By Elliot Crossan
On Thursday, the architect of Aotearoa’s broken economic model called for the resignation of Finance Minister Nicola Willis. Sir Roger Douglas, now aged 87, issued a statement alongside University of Auckland chair of macroeconomics Robert MacCulloch putting pressure on the government to ramp up its austerity programme, claiming that Willis is “sending New Zealand bankrupt by failing to get to grips with our ballooning fiscal deficits and public debt”. The Herald chose to run this story on the front page of its Friday edition.
Roger Douglas served as Finance Minister from 1984 to 1988. 41 years ago, Douglas unleashed the ‘Rogernomics’ revolution, which transformed our economy at lightning speed from a protectionist welfare state towards the neoliberal free market model which remains with us today. This neoliberal revolution involved fire-sale privatisation, reckless deregulation and regressive tax reform. This radical agenda was carried out with no democratic legitimacy; Douglas was part of a Labour government elected on a centre-left manifesto. Nobody voted for these sweeping reforms.
Rogernomics, in combination with the austerity, welfare cuts and anti-union laws introduced by the National government of the early 1990s, produced an explosion of inequality which has never been reversed. To this day Aotearoa has a low-wage economy, a broken tax system, a housing crisis, and high levels of poverty — all thanks in large part to Douglas.
This period of radical economic overhaul ended in 1993. In the 30 years that followed, a succession of moderate National and Labour governments carefully managed this new neoliberal order, keeping the structural reforms of Douglas and Richardson in place while staying in the political ‘centre ground.’ This changed with the election of the Coalition in 2023.
The Coalition is the most anti-worker government since the 1990s. Its austerity agenda, led by Willis, involves cutting already-underfunded public services to the bone. The health system is straining to breaking point as a result. In May, the government introduced a shock overhaul of pay equity legislation in order to meet their budget targets. State housing is being sold off, while tougher benefit sanctions and restricted access to emergency housing have created an alarming spike in homelessness.
It is not austerity for everyone though; the government has handed out tax breaks to businesses and landlords, increased spending on police and prisons, and acceded to the Trump administration’s demand for US allies to increase military spending. The general public are being made to pay as our services are eroded, the social safety net is slashed and prisons are built instead of houses.
Inequality has spiraled out of control since 1984, and the Coalition’s austerity agenda is designed to hasten this process. In June it was revealed that the net worth of the 119 individuals and families on the NBR Rich List has exceeded $100 billion for the first time. The government represents the wealthiest and most powerful people in society, and is waging class war against the rest of us on their behalf.
Yet none of this is enough for Sir Roger Douglas. He wants deeper cuts to public spending, using the justification that “Treasury’s long term fiscal forecasts show out-of-control deficits due to pensions and health-care spending from an ageing population.”
Critics of Rogernomics in the 1980s highlighted the key role that Treasury advice played in laying the ground for Douglas’ neoliberal revolution. Then as now, the Treasury was a highly ideological institution staffed by economists trained to believe that neoliberal theory is the only rational way to run an economy.
So when the Treasury in 2025 is releasing briefing documents sounding the alarm bells about rising public debt, we must bear in mind this ideological commitment to free market economics. Reducing government debt and deficits is a key objective of neoliberal thinking. Debt reduction is regarded as a more important objective than maintaining high quality public services. Indeed, the Treasury recently warned that the government’s goal of reducing public spending as a share of the economy means that Kiwis will have to “accept a lower level of public services provided in some functional categories.”
This ideological commitment to debt reduction also means ignoring the fact that NZ government debt as a percentage of GDP is less than half the OECD average. Our problem is with high levels of private debt, not public debt. Treasury’s own long-term forecasts show NZ public debt rising in coming years, but even after this rise we would still have lower debt than the US, UK, France or Japan have in 2025.
Douglas and MacCulloch blame the country’s current economic malaise on Willis not being austere enough. Their statement was released following Stats NZ data showing a sharp 0.9% decrease in GDP in the second quarter of 2025. The claim that this recession has been caused by recent budget deficits is entirely grounded in ideology rather than a real-world assessment of economic facts; any analysis of the actual state of the NZ economy would note that our public debt levels are very low by international standards.
Further cuts to government spending during a recession will only worsen the current crisis. Cutting spending during a downturn leads to a cycle of falling business confidence which in turn leads to lower private investment. When neither businesses nor the state are investing, the entire system screeches to a halt. The UK has been stuck in this ‘austerity doom-loop’ for over a decade; spending cuts have led to further economic contractions, which in turn have caused government debt levels to rise further, justifying more spending cuts.
