New Public Management and Public Sector Reform in Victoria and New Zealand: Policy Transfer, Elite
Networks and Legislative Copying
SHAUN GOLDFINCH Nottingham University Business School
VANESSA ROBERTS Independent Scholar
In the early 1990s, Victoria reformed its state sector along New Public Management (NPM) lines. Drawing on interviews with key policy-makers of the time, including chief executives, ministers and key officials from both jurisdictions, and using archival material and secondary sources, this article shows that New Zealand developments were a key source for Victoria’s reforms — even down to seemingly copying passages of legislation. Policy transfer took place within a supporting framework of an Anglo-American diffusion of NPM rhetoric and neoliberal ideas. But New Zealand’s experiences gave content, form and legitimation to Victoria’s reforms, while providing a platform and experience for learning and divergence, and a group of transferable experts. We underline the importance of the Australia-New Zealand relationship and trans-Tasman elite networks in understanding the governance of both countries.
Policy-makers borrow from each other in a process termed, amongst other things, policy learning, policy transfer, diffusion or lesson drawing. As Dolowitz and Marsh note, “policies, administrative arrangements, institutions, and ideas in one political system (past or present) are used in the development of policies, administrative arrangements, institutions and ideas in another political system”.1 Policy transfer can take place between states, within states, and across time. It can include the transfer of rhetoric; policies; institutions; ideologies or justifications; attitudes, values and ideas; implementation; instruments; and negative lessons. It can range from direct copying of legislation, policy and techniques — “the simplest way to draw a lesson”2 — to “emulation” of “best” practices; adaptation; synthesis, hybridization; inspiration;
This study draws on Vanessa Roberts, “The Origin of Victoria’s public sector reforms: policy transfer from New Zealand?”, MA thesis, Department of Political Science, University of Canterbury, Christchurch (2005), supervised by S. Goldfinch. The thesis topic was funded by a scholarship from the Marsden Fund of the Royal Society of New Zealand. Order of authorship of this article is alphabetical and does not imply priority. Thanks are due to the referees and editors of this journal. Errors and omission are ours. 1 D.P. Dolowitz and D. Marsh, “Learning from Abroad: The Role of Policy Transfer in Contemporary Policy-Making”, Governance, Vol. 13, 1 (2000), p.5. 2 R. Rose, Lesson-Drawing in Public Policy (Chatham NJ, 1993), p.30.
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legitimation and simulacrum.3 Politicians, public officials and policy networks of international actors, international organizations, NGOs, think-tanks, international consultancies and business groups can be involved.
Australian and New Zealand policy-makers have continually borrowed ideas, legislation and policy from elsewhere. This has ranged from a “coercive” transfer of the British constitution, legislation, common law, institutions, policies and instruments during colonialisation,4 to more recent eclectic borrowings from elsewhere, particularly the United States and the Anglo-American world.5 One link that remains less explored is the close interactions on policy development, transfer and learning that have occurred between Australia and New Zealand. This is despite a recent book-length study on the history of the New Zealand and Australian relationship.6
This deficit is perhaps most striking when examining links in policy development between the state level in Australia, and central level in New Zealand. To address this deficit and to drill down further into this important relationship, we examine a particular series of major reforms to state governance in Victoria in the early and mid 1990s, broadly in a new public management (NPM) tradition. These have striking similarities to New Zealand’s NPM reforms of the 1980s and 1990s. We attempt to examine why these strong similarities exist, and what light they shine on the processes of policy development and change. Drawing on interviews with seventeen key policy-makers of the time including chief executives and ministers and key officials from both jurisdictions (contact authors for list), and using archival material and secondary sources, this articles shows that indeed New Zealand developments were a key source for Victoria’s reforms — even down to seemingly copying passages of legislation. Policy transfer took place within a supporting framework of a worldwide diffusion of new public management (NPM) rhetoric and neoliberal ideas. But New Zealand’s experiences gave content and form to Victoria’s reforms and legitimated the reforms themselves, while providing a platform and experience for learning and divergence, and a group of transferable experts. Organisational ties and elite networks were central in this process. This paper adds to the literature on policy transfer and learning, including focussing on the role of policy transfer between central and regional government from different jurisdictions. Its particular novelty lies in the light shone on the role of transferable experts in policy transfer, and on the importance of the Australia-New Zealand relationship in policy development.
Public Sector Reform in Victoria and New Zealand
New Zealand’s comprehensive public sector reforms were introduced by the Fourth Labour Government (1984-90) in legislation, including the State-Owned Enterprises Act 1986, the State Sector Act 1988 and the Public Finance Act 1989. The Employment Contracts Act 1991 and the Fiscal Responsibility Act 1994 passed by the succeeding National Government, added further components. Reform was distinguished by the speed and scope of change, and the remarkable influence of then
3 Shaun Goldfinch, “Rituals of Reform, Policy Transfer, and the National University Corporation Reforms of Japan”, Governance, Vol. 19, 4 (2006), pp.585-604. 4 Alan Ward, “Exporting the British Constitution: Responsible Government in New Zealand, Canada, Australia and Ireland”, Journal of Commonwealth and Comparative Studies, Vol. 25 (1987), pp.3-25. 5 Daniel Roberts, Atlantic Crossings: Social Politics in a Progressive Age (Cambridge, MA and London, 1998). 6 Philippa Mein Smith, Peter Hempenstall, and Shaun Goldfinch, Remaking the Tasman World (Christchurch, 2008).
