[Congressional Record Volume 142, Number 102 (Thursday, July 11, 1996)]
[Extensions of Remarks]
[Pages E1262-E1263]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                      NEW ZEALAND ECONOMIC REFORMS

                                 ______
                                 

                           HON. SCOTT L. KLUG

                              of wisconsin

                    in the house of representatives

                        Thursday, July 11, 1996

  Mr. KLUG. Mr. Speaker, I led a congressional delegation which visited 
New Zealand to study their economic reforms. We met with many people 
ranging from the privatization policymakers to sheep farmers and walked 
away with an insightful approach to rescuing an enormous Federal debt 
in a relatively short amount of time. Eliminating the deficit is 
crucial for the United States fiscal survival and the New Zealand model 
provides us with some options to explore. For the benefit of my 
colleagues, I would like to have printed in the Record the preface and 
executive summary of the United States-New Zealand Council report on 
the delegation's trip to New Zealand. For those who desire the complete 
report, please contact my office.

           Report on Congressional Study Tour to New Zealand


                                preface

       A bipartisan Congressional study group visited New Zealand 
     from April 8 to 13, 1996 to examine the causes and effects of 
     New Zealand's remarkable economic reform that has brought New 
     Zealand from the bottom to the top of various OECD lists in 
     terms of economic performance. The group was comprised of 
     Congressmen Scott Klug (R-Wisconsin), William Orton, (D-
     Utah), and Dana Rohrabacher (R-California), plus four senior 
     House staffers: Scott Palmer, Deputy Chief of Staff, Office 
     of the Majority Whip; John Feehery, Communications Director, 
     Office of the Majority Whip; Paul Behrends, Legislative 
     Assistant for Congressman Rohrabacher; and Joyce Yamat, 
     Legislative Assistant for Congressman Klug. The group was 
     accompanied by Ambassador (ret.) Paul Cleveland, President of 
     the United States-New Zealand Council, the organization which 
     funded and arranged the trip.

[[Page E1263]]

       In the course of a crowded and intense five day schedule, 
     the group met with close to two hundred individuals, business 
     leaders, non government organizations, as well as government 
     officials, and took field trips with Telecom New Zealand, 
     Tranz Rail, and the New Zealand Dairy Board to gain a 
     comprehensive view of the reform process and what it has 
     meant to a diverse group of New Zealanders and their 
     institutions.
       The Council deeply appreciates the help and sponsorship of 
     a number of individuals and government and private 
     institutions without whom the trip would not have been 
     possible: the New Zealand Embassy in Washington, the United 
     States Embassy in Wellington and the U.S. Consulate General 
     in Auckland, the Department of State and the New Zealand 
     Ministry of Foreign Affairs and Trade, Bell Atlantic, 
     Ameritech, Wisconsin Central, Mobil Oil Corporation, the New 
     Zealand Dairy Board, Air New Zealand, and all of the 
     individuals and organizations included in the trip schedule.
       The report prepared by the Council reviews the highlights 
     and the principal points that emerged. Its accuracy and 
     representation of views and conclusions are the 
     responsibility of the Council and do not necessarily 
     represent the thoughts of the members of the delegation.


                           executive summary

       New Zealand has undergone one of the most radical economic 
     transformation in recent years in the Western world and 
     increasingly has become a subject for study by others, who 
     want to know why it has been so successful.
       Small, with a population of 3.5 million, and highly 
     homogeneous compared to the United States New Zealand had 
     prior to 1984 become the most socialized country extant 
     outside the communist world, and as New Zealand Ambassador to 
     the United States John Wood is wont to say, ``was performing 
     about as well as the communists.'' Deeply in debt in 1984 
     with its back to the wall, ironically a new Labour 
     government, probably the most intellectual New Zealand has 
     ever had, introduced a comprehensive set of reforms that 
     relentlessly tackled monetary, fiscal, labor, privatization, 
     administration and a myriad of other problems. When Labour 
     ran into political and economic problems that eventually 
     divided it, a National party government was elected and 
     finished the job of reform.
       The results in only ten years proved electric. Shocked into 
     reality, the revived economic system is currently among the 
     best performers in the OECD. Even better indicators than the 
     figures are the improvements in productivity, competitiveness 
     and attitude. New Zealand is rated by responsible judges 
     highest or close to highest in the world in all three.
       Not all have benefited equally. Some Kiwis, particularly 
     those in certain minority ethnic groups, have been left 
     behind and disagreements over what should be done and the 
     ability of government to deliver social and other services is 
     as intense as in the United States and elsewhere in the 
     world. The Congressional group heard from the dissenters as 
     well as from the advocates.
       Despite the differences in pre and post-reform positions, 
     as well as the size and complexity of the two economies, New 
     Zealand offers the following lessons worth further study for 
     their possible application in the United States . . . some 
     obvious, some less so: Speed and equal distribution of the 
     pain of reform were politically necessary in New Zealand to 
     reap the universal gain of reform. Effective managers and 
     sustained attention to following through on changes are 
     essential. Tax revenues grew surprisingly higher than 
     expected because of the integrity introduced into the system 
     by value added taxation. New Zealand might have done better, 
     sooner had it introduced labor and social service reform 
     earlier, thereby reducing these major costs early in the 
     game. The free market absorbs naturally a sizable part of the 
     redundancy created by reform and its worrisome cousin, 
     ``downsizing.'' Training is an essential ingredient however, 
     whether provided by the government or the private sector. Not 
     only should businesses be removed from government to the 
     private sector, where they can be managed effectively in the 
     general interest, government itself should be made more 
     businesslike. We can usefully study such New Zealand 
     innovations as contracts under which senior civil servants 
     can be hired and fired as in the private sector, cost accrual 
     accounting and the requirement for government departments to 
     figure in capital costs of such things as buildings and other 
     hard assets. This practice forces government, like business, 
     to shed unnecessary assets and costs.

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