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| Robert Muldoon | David Lange |
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The New Zealand constitutional crisis of 1984 arose following the 1984 general election, and was caused by a major currency crisis. The crisis led the incoming government to review New Zealand's constitutional structures, which resulted in the Constitution Act 1986. [1]
Prior to 1985 the New Zealand dollar was controlled centrally by the Reserve Bank of New Zealand at an exchange rate fixed to the United States dollar. In early 1984 the Deputy Governor of the Reserve Bank, Roderick Deane, became concerned that the New Zealand dollar had become significantly overvalued and was vulnerable to currency speculation on the financial markets in the event of a "significant political event". [2]
At the time, New Zealand was led by Prime Minister Sir Robert Muldoon and his National Party government. Media speculation followed a leak that a potential incoming Labour government would be likely to significantly devalue the dollar upon election. The Reserve Bank advised Muldoon, who was also the Minister of Finance, that the dollar should be devalued. Muldoon ignored the advice, believing it would hurt poorer New Zealanders in the medium term. In June 1984, as a result of dissension within his own parliamentary caucus, Muldoon announced a snap election to be held in July. This caused an immediate run on the dollar, as currency speculators believed a Labour win would mean devaluation. Despite a deepening foreign exchange crisis, Muldoon continued to refuse to devalue, forcing the Reserve Bank to take some extraordinary steps, such as closing the forex markets for a short period of time to slow down devaluation.
On 14 July, Muldoon and National lost the general election, and the Fourth Labour government led by David Lange was set to be sworn in on 26 July.
By New Zealand constitutional convention, between election day and the return of the writs for the election, an outgoing caretaker government implements the directions of an incoming government. [3] [4]
On the morning of Sunday 15 July, Reserve Bank officials (Reserve Bank Governor Spencer Russell, deputy Roderick Deane, and Treasury Secretary Bernie Galvin) met with the head of the Prime Minister's Department Gerald Hensley, and agreed that the currency market could not open on Monday unless there was a devaluation. Contacted by Hensley, Muldoon refused to meet that afternoon but told him that they could close the market on Monday if they liked, and agreed to meet them at 8:30 am on Monday 16 July. Russell closed the market on Sunday evening. The Reserve Bank officials also wrote a letter to Lange, and a senior Treasury officer unofficially briefed the incoming Finance Minister Roger Douglas on the situation. [5]
After their meeting on Monday morning, Russell and Galvin boarded a flight to Auckland in order to advise Lange, and Deane reluctantly briefed Labour's Deputy Leader Geoffrey Palmer, before escaping from waiting journalists through a back door. Muldoon called Lange at 10:30 am and suggested they make a joint statement that the currency would not be devalued. Lange said he would give Muldoon an answer after meeting with Russell and Galvin. The meeting, which also included Douglas and his incoming associate finance minister David Caygill, took place at Auckland International Airport. On being advised that a joint statement would not solve the currency problem, Lange told Russell and Galvin to inform Muldoon there would be no joint statement. Lange then travelled to unrelated meetings with the U.S. Secretary of State in Ohakea and the Australian Foreign Minister in Wellington, before returning to Auckland. Meanwhile, Russell and Galvin decided while travelling back to Wellington that they should not tell Muldoon, but that Lange should do so himself. Muldoon was left waiting for a response and despite Hensley's appeals to Galvin, received none before going home around 5 pm. His wife told him to have a rest and took the phone off the hook without telling him. By now, Deane had decided Muldoon had to be told what had happened, but could not reach Muldoon by phone. [6]
Lange had meanwhile imposed a 24-hour news blackout on the currency problem, and was reported in the 6:30 pm television news as saying that Muldoon was "refusing his advice on the matter". Muldoon had his press secretary issue a statement that this was untrue, and agreed to a television interview with Richard Harman that evening. Shortly afterward he received a handwritten note from Deane explaining the situation, followed by a letter from Lange. In the interview, Muldoon went over the events of the day from his perspective. He said Lange had not yet responded to him, that "I am not going to devalue, as long as I am Minister of Finance", and that he hoped Lange would agree tomorrow not to devalue. [7] Prime Minister elect David Lange responded with an interview of his own. He stated: "This nation is at risk. That is how basic it is. This Prime Minister outgoing, beaten, has, in the course of one television interview tried to do more damage to the New Zealand economy than any statement ever made. He has actually alerted the world to a crisis. And like King Canute he stands there and says everyone is wrong but me". [8]