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cutting-edge economic and neoliberal theory.7 Claims of fiscal crisis, state excess and economic stagnation were used in their legitimation.8 Changes included corporatising and privatising state owned enterprises; introducing performance-related individual contracts for senior and other staff; increasing departmental management autonomy; and changing financial management and reporting requirements including moving from input-based to output-based reporting, and the introduction of budget transparency mechanisms.
Public sector reform in Victoria followed similar lines, in the processes of reform, the use of comprehensive legislation to introduce changes, and in reform content. In October 1992 the Cain Labor government was replaced by a Liberal government led by Jeff Kennett, elected on a rhetoric of fiscal crisis and expressing a preference for “a small, efficient public service concentrating on core services and the promotion of the private sector as a vehicle for providing government services”.9 On 9 October 1992, just six days after the election, Kennett ordered an independent Commission of Audit, which, he said “would give the Victorian public an accurate and comprehensive statement on the State’s finances [and] make recommendations for the Government to manage Victoria’s finances out of the crisis inherited from the previous Government”.10 Draft legislation was sent to parliament, and despite opposition misgivings, the Public Sector Management Act, the Employee Relations Act, and the State Owned Enterprises Act were assented to in November.
In October 1993 Kennett released a document outlining the government’s Management Improvement Initiative. This followed “closely the Victorian Commission of Audit’s recommendations for fundamental public sector reform” with the Government to “quickly and decisively [...] formalise new management systems that will [build] long term success and make sure the problems of the past do not recur”.11 The Financial Management Act followed in 1994. As in New Zealand, limited-term individual contract employment was adopted, as was ostensible performance-based pay, output funding, contracting out and competitive tendering and ultimately privatisation. Reporting, budget and fiscal responsibility requirements converged. Both sets of legislation are compared in Tables 1, 2 and 3, with further detail below.
State Owned Enterprises (SOEs)
The respective SOE Acts required government-owned businesses — previously a mix of various departmental and other structures — to be restructured along corporate lines. This included boards of directors reporting to the shareholding ministers, financial reporting along commercial lines and a requirement for “efficiency” and, in NZ’s case, profitability. Previously existing social and other obligations were largely removed or
7 Jonathan Boston et al., Public Management: The New Zealand Model (Auckland, 1996); Brian Dollery, “Economic Foundations of Public Sector Reform” in Shaun Goldfinch and Joe Wallis, eds., International Handbook of Public Sector Reform (London, 2009); Shaun Goldfinch, “New Zealand: Reforming a NPM Exemplar?” in International Handbook of Public Sector Reform . 8 Shaun Goldfinch and Daniel Malpass, “The Polish Shipyard: Myth, Economic History and Economic Policy Reform in New Zealand”, Australian Journal of Politics and History, Vol. 53, 1 (2007), pp.118-37. 9 P. Salway, “Reform of Human Resource Management in a Public Service” in C. Clark and D. Corbett, eds., Reforming the Public Sector: Problems and Solutions (St. Leonards, 1999), p.13 10 Jeff Kennett, Victorian Commission of Audit Press Release retrieved 9 June 2004 from <http://www.dpc.vic.gov.au/domino/webnote/pressrel.nsf>. 11 State Government of Victoria, “A Management Improvement Initiative for Victoria” (Melbourne, 1993).
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required to be transparently funded. Management of the SOEs was expected to be carried out at arm’s length from the Ministers, although this was to a greater extent evident in New Zealand. As in New Zealand, corporatisation in Victoria developed quickly into privatisation. Again, as in New Zealand, fiscal considerations and debt repayment were the ostensible, but disputed, reasons for this. However, in Victoria there was not an attempt to establish the SOEs as profitable businesses before sale, as attempted to a limited extent in New Zealand (Table 1).
Table 1
New Zealand and Victorian Public Management Legislation Compared State-Owned Enterprises Act 1986 (NZ) State Owned Enterprises Act 1992 (Vic)
‘State-owned enterprises‘ (NZ) or ’state business corporations‘ (Vic)
Operate as ‘efficiently as possible in accordance with prudent commercial practice’ (Vic) or ‘as profitable and efficient as comparable businesses’ (NZ)
Established boards and reporting requirements along commercial lines
‘Sense of social responsibility’ (NZ) and ‘contribution to the economy and well-being’ (Vic)
Moved quickly to privatisation
State Sector Act 1988 (NZ) Public Sector Management Act 1992 (Vic)
Individual contracts (agreements) and ‘freedom of association’
Bargaining rights contestable
Victorian Act greater emphasis on dispute resolution and industrial harmony
Principles of sound financial management, reporting standards
Budget transparency and pre-election updates
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The State Sector Act 1988 and the Public Sector Management Act 1992
The State Sector Act 1988 (NZ) and the Public Sector Management Act 1992 (Vic) introduced contracts of employment of up to five years for chief executives (department heads in Victoria), employed other senior officials on individual contracts and gave the new chief executives greater management autonomy, including the hiring of their own staff. Previously, public servants were employed by central agencies — the State Service Commission in New Zealand and the Public Service Board in Victoria — across the entire public sector. In Victoria contracts could be terminated with four weeks’ notice. New Zealand introduced a senior executive service, which never gained momentum, while Victoria maintained the senior executive service which had its origins in the earlier Liberal Thompson administration. The Public Service Commissioner replaced the Public Service Board in Victoria. The more significant Board powers were redistributed between the Premier and heads of departments. 12 As Tables 1 and 2 show, parts of both acts are virtually identical.