Blind adherence to neoliberal ideology has led to economic illiteracy on the part of Douglas and MacCulloch. Their argument is based on the false claim that government spending “crowds out” private spending, and that the government reducing investment will cause the market to step into the gap. This ideological position has been disproven time and time again. It is part of an economic theory which persists not because of evidence, but because it serves the interests of the wealthy few.
The real substance of this debate is a disagreement within the government and the ruling class about how far its austerity programme should go. The National Party is currently attempting to balance its austerity measures with the desire to maintain some measure of social and political stability. There is also the electoral consideration that the National Party leadership has to make — whilst Willis and Christopher Luxon broadly adhere to the same neoliberal theory as Douglas and MacCulloch, they also want to win the next election. Recent polls and surveys, which have shown support for the government falling alongside growing levels of discontent across society, indicate that Willis and Luxon are failing on both of these objectives.
Douglas, MacCulloch and Treasury officials align more closely with ACT. Douglas was one of the co-founders of the ACT Party in 1993, and despite some ideological disagreements with David Seymour’s brand of libertarianism, the architect of Rogernomics still shares the same overall view as Seymour: that attempting to manage the status quo while maintaining stability is impossible, and that Aotearoa needs to enter a second phase of the neoliberal revolution. Douglas’ book Unfinished Business (1993) outlines some of the extreme measures he believes are necessary, including the introduction of a flat tax rate.
The free market radicals believe that another full-scale confrontation between capital and labour is necessary to restart economic growth. Their agenda would once again drive down the living standards of the majority of the population in order to slash taxes for the rich, privatise essential services and boost corporate profits.
New Zealand First was also founded in 1993, and initially the party was opposed to Rogernomics. Winston Peters appears to have made his peace with the free market later in life however, given his party’s main role in the current neoliberal Coalition has been to advance the interests of mining companies and tobacco giants. Even so, the policies announced at the party’s latest conference include major unfunded spending commitments, and Peters has objected to Willis’ demands for savings to be made in the Ministry of Foreign Affairs and Trade; NZ First appears to be positioned on the moderate side of the austerity debate within Cabinet.
The Coalition, and the ruling class as a whole, are divided over which approach to take. Working class living standards in Aotearoa have already been falling in the last few years through the cost-of-living crisis, the recession and the government’s current austerity programme. If the fiscal hawks in the Treasury and the ACT Party get their way, it will mean even more severe cuts to public services and the social safety net. The inequality crisis will accelerate even faster.
Naomi Klein’s 2007 book The Shock Doctrine outlines in detail how moments of crisis are exploited by neoliberal governments to introduce unpopular reforms which in normal times would not be palatable. We are experiencing this phenomenon in Aotearoa today: the recession is being used to justify unpopular austerity policies.
It is no coincidence that the Herald chose to run Douglas’ demand for even harsher austerity measures on its front page the day after the dire GDP figures for June were released. The ruling class are attempting to manufacture consent for deeper cuts, heedless of the devastating effect these cuts will have on future growth. This narrative must be exposed for what it is: an attempt to ramp up the class war against working people.
Growing inequality is not inevitable. The continual deterioration of the public sphere is not inevitable. Falling living standards for working people are not inevitable. All of these trends can and should be reversed through a programme to redistribute wealth and invest in the public sector, financed through a combination of raising taxes on the rich and abandoning arbitrary debt targets. This will require a confrontation with neoliberal ideology, and with the capitalist interests that this ideology serves.
If decisive action is not taken to tackle growing inequality, the rising discontent and alienation in our society will turn into mass anger and resentment. We only have to look overseas to see where this leads: far-right mobilisation and anti-refugee riots in the streets of Britain and the authoritarian demagogue in the White House are just two examples among many.
There is no way out of this inequality crisis without a fundamental and irreversible redistribution of wealth and power away from the corporate oligarchy and towards the working class of Aotearoa. The current austerity programme, let alone the harsher measures Douglas is calling for, must be stopped.
Nobody voted for Rogernomics 41 years ago — the free market failed our people in the 1980s and it is failing us today. The legacy of Roger Douglas must be torn down root and branch. It is time to end the era of neoliberalism once and for all.
Elliot Crossan is an ecosocialist writer and activist from Tāmaki Makaurau Auckland. He is the Chair of System Change Aotearoa. Subscribe to his Substack page to read more.