Following the interviews, a further crisis was triggered in the foreign exchange markets: when the exchange opened on 17 July, millions of foreign exchange dollars left the country as currency speculators expected a devaluation of the New Zealand dollar. Lange later remarked "We actually were reduced to asking our diplomatic posts abroad how much money they could draw down on their credit cards! That is the extent of the calamity that had been ground into us by the briefings that we'd got". [9]
Roderick Deane and Spencer Russell then spoke to several senior ministers within the National Party caucus. [10] On the morning on Wednesday 18 July, [11] after an emergency caucus meeting, Muldoon relented and agreed to devalue the currency upon Lange's wishes. Muldoon's most senior Cabinet members, led by the soon to be Leader Jim McLay, had threatened to remove Muldoon from his leadership of the National Party and thereby strip him of his post as Prime Minister and Minister of Finance. [1] [12] Cabinet member Jim McLay and Labour party MP Geoffrey Palmer had key roles in persuading Muldoon to step down. They advocated a 'caretaker convention' despite it not existing formally. McLay drafted the convention and presented it in a press statement on 17 July, where it became recognised as the 'caretaker convention'. [13] The New Zealand dollar was devalued by 20%. [11] In a 1994 documentary on the crisis, former Cabinet minister Hugh Templeton confirmed that McLay, working with Bill Birch and Jim Bolger, was ready to approach the Governor-General, Sir David Beattie to have Muldoon removed as Prime Minister (Beattie had suggested he could remove Muldoon prior to the Cabinet meeting on 19 July). [14]
As a result of the constitutional crisis, the incoming Labour Government convened the Officials Committee on Constitutional Reform to review New Zealand's constitutional law, and the Constitution Act 1986 resulted from the two reports by this committee. The issue of the transfer of power from incumbent to elect governments (and hence Prime Ministers) was not resolved by this Act, however, and the transfer of executive powers remains an unwritten constitutional convention, known as the 'caretaker convention' which was developed by Jim McLay. [1]
A television mini-series, Fallout , dramatising both the events surrounding the crisis and the initiation of New Zealand's nuclear-free policy (a major plank of Labour's 1984 election campaign) was produced in New Zealand in 1995. This mini-series, written by Greg McGee and Tom Scott, starred Mark Mitchell as Lange and Ian Mune as Muldoon. [15]
Rogernomics were the neoliberal economic reforms promoted by Roger Douglas, the Minister of Finance between 1984 and 1988 in the Fourth Labour Government of New Zealand. Rogernomics featured market-led restructuring and deregulation and the control of inflation through tight monetary policy, accompanied by a floating exchange-rate and reductions in the fiscal deficit.
David Russell Lange was a New Zealand politician who served as the 32nd prime minister of New Zealand from 1984 to 1989.
Sir Robert David Muldoon was a New Zealand conservative politician who served as the 31st prime minister of New Zealand, from 1975 to 1984, while leader of the National Party. Departing significantly from National Party convention, Muldoon was a right-wing populist with a distinctive public persona described as reactionary, aggressive, and abrasive.
Sir Roger Owen Douglas is a retired New Zealand politician who served as a minister in two Labour governments. He became best known for his prominent role in New Zealand's radical economic restructuring in the 1980s, when the Fourth Labour Government's economic policy became known as "Rogernomics".
James Brendan Bolger is a New Zealand retired politician of the National Party who was the 35th prime minister of New Zealand, serving from 1990 to 1997.
The 1984 New Zealand general election was a nationwide vote to determine the composition of the 41st New Zealand Parliament. It marked the beginning of the Fourth Labour Government, with David Lange's Labour Party defeating the long-serving Prime Minister, Robert Muldoon, of the National Party. It was also the last election in which the Social Credit Party won seats as an independent entity. The election was also the only one in which the New Zealand Party, a protest party, played any substantial role.