Table 2: Principles and Purposes in the State Sector Act and the Public Sector Management Act
State Sector Act 1988 (NZ) Public Sector Management Act 1992
(Vic)
Principles
Purposes ...ensure that employees in the State
services are imbued with the spirit of service to the community (Long title a).
...promote among public sector employees a spirit of service to the community ( s. 3b)
...promote efficiency in the State
services [and] ensure the responsible management of the State services (Long title b, c).
...emphasise the principles of merit, responsible management, management competence and efficiency within the Victorian public sector (s. 3c).
...maintain the appropriate standards of
integrity and conduct among employees in the State services (Long title d).
...maintain appropriate standards of integrity and conduct for employees in the Victorian public sector (s. 3d).
In New Zealand the responsible Minister was the “employer” of chief executives while the State Services Commission was the “employer” for the purposes of negotiating conditions of employment for chief executives and monitoring their performance. Chief executives became the employer of their staff. In Victoria the Premier became the employer of all department heads, who in turn became the employers of all staff employed within their agencies, and Kennett maintained a direct role across the public service through a bureaucratic structure called the State Coordination and Management Council that became known as the “Black Cabinet”. As such, Ministers in Victoria played a lesser role than they did in New Zealand, with powers in Victoria shared
12 Deirdre O’Neill, “Victoria: Rolling Back – or Reinventing – the Kennett Revolution?”, Australian Journal of Public Administration, Vol. 59, 4 (2000), pp.109-115.
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between the Premier, department heads, the Public Service Commissioner, and the Employee Relations Commissioner.13
The Employment Contracts Act 1991 and the Employee Relations Act 1992
The Employment Contracts Act 1991 (NZ) and the Employee Relations Act 1992 (Vic) introduced individual contracts into employment matters, overturning a century of active regulation of the labour market and sponsorship of trade unions and collective bargaining. Individual contracts (agreements in Victoria) were introduced for state sector employees below the senior executive level, not covered in the State Sector Act and the Victorian equivalent. The two Acts share important similarities and sections are strikingly similar, with some virtually identical. Employees had the “freedom to choose” whether to associate with other employees for the purposes of advancing their employment interests. Industrial action was deemed unlawful, subject to certain conditions (Tables 1 and 3). Both Acts nominated bodies to deal with industrial disputes: in New Zealand the Employment Tribunal, and in Victoria the Employee Relations Commission of Victoria. Victoria, however, saw its industrial law challenged at the federal level and in November 1996 the Kennett Government referred its industrial relations power to its federal counterpart, which resulted in dual regulation.
Financial management
The Financial Management Act 1994 (Vic) and the Public Finance Act 1989 (NZ) shared a move from input funding, to what was called “output” funding. Input funding — where actual inputs into the policy process are specified and directly funded — was replaced by the quasi-market type “output” model with the purchase of goods and services from agencies by the minister. How outputs were to be delivered was, in theory at least, left to the agency to decide. The New Zealand Act stipulated that the chief executive of a department was responsible to the Minister for the financial management and performance of the department. In Victoria the accountable officer was the head of that department; or, if relevant, the chief executive officer. New Zealand used the term “outputs” while the Victorian Act referred to “services”. However Victoria later adopted the term “outputs” in its Financial Management (Amendment) Act 1998 where outputs were “goods produced or services provided by or on behalf of an authority or public body”. Both Acts encouraged the adoption of private sector type accounting practises into the public sector, including the use of accrual accounting (Table 1). Both jurisdictions converged on budget transparency legislation.
13 Deirdre O’Neill, “The Quiet Revolution: Public Service Reform in the Kennett Era” in B. Costar and N. Economou, eds., The Kennett Revolution: Victorian Politics in the 1990s (Sydney, 1999), pp.76-87. Twenty-two departments were amalgamated into thirteen “mega-departments”.
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Table 3: The Employment Contracts Act 1991 and the Employee Relations Act 1992 Compared
Employment Contracts Act 1991 (NZ)
Employee Relations Act 1992 (Vic)
…to promote an efficient labour market (Long title).
…to promote efficient and productive industry...and an efficient labour market (s. 3a).
Employees shall have the freedom to choose whether or not to associate with other employees for the purpose of advancing the employees’ collective employment interests (s. 5a). No person may, in relation to employment issues, apply any undue influence, directly or indirectly, on any other person by reason of that other person’s association or lack of association, with employees (s. 5b). The Act provides for voluntary membership of employees’ associations (s. 6). Where there is no applicable collective employment contract, each employee and the employer may enter into such individual employment contract as they think fit (s. 19.1). The rights of employees to strike and the right of an employer to lockout are recognised, subject to certain constraints (s. 60a).
...all persons …have the freedom to choose whether or not to associate with other persons for the purposes of advancing their employment interests (s. 53a). ...no person may, in relation to employment issues or the provision of services, apply any undue influence, directly or indirectly, on any other person by reason of that other person’s association, or lack of association, with other persons (s. 53b). The Act provides for voluntary membership of employees associations (s. 54). ...an employee who is not covered by a collective employment agreement and his or her employer may enter into any individual employment agreement they think fit (s. 9.1). Participation in industrial action is unlawful if certain conditions apply (s. 36.1).
Sources of Reform in Victoria
Why did the Victorian reforms so closely resemble the New Zealand ones? While a general policy “diffusion” and spread of values and ideas may have encouraged NPM in a broad albeit vague and sometimes contradictory sense, we argue the particular content and form of the Victorian reforms drew heavily on New Zealand models. A broad groundwork for reform was laid before the election, with a campaign appealing to crisis to legitimate change that had “no alternative”, and with investigations of reforms beginning in previous years.
