, their programmes have a way of falling with them. Their opponents will happily play the man not the ball, and will even change the rules of the game.
For these and other reasons, most experts we consulted were reluctant to rank our finance ministers from one to 10 and the historians among them noted their expertise was limited to particular periods in our history. So their assessments were given a weighting, and we drew more widely on relevant biographies and histories to create our list.
A number of finance ministers are missing from our considerations. Among them is Sid Holland (1949-54), who was also prime minister. Apart from some serious union bashing, his counter-revolution faltered and his World War II-era predecessor Walter Nash’s legacy of all-consuming regulation persisted.
Also left off is Harry Lake. He suffered illness during his six years as Holyoake’s finance minister and did little when he was well. The Norman Kirk era’s two finance ministers, Bill Rowling and Bob Tizard are also skipped over as they shared just three years. Arnold Nordmeyer (1957–1960) also misses the cut, even though he was a competent economic manager and his “Black Budget” was probably just a darker shade of grey. But of those who made the cut, here’s where they rank.
Our best and worst
1. Roger Douglas (Labour) 1984-88
If you strip away name-calling, 20/20 hindsight and alternative facts, Douglas comes out on top. Douglas inherited a currency crisis, high debt, a loophole-ridden revenue service and an impenetrable thicket of regulation.
To be fair, fixing these defects helped him to carry out the plans he already had in mind. “We did not create crises but were not above taking advantage of them,” a Treasury official told historian Malcolm McKinnon, one of our expert panel. But Douglas pounced anyway. He floated the dollar, introduced the Goods and Services Tax (GST), sold or corporatised state assets and abolished price and exchange controls, as well as agricultural subsidies. There was much collateral damage. Unemployment rose, so did interest rates.
“It was one change after another, bang, bang, bang,” says historian and panel member Michael Belgrave. “But if you are talking about significance, Roger Douglas has to be the number one. He was able to institute a revolution, whether you agree with it or not, and some things he did should have been done a lot earlier, but a lot more gradually.”
Another member of our panel, economist Michael Reddell, put it another way: “His changes – in law and ethos – re-established macroeconomic stability, fiscal and monetary, and contributed to a sustained improvement in our productivity performance.”
Even Douglas’s eventual nemesis, his prime minister, David Lange, said he was battling “economic neanderthals”. Tax expert and panel member Robin Oliver sums up: “It is hard to imagine New Zealand now without the fourth Labour government and hard to imagine that government without Douglas. He pushed boundaries and one can argue about the pace and timing, but many forget how close New Zealand then was to economic and social meltdown.”
For listener.co.nz’s full 2024 series on the impact of Rogernomics, go here.
2. Walter Nash (Labour) 1935-49
As finance minister for the entire reign of the first Labour government, Nash had to pay for both the Great Depression and World War II. And he somehow managed to do it. While state debt approximately doubled, “most of the borrowing came from internal sources, such as people’s savings … offshore debt fell,” wrote economist Brian Easton. Some of the credit had to be shared with Nash’s party leaders and his Treasury chief. But it still happened on his watch.
Direct taxes rose fivefold during the war, according to McKinnon. Prices and wages were controlled, while imports were held down and many goods were rationed. At its height, World War II cost more than half of New Zealand’s GDP, and Nash somehow found a way to pay the bill. Robin Oliver says Nash faltered initially with unaffordable stimulus measures, but his management of the war salvaged his reputation. It also created a legacy of state control – the so-called “licence economy”. “There was no aspect of economic life that Nash thought he could not improve through regulation,” Oliver writes. “Nash was one of the great fix-it managers. He had his hands in everything.”
3. Michael Cullen (Labour) 1999-2008
Cullen told The New Zealand Herald early on, “There is no money for reckless spending,” and he kept his word. He rejected multiple requests for money for the same projects expressed differently, and called other bids “nothing more than try-ons”. This entrenched his position as “the unfriendliest member of the cabinet”, to quote his autobiography.
But Cullen’s flintiness enabled him to pay debt down to just 5.4% of GDP. And that still left spare change in his pocket, which he used to launch the NZ Super Fund, a gigantic sovereign wealth fund to help pay for the future costs of pensions.
That and the establishment of KiwiSaver cement Cullen’s reputation as a forward-looking politician. Michael Reddell says Cullen can’t take all the credit, since favourable terms of trade smiled down from above while he was in power. But as with Nash, it could have been different, and Cullen made the most of his chances.
4. Gordon Coates (Reform)1933-35
Coates’s reputation has yo-yoed from neglectful minister who was swept away by the cavalry of the first Labour government to thoughtful man who surpassed his Labour Party successors. Coates is perhaps now trending back down again. However, his establishment of the Reserve Bank, his pursuit of better export prices and the currency devaluation that boosted farmers’ incomes showed his decisiveness.
“Coates is often blamed for the Depression but that is unfair,” says historian and panel member Liz Ward. “His prime minister, George Forbes, did not seem to be able to make a decision. Coates was trying to think of a solution.”
Robin Oliver thinks Coates was New Zealand’s best finance minister. “Despite declining tax revenue and increasing expenditure pressure, he kept the government in budgetary surplus. He left the Labour government elected in 1935 with fiscal leg room.”
Reddell says by the time Coates left office, the country had “substantially recovered from the Depression”. In contrast, McKinnon says his devaluation dried up consumer spending in the cities, which made some things worse.
These views averaged out give Coates fourth spot.