Think Big was an interventionist state economic strategy of the Third National Government of New Zealand, promoted by the Prime Minister Robert Muldoon (1975–1984) and his National government in the early 1980s. The Think Big schemes saw the government borrow heavily overseas, running up a large external deficit, and using the funds for large-scale industrial projects. Petrochemical and energy related projects figured prominently, designed to utilise New Zealand's abundant natural gas to produce ammonia, urea fertiliser, methanol and petrol.
In macroeconomics and modern monetary policy, a devaluation is an official lowering of the value of a country's currency within a fixed exchange-rate system, in which a monetary authority formally sets a lower exchange rate of the national currency in relation to a foreign reference currency or currency basket. The opposite of devaluation, a change in the exchange rate making the domestic currency more expensive, is called a revaluation. A monetary authority maintains a fixed value of its currency by being ready to buy or sell foreign currency with the domestic currency at a stated rate; a devaluation is an indication that the monetary authority will buy and sell foreign currency at a lower rate.
The 41st New Zealand Parliament was a term of the Parliament of New Zealand. Its composition was determined by the 1984 elections, and it sat until the 1987 elections.
Sir David Stuart Beattie, was an Australian-born New Zealand judge who served as the 14th governor-general of New Zealand, from 1980 to 1985. During the 1984 constitutional crisis, Beattie was nearly forced to dismiss the sitting prime minister, Robert Muldoon.
The pound was the currency of New Zealand from 1840 until 1967, when it was replaced by the New Zealand dollar. Like the pound sterling, it was subdivided into 20 shillings each of 12 pence.
The following lists events that happened during 1984 in New Zealand.
Sir Roderick Sheldon Deane is a New Zealand economist, public sector reformer, and businessman. He served as deputy governor of the Reserve Bank of New Zealand, and as CEO and chairman of the country's largest telecommunications company, Telecom New Zealand.
The Fourth Labour Government of New Zealand governed New Zealand from 26 July 1984 to 2 November 1990. It was the first Labour government to win a second consecutive term since the First Labour Government of 1935 to 1949. The policy agenda of the Fourth Labour Government differed significantly from that of previous Labour governments: it enacted major social reforms and economic reforms.
Robert James Tizard was a Labour politician from New Zealand. He served as the sixth deputy prime minister, the minister of Finance, minister of Health and minister of Defence.
Colin James Moyle is a former politician of the New Zealand Labour Party who served as a Member of Parliament (MP) from 1963 to 1976 and again from 1981 to 1990. He was a Government minister in the Third Labour and Fourth Labour Governments. He was a close confidant of Bill Rowling during Rowling's short premiership. In the Fourth Labour Government, as Minister of Agriculture, Moyle oversaw the removal of farming subsidies and the establishment of a fisheries quota system.
The Constitution Act 1986 is an Act of the New Zealand Parliament that forms a major part of the constitution of New Zealand. It lays down the framework defining fundamental political principles of governance, and establishes the powers of the executive, legislative and judicial branches of state. It outlines the roles and duties of the monarch, the governor-general, ministers and judges. The Act repealed and replaced the New Zealand Constitution Act 1852 and the Statute of Westminster, and removed the ability of the British Parliament to pass laws for New Zealand with the consent of the New Zealand Parliament.
On 3 February 1983, a New Zealand Labour Party leadership election was held to determine the leadership of the New Zealand Labour Party. The leadership was won by Mangere MP David Lange, who had been Deputy Leader of the party since 1979.
The 1984 New Zealand National Party leadership election was held to determine the future leadership of the New Zealand National Party. The election was won by former deputy prime minister Jim McLay.
The Letters Patent Constituting the Office of Governor-General of New Zealand is a royal decree and a part of the uncodified New Zealand constitution. Sometimes known as the Letters Patent 1983, the instrument has been amended twice since its original issue in 1983. The letters patent—essentially an open letter from Queen Elizabeth II that is a legal instrument—constitutes the office of governor-general as the monarch's representative in the Realm of New Zealand, vests executive authority in the governor-general, establishes the Executive Council to advise the governor-general, and makes provision for the exercise of the governor-general's powers should the office be vacant.