The Liberal Party’s election strategy had been set out in an internal party document as early as July 1991. During the 1992 election campaign, the Coalition denied plans to make any major changes to the Victorian Public Service. However, while Treasury spokesman Alan Stockdale admitted there were no detailed policy debates on the issue during the election campaign, he gave “hundreds of speeches” about public sector
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reform and privatisation. Prior to the 1992 election, the Liberals conducted a “Guilty Party” advertising campaign to vilify individual Labor Ministers for their role in the state’s perceived economic decline. The speed at which the new legislation was introduced so soon after the election, suggests that it was likely a considerable part was developed while the Liberals were still in opposition.
Once elected, the Premier Jeff Kennett, described by respondents as “visionary”, the “front-man” and “politically brave”, along with his Treasurer Stockdale —variously described as the “intellectual powerhouse”, “the engine room” and “a solid thinker” — provided the “double act [...] that produced the performance that kept the Government humming along”. The duo was seen as key in driving the reforms. Kennett also had strong links with Ken Baxter (Chair of the Victoria Public Service Board in 1992 and the Secretary of the Victorian Department of Premier and Cabinet 1992–1995) in the early days of the Liberal government, so much so they were also described as a “double act”.
We can see a series of possible, not necessarily mutually exclusive, sources for the reforms.
International Trends
According to the former Treasurer, the “the most important influence was […] a broad international movement that was pursuing the same sort of agenda”. One official noted the United Kingdom (UK) as an important influence on the electricity sector. International consultants, many of whom were British, were a further influence, particularly on privatisation.14 Britain and British consultants also provided negative lessons, being “extremely useful for indicating areas where they thought they should have done better”, as one respondent noted. There was also interest in the United States for justifications for a reduced role for government, and American theorists provided much theoretical and ideological underpinning for NPM. It was seen as useful to look to Canada as it operated under a similar federal system.
The Victorian reforms drew on years of thought and work by the Liberal opposition, which also involved international learning. Before 1985, Liberal shadow minister Haddon Storey examined Canadian reforms, while the examination of US state governments supported a belief in a more limited role for government. Between 1985 and 1992 Kennett and Stockdale familiarised themselves with trends in the rest of the world and within Australia. In 1990 Stockdale undertook post-graduate study at the London School of Economics on a British government scholarship and examined, amongst other things, the “Next Steps” Programme and made contact with members of think-tanks including the Institute of Economic Affairs, and with civil servants, industry leaders, and various other bodies. Stockdale also visited and examined reforms in New South Wales, examined reforms in Canada, and hosted visits from several provincial Canadian ministers.
Policy elites looked to international literature. The NPM tract Reinventing Government15 was important, with, according to a former senior official, copies “being circulated like mad”. It was seen as required reading for senior Victorian public servants who wished to keep their jobs following the election of the Kennett government. It provided some rhetoric used by the Liberal government, including Kennett’s favoured “We’re steering, not rowing”. The book’s influence extended beyond government, with Des Moore, a former Commonwealth Treasury official and
14 D. Woodward, “Privatisation: A Policy or an Ideology?” in The Kennett Revolution, pp.150-159. 15 David Osborne and Ted Gaebler, Reinventing Government (Reading, MA, 1992).
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member of the think tank the Institute for Public Administration, meeting with one of the authors while in America. The Victoria Commission of Audit drew on it and cited it, and folklore has it that one of its first actions was to buy a dozen copies.16 In interviews Commission members confirm reading it and saw it helping reinforce principles they held, while providing reassurance their thinking was acceptable.17
A key problem with seeing a broad NPM international consensus as the main driver and provider of content of reform, is the great variety and indeed sometimes contradictory prescriptions and decisions that can be subsumed under the NPM banner.18
Victorian Commission of Audit
The Victoria Commission of Audit is potentially a key source.19 Ordered by Kennett in October 1992 just days after the election, it released its findings in April 1993 (i.e. actually after some of the legislation considered here). Its findings reflect broad NPM trends and rhetoric. It followed and influenced similar reports elsewhere, including the New South Wales 1988 “Curran” Commission of Audit and reports in Tasmania (1992), Western Australia (1993), South Australia (1994) and Queensland (1996).20 The Victorian Commission adopted the language of crisis, noting the “magnitude of the budgetary problems facing the State and the […] very limited options open to any government faced with [such] problems”.21
Views on the influence of the report differ amongst respondents. As a former departmental secretary noted, the report was a catalyst that “awakened people to the quantification of the problem”. This crisis framing provided a useful delegitimation of previous policy settings. For Stockdale, it reinforced the government’s mandate by affirming the perception of financial crisis and gave credibility to the government’s programme. While not seen as an initiator, the report gave some structure to the reforms, supported their direction and gave them “a degree of legitimacy”. It also provided a checklist to monitor progress.