5. Bill Birch (National) 1993-99
He smoothed over predecessor Ruth Richardson’s sharp edges but maintained many of her fiscal policies. However, he avoided public conflicts in favour of consensus-seeking, like his boss, Jim Bolger.
“Bill is a tactician, not a strategist,” then-Treasury secretary Murray Horn told Birch’s biographer Brad Tattersfield. “If you want to move the maximum distance, spending the minimum capital, he’s the man.”
This was accompanied by an enormous capacity for hard work and complete lack of drama – he was a “journeyman finance minister who did his homework and knew his stuff,” according to one observer. Birch was famously frugal – Tattersfield wrote that more than one interviewee for his book suggested Birch would climb into a long drop for a sixpence – and that frugality paid off.
Oliver rates Birch for his work ethic and attention to detail. “Every line of expenditure was scrutinised. He considered every dollar spent as coming out of the pocket of the low-income office cleaner. It needed to be justified. He normally knew more detail on cabinet proposals than the minister whose cabinet paper it was.”
6. Joseph Ward (Liberal) 1893-96; 1906-12; 1915-19; 1928-30
As finance minister under Richard Seddon, Ward helped save the Bank of New Zealand from collapse in 1894-95. His 1897 resignation due to personal bankruptcy still leaves him with some credit for New Zealand’s later move from depression-ridden anguish to world-class prosperity during the John Balance/Seddon years.
Ward returned to the finance role under his own prime ministership and again as part of a grand coalition during World War I, when he raised taxes and imposed price controls to help finance the war. But his big achievement was helping to develop New Zealand’s “backbone” of independent farmers.
“He broke up the big sheep estates and enabled people to be financed onto farms,” says Liz Ward. “He borrowed £1.5 million on the London money market at 3%. The government became like a bank – it loaned money to farmers at a lower rate than the banks were offering. You could borrow 60% of the value of your farm.”
7. Ruth Richardson (National) 1990-93
Her attempt at “Roger Douglas on steroids” failed to win hearts or minds. The extension of Rogernomics into social policy didn’t work. Treasury head Graham Scott told a journalist she was the only genuinely ideological finance minister he had ever worked for. “She believed in small government and deregulated labour markets … She thought people should take more personal responsibility and said the welfare state had undermined self-reliance.”
Those beliefs helped to shorten her political career. But her crackdown on loose or even dishonest spending by governments has gone down in history.
“She wanted to make sure politicians can’t spend lavishly without there being consequences,” Belgrave writes. “In many ways she put constraints on spending (via the Fiscal Responsibility Act) into the country’s constitution. She made it much more difficult for a populist government to spend money without some degree of constraint. Those constraints are still with us today, so in that sense I think she was successful.”
8. Bill English (National) 2008-16
English set out to eliminate the large budget deficit that followed the Global Financial Crisis, which started in 2007, and was also in the chair for the Christchurch earthquakes. Reddell says English initiated few significant economic reforms, and the twin legacies of rising house prices and low productivity were not addressed.
Nevertheless, English was a serious politician who was quite respected by Cullen. His leader, John Key, may have hampered sensible reforms with his easy populism, and there was more detailed policy-making after Key quit and English became PM. But by then, the tide was turning against National, and Winston Peters finished off the party’s prospects after the 2017 election.
“Despite English’s extensive experience and a lengthy tenure in the finance portfolio, his impact seems less than one would expect,” says Oliver. “English seemed to lack the power to set a clear agenda.”
9. Grant Robertson (Labour) 2017-23
Robertson oversaw the Covid threat and claimed to handle it well. But he greatly increased public spending for ambitious reforms that were cancelled by the subsequent government.
“There isn’t much to his credit,” says Reddell. “He inherited a structural Budget surplus and bequeathed a large structural deficit after the Covid effects had already passed through. He made few or no useful structural reforms and displayed little real interest in productivity.”
Robertson’s main failing was as fiscal manager, according to Oliver.
“His approach to fiscal management seemed to be to agree to any expenditure proposal that might sound good in the media. Whether the expenditure achieved anything did not seem to matter.
“Roberston was not a fix-it manager. The end result of his tenure was high debt, high inflation and a high government interest cost that will eat into the ability of future governments to fund social and other infrastructure.”
On the plus side, Robertson believed a capital gains tax on realised assets such as speculative housing should be implemented to make our tax system more balanced and less distortionary. Later, he worked with cabinet colleague David Parker to explore ways of taxing unrealised capital gains through such means as a wealth tax on static assets above a $10 million threshold for couples. Both plans were scotched by party leaders.
10. Robert Muldoon (National) 1967-72; 1975-84
An accountant before entering politics, Muldoon increased debt, screwed down the economy with industrial-strength regulation and cancelled a contributory superannuation scheme.
“This dreadful decision transformed New Zealand from the potential Switzerland of the Southern Hemisphere into a low-ranking OECD economy,” wrote respected financial commentator, the late Brian Gaynor.
“That financial decision has done so much to make things difficult for the New Zealand economy,” wrote Belgrave, “by his third term, he had lost complete control.”
There was also much criticism from within his own ranks.
“Muldoon exuded no sense of greatness,” wrote his cabinet colleague, Hugh Templeton. “He repelled as much as attracted. He operated as an elemental force. Power was his objective and once he had that, he claimed a personal monopoly.”
Robin Oliver says Muldoon did some good things in his younger years but failed badly in the end.
“He left office in 1984 with the country facing stagflation, a foreign exchange crisis, and a fiscal crisis – with no apparent strategy to deal with this except to hunker down.”