The Influence of New Zealand in Victoria
New Zealand, as one respondent noted, had become “a very good laboratory for Australia”, with another noting it had “the advantage of being relatively small and you [could] almost see the impacts of the reforms on the economy because they were quite substantial”. Indeed, “the view was held that the New Zealand system […] would produce the results more effectively than any of the other systems”, noted a former departmental secretary. Avenues for learning and transfer were certainly in abundance. These ranged from visits, personal links and friendships, organisational linkages, to the active recruitment of New Zealand policy entrepreneurs and consultants into the
16 R. Elvins, “Program Evaluation in the Budget Sector in Victoria” in J. Guthrie, ed., Making the Australian Public Sector Count in the 1990s (North Sydney, 1995), p.55. 17 The role of international organisations was seen as limited by participants in Victoria with the former Treasurer noting their “zero” role in the reform of the Victorian public sector. 18 Shaun Goldfinch and Joe Wallis. “Two Myths of Convergence in Public Management Reform”, Public Administration, Vol. 88, 4 (2010), pp.1099-1115. 19 Owen Hughes and Deidre O’Neill, “Public Management Reform: Some Lessons from the Antipodes” in L. Jones, J. Guthrie, and P. Steane, eds., Learning from International Public Management Reform Vol. 11-A (Kidlington, 2001). 20 B. Walker, Privatisation: Sell Off or Sell Out? The Australian Experience (Sydney, 2000). 21 Robert Officer, Report of the Victorian Commission of Audit (Melbourne, 1993).
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Victorian public sector. Legislation was also a direct link, as were the writings and books of policy innovators from New Zealand.
Network links between New Zealand, Victorian and Australian policy elites were numerous and dense, cemented by visits and shared and interlocking positions. Roger Kerr, of the New Zealand Business Roundtable, worked for the Industry Commission for three months from late 1984 to 1985 and later employed former officials in the Business Roundtable. Kerr recalls being seated next to Jeff Kennett at an annual general meeting of the Australian Stock Exchange dinner, with this an example “of how close the Victorian Government felt to what was going on in New Zealand”. Victoria and New Zealand shared links such organisations as the Council of Australian Governments (COAG), with New Zealand a member or observer on most of its ministerial committees. Official Jeff Rae, who had held a number of senior Commonwealth positions, was one of the first to work in the New Zealand Treasury as part of a staff exchange negotiated under what became the Closer Economic Relations (CER) Agreement. Memberships of neo-liberal think tanks were heavily intertwined, as below.
Dedicated learning (and teaching) trips were common. The Victorian Treasurer Stockdale visited New Zealand and met with those involved with the privatisation of New Zealand Telecom and had briefings on various initiatives planned in New Zealand. Roger Douglas, New Zealand Minister of Finance 1984-1988 and key figure in New Zealand’s reforms, along with his advisor Geoff Swier (who was to later work for the Victorian public service), also met with Stockdale in Melbourne in 1989. Douglas was highly regarded, particularly by business interest groups in Victoria. Roderick Deane (a former State Services Commissioner and Chief Executive of the privatised Electricorp and Telecom, strongly identified with New Zealand’s reforms) and Ruth Richardson (Finance Minister, 1990-1992, identified with New Zealand’s fiscal responsibility legislation) made trips to Australia to meet individuals involved with Victoria’s reforms. Ken Baxter invited Deane to Sydney to talk to New South Wales officials regarding New Zealand’s reforms. As one respondent noted, “people were prepared to discuss what had happened in New Zealand because they were proud of their achievements in New Zealand at that time”. While in opposition, Liberal member Jim Plowman was on a member of a group that travelled to New Zealand to investigate privatisation. The group met with cabinet ministers and bureaucrats. David Briggs, who worked in the Premier’s Department and was a Director in the Economic Reform Unit of the Victorian Treasury, visited New Zealand and “was amazed at how intense and consistent” the thinking was in New Zealand.
As well as providing lessons, such visits gave legitimacy to similar reforms in Victoria. As the former Victorian Treasurer noted, such visits contributed to refining “my own ideas […] gave me some anecdotes […] useful in selling the message [and] gave credibility to what we were doing”. There was also “a fair stream of academics back and forth between New Zealand and Australia”. When academics were being supportive they could give credibility to the government’s policy direction, which could help facilitate the introduction of the reforms. A senior Victorian official notes economist Sir Frank Holmes and those working with him at Victoria University in Wellington gave “us quite a lot of advice”, although there was a general suspicion of many academics as “left wing”.
While some considered verbal and experiential learning to be more valuable, policy-makers also read widely from New Zealand sources. This included the New Zealand Treasury briefs to the incoming government written in 1984 and 1987. Publications
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such as The Economist helped to bring New Zealand’s activities to a wider audience. Papers were also received from the New Zealand Business Roundtable, and former New Zealand Minister Richard Prebble’s book, I’ve been thinking, was seen as useful for its “anecdotal content” by one respondent. Some ministers in the Kennett government read Roger Douglas’ books and were aware of his speeches. The widely read Reinventing Government also mentions New Zealand at length. The Commission of Audit cites New Zealand sources such as the Treasury’s 1989 Putting it Simply and the other documents, and references are made to New Zealand’s accounting systems, chief executive contracts, budget reporting procedures, and supposed gains from the reforms.22 Indeed, the report draws clear parallels between the “current economic climate in Victoria [which] is similar to that which existed in New Zealand. It should be possible to employ or contract the services of people or organisations with appropriate skills at reasonable rates.”23
Direct recruitment of New Zealanders was also an important and perhaps central avenue for transfer, particularly in implementation. As a member of the Commission of Audit noted: “It wasn’t enough to have a group of people intellectualising about the issue — you had to make it operational and the question is ‘Where do you get people who’ve had operational skill?’ […] in New Zealand you could have both.” Examples were many and significant. Geoff Swier, a former ministerial advisor to Roger Douglas, advised the Victorian government on its electricity and gas reforms from 1993-1999. He also introduced other New Zealanders to work in Victoria. Rik Hart worked for the Ministry of Fisheries in New Zealand before being “headhunted” to head of the Department of State (and Regional) Development in Victoria from 1995-2000. Chloe Munro, strongly identified with the Victorian reforms, worked for the New Zealand Treasury before overseeing a reform unit in the Victorian government in the mid-1990s. John Perham, responsible for restructuring New Zealand’s National Provident Fund, later became Deputy Secretary and Director of Privatisations in Victoria and oversaw the sale of $billions of Victorian assets. He directly applied “the major lesson from New Zealand [which] was to move on all fronts swiftly using all means”. Harvey Parker, an Australian and first chief executive of New Zealand Post, headed United Energy, the first electricity company in Victoria to be privatised. Peter Troughton, British, but with extensive reform experience in New Zealand including leading NZ Telecom to a float, was recruited as principal consultant on energy reform in Victoria. Troughton in turn recruited other New Zealanders. Troughton, Stockdale, and senior consultants from other organisations became the core of the reform team and met twice a week. Consultants were used particularly, according to one respondent, in “post-implementation thinking and [when] we were trying to keep pace with where New Zealand was going” and when the necessary skills were seen to be lacking in the public service. New Zealanders also made recommendations about which consultancy firms should be used.
At its most basic, policy transfer was seen in the direct copying or adaptation of New Zealand legislation, as previous sections suggest. For example, while a former New Zealand ministerial advisor and advisor to the Victorian government claimed few in Victoria had a sophisticated understanding of the intellectual underpinnings of the NZ SOE Act, it provided, according to a former Secretary of the Victorian Department of Premier and Cabinet, “structurally […] the best basis — it put the SOEs clearly to
22 Ibid. 23 Ibid., p.201 [emphasis added].
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one side, clearly identified them, gave them clear lines of accountability and […] gave you a good vehicle for privatisation”. The legal drafting team “cherry-picked” from New Zealand’s legislation and the legal firm Minter-Ellison “used [NZ’s] legislation […] as the core for redrafting Victoria’s public service legislation”. On employment issues however, because of the division of powers at the state and federal levels in Australia, New Zealand’s legislation could not be copied in entirety. As noted by interviewees, the principles of the New Zealand legislation were borrowed, and some sections were largely lifted. Given the speed at which legislation was introduced in Victoria, copying New Zealand legislation provided a useful cognitive shortcut for Victorian policy-makers.
New Zealand was also used as a negative lesson by opponents of the reforms, albeit with little success. The Labor Party ran television advertisements during the election using New Zealand as an example of what was intended if the Liberals were elected. In Parliamentary debates on the Employee Relations Bill, a Labor member noted that “the New Zealand experience […] has hit hard the wages and conditions of women and young people”.24 In debates on the State Owned Enterprises Bill, an opposition member claimed “the failed privatisation schemes undertaken in Britain and New Zealand [are] a recipe for huge increases in prices to the community and for a total loss of public accountability [and] can involve hundreds of millions of dollars in consultancy fees”.25
Think Tanks
Think tanks, usually presenting a strong neoliberal policy line, provided a source of policy advice and influence, legitimation of the government’s policy directions, and further cemented links between cross-Tasman elites. They also had often shared highly interlinked and overlapping memberships, and sometimes had an explicitly trans-Tasman focus. Some were seen as “active contributors” to the Kennett government’s policy formulation, and as Stockdale noted, provided legitimacy for the Liberal agenda.26
One of the more important was the Tasman Institute, formed in 1990. This provided research and advice on a broad range of issues, including economic restructuring and reform in Australia, New Zealand and the region, and was noted as influential by some respondents. The Director, former academic Michael Porter, had worked for the IMF, the Reserve Bank of Australia, and as a former senior advisor in the Department of the Prime Minister and Cabinet. He was previously a Professor of Economics. Assessments of its influence by respondents range from it “playing a reasonable role” according to one public sector chief executive, to “contributing to a process of getting ideas discussed […] to inform the debate as to what should happen”, to not being mainstream enough to influence government significantly. Funding was from leading Australasian business corporations. Former New Zealand Finance Minister Roger Douglas was the founding Chairman of the Institute in 1990. Former New Zealand State Service Commissioner Roderick Deane played a role in its establishment. Later the Tasman Institute combined with ACIL Consulting to form ACIL Tasman. The Tasman Institute has close links and shared membership with the New Zealand
24 J. Kirner, “Employee Relations Bill”, Hansard (Parliament of Victoria), (Assembly), 5 November 1995, p.485. 25 T. Theophanous, “State Owned Enterprises Bill Second Reading 17 November 1992” in Hansard (Parliament of Victoria), p.742. 26 Woodward, “Privatisation: A Policy or an Ideology?”, p.52
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Business Roundtable (NZBR), a highly influential business interest group with strong ties to both the Labour (1984-1990) and National Governments (1990-9), with a hard-line neoliberal policy agenda. It awarded Roger Kerr, the Executive Director of the NZBR and a former Treasury official, the first “Tasman Medal” in 1994 for services to economic reform.
The Centre for Independent Studies (CIS), a Sydney-based think-tank, provided some general intellectual support for the changes in Victoria. The Centre also had a close association with the New Zealand Business Roundtable with Kerr a regular visitor, and Roderick Deane a one-time board member. Former New Zealand Finance Minister Ruth Richardson was a director. As Deane noted, CIS functions provided an avenue for informal interaction. The Crossroads Group was most prominent during the time of the Fraser government and promoted free-market thinking. It became “the nucleus of the ‘free-market’ counter-establishment of the 1980s”. The group comprised prominent political figures, academics, and those from the corporate sector but was not directly focused on Victoria.27 The hard neoliberal H.R. Nicholls Society, focussed on reforming Australia’s industrial relations, also had links to other think tanks and some senior liberal politicians (particularly at the federal level). Des Moore, a former senior fellow of the IPA, was also involved with the H.R. Nicholls Society, although Alan Stockdale describes it as having an “extremist aura”. While having little direct influence, the Society played a role in expanding the parameters of the debate and its advocacy of more extreme action made the government’s policy innovations seem less so.
Another important think tank was the Institute of Public Affairs (IPA), also with a strong neoliberal agenda. It was founded in 1943 as “an independent, non-profit public policy think-tank, dedicated to preserving and strengthening the foundations of economic and political freedom” and had run a pro-privatisation line since the 1980s. It had strong ties with the Commonwealth bureaucracy. Both Tasman and IPA seized on the downgrading of Victoria’s credit rating in 1990 and 1991 as evidence of a deepening crisis that need urgent solutions.
The IPA, the Tasman Institute and a number of business interests collaborated to produce a report in 1991 called Victoria: An Agenda for Change, which was part of a larger project named Project Victoria.28 Its aim was to “solve the major economic and budgetary issues facing Victoria without increasing the burden of taxation”.29 Des Moore of the IPA saw Project Victoria as a “first attempt” to show why less government is needed. New Zealand provided “good examples of how the processes can be done effectively and how some of the pitfalls can be avoided”, with its corporatisation programme described as spectacular.30 Moore noted any evidence of overseas action that seemed to improve the “efficiency of government”, was referenced. As Moore and Porter noted, the “[p]roject […] draws on elements of Norway, UK, US and NZ experience and is tailored to the characteristics of the Victorian situation”.31 The main value of Project Victoria for the liberal opposition was
27 Paul Kelly, The End of Certainty: The Story of the 1980s (Sydney, 1992), pp.41-2. 28 D. Moore and M. Porter, Victoria: An Agenda for Change (Melbourne, 1991), D. Moore, “Victoria: Why Government Should Take a Big Step Back. Project Victoria: An Agenda for Change” in Project Victoria: An Agenda for Change, Melbourne 29 April (1991). Several smaller reports were written particularly in relation to utilities such as gas, water and electricity. 29 Ibid. 30 Ibid. 31 Moore and Porter, “Victoria: An Agenda for Change”, p.13.
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that it prescribed similar policy positions to those which the government was to undertake, giving them credibility in some eyes. It bolstered the morale of the Liberal opposition providing them, as one interviewee noted, with “a lot of intellectual muscle and a roadmap” prior to taking office. One former senior official attributes less importance to Project Victoria and says it was “moderately important, but not a significant driver [of the reforms]”.
There were direct links between think-tanks and Liberal opposition politicians. This was useful for an opposition with fewer resources with which to develop their policies. According to one former Minister, the opposition and then government had discussions with think-tank groups “on a regular basis because they were providing us with some very good intellectual considerations […] and that must have helped us considerably at the time”. Stockdale spent time with Michael Porter of the Tasman Institute, and was kept abreast of developments in Project Victoria. Stockdale also had some association with the Centre for Independent Studies and IPA. Several other politicians, including Haddon Storey, had similar connections. Links to New Zealand sources were facilitated through such associations. Stockdale views his party’s policy development as a “complementary process” and asserts that policies were developed ahead of those emerging from various think-tanks. He also saw the role of think-tanks as expanding the parameters of the debate as if reasonably credible groups asserted the Liberal Government was not going far and fast enough, then their actions did not appear as extreme.
Pressures in a Federal State
At a national (Federal) level, John Alford and Deirdre O’Neill32 propose that micro-economic reform pressures prompted Victoria to make changes to its public sector. However, this provides limited explanatory power as other states did not adopt the NZ NPM agenda to Victoria’s extent, and economic pressures condition but do not determine the direction of changes, as there will always be a variety of policy responses to any situation. In any event, Stockdale claims systematic pressure on states to improve performance came later when the Federal government established a system of financial rewards and adopted the competition policy. The National Competition Policy Review, known as the Hilmer Commission Report, was not released until 1993, after some of the legislation considered here. Instead, those involved with the reforms, such as Stockdale and Baxter, claim that Victoria was ahead of the national agenda, with national micro-economic reform flowing instead from Victoria’s actions. As one chief executive noted “there’d been a lot of discussion about it nationally but it was the Victorian reforms, particularly in electricity, and water and the public service that gave real impetus for it”.
Business and Government Links
Additional to indirect links formed though business-funded think tanks, government and business elites formed direct links. Treasurer, Alan Stockdale, and Minister for Industry and Employment, Phil Gude, had worked in industrial relations prior to entering parliament. Once in power they used personal links to obtain support for the government’s reform programme. From around the time of the release of the Commission of Audit’s report, Kennett held early morning monthly meetings with prominent Australian business people, dubbed by The Sunday Age as the “Silent
32 John Alford and Deirdre O’Neill, eds., The Contract State. Public Management and the Kennett Government (Victoria, 1994), p.6.
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Knights of Kennett’s Round Table”, although half the listed representatives of Australia’s major corporations did not attend.33 The Victorian Employers’ Chamber of Commerce and Industry (VECCI), was kept well informed of the government’s legislative plans34 and applauded the introduction of the new Employee Relations Act 1992.35 The Premier, Treasurer or a senior minister contacted VECCI almost every day for advice or consultation.36 As one public sector chief executive pointed out, groups such as VECCI were also “quite useful in that they pointed out what needed to be done”. They also provided another useful link to the NZ BRT.
Conclusion
In the early 1990s the Australian State of Victoria fundamentally reordered its state sector along NPM lines. Change was extensive and rapid — with a number of key pieces of legislation passed within a few months of the Liberals winning the 1992 election. While crisis language was used to justify the reforms — with Victoria portrayed as a state nearing economic collapse — putative fiscal crisis did not determine the policy responses and there was nothing inevitable in their adoption. Instead, a broad agenda was set before the election and the process of policy reform in Victoria saw key policy entrepreneurs and policy elites drawing on a policy fashion for NPM-type reforms, using apparent economic problems to effectively outmanoeuvre opponents. What is striking is the remarkable similarity of the Victorian reforms to that of its near neighbour, New Zealand — even down to almost repeating some sections and titles of New Zealand legislation. New Zealand, of course, also reflected the NPM rhetorical fashions of the time and as such is part of an apparent worldwide trend — albeit with its leadership of this trend and the comprehensive and singular nature of its reforms being much noted.
New Zealand was not the only influence on the Victorian agenda, and reform should be understood as being nestled within a broad diffusion of NPM rhetoric and (highly disputed) claims of policy convergence. Reforms along NPM and similar lines were examined by Liberal and other policy elites in the period before the 1992 election, linked to the broader neoliberal policy agenda they were developing while in opposition. As such, British reforms, and Canadian and US policy innovations were also important, in broad and legitimating terms at least. However, while influential in NPM debates in other countries and noted in such NPM tracts as “Reinventing Government”, the New Zealand model has not often been adopted elsewhere with such faithfulness and enthusiasm. Accordingly, suggesting the Victorian reforms reflect similar rhetorical trends to those that influenced New Zealand, while true in part, is insufficient to explain the convergence. In this article we have shown how a notably direct process of policy transfer provides a large part of this explanation. NPM models and rhetoric was being widely diffused though the Anglo-American “family of nations”, albeit with considerable variation in their actual form across countries. But New Zealand examples gave the form and detail to the Victorian reforms and provided significant legitimation. The form of this convergence and the mechanisms by which it occurred to a large extent flow from the remarkably close ties and similarities existing
33 B. Mitchell, “Silent Knights of Kennett’s Round Table”, Sunday Age, 11 July 1993. 34 M. Simons, “Kennett’s Roundtable”, Australian, 27 February 1993. 35 A. Shamshullah, “Victoria (Political Chronicle)”, Australian Journal of Politics and History, Vol. 39, 2 (1993), p.245. 36 Simons, “Kennett’s Roundtable”.
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between New Zealand and Australia, and New Zealand and Victoria, at an institutional, organisational and social network level.
Language, cultural and institutional similarities explain much of the ease of transfer. Victoria — and Australia generally — and New Zealand share similar Westminster-type systems, a common history of British colonisation and settlement and a long history of the sharing of policy knowledge and policy personnel. They share strong cultural similarities.37 The Australia New Zealand Closer Economic Relations Trade Agreement, signed in 1983, is one of the most comprehensive free-trade agreements, and related policy convergence is marked. A Trans-Tasman labour market allows labour flows. For policy and business elites, this interchange is significant — with a number of policy-makers, and business and public policy executives moving across the Tasman in both directions.38 The Council of Australian Governments (established 1992) and its associated of Ministerial Councils and associated fora — the majority of which New Zealand is a member of or observer — provides another avenue for policy transfer and establishment and maintenance of social networks.
Ideological convergence and the highly interlocked Australasian think-tanks provided a key source of policy influence and legitimation, and of social ties amongst elites. For many Australian and Victorian policy elites favouring neoliberal policy innovations, New Zealand provided an exemplar of economic restructuring and liberalisation, with New Zealand policy entrepreneurs seen as remarkably successful in achieving their policy aims, both in terms of speed and in the largely undiluted policies finally delivered. Victorians actively ought to attract these policy entrepreneurs, in terms of membership of various think-tanks and in the direct recruiting of New Zealanders into the Victorian state and private sector, and through visits across the Tasman. In turn, New Zealanders were active participants in setting up mechanisms to facilitate this interchange, including supporting the establishment of trans-Tasman think-tanks that promulgated this neoliberal policy agenda, notably the Melbourne-based Tasman Institute. The importance of “true believers” in spreading the policy reform message, and in selling their own ability (often as paid consultants) to develop and implement these policies, should not be underrated.
The Victorian political landscape too shared important similarities to New Zealand. This facilitated transfer and achievement of policy entrepreneurs’ aims. The dominance of the New Zealand House of Representatives by the executive has been much noted, particularly in the first-past-the-post electoral system that existed until 1996. While at the federal level in Australia the Senate provides an important and powerful check on the ambitions of government and on the House of Representatives, the Victorian upper house (Legislative Council) was Liberal-dominated, and in any event, not overburdened with responsibility or power; although it retained the rarely-used power to block supply until 2003. The ability of highly effective political leaders to master these relatively simple political and policy processes — particularly the Ministers of Finance Roger Douglas and Ruth Richardson in New Zealand and their Treasury and other officials, and Premier Kennett and Treasurer Stockdale and key officials in Victoria — saw these reforms introduced. Again, the tactics and strategies of successful New Zealand policy entrepreneurs were widely promulgated through their
37 Mein Smith et al., Remaking the Tasman World. 38 Nicolas Harrigan and Shaun Goldfinch, “A Trans-Tasman Business Elite?”, Journal of Sociology, Vol. 43, 4 (2007), pp.367-84.
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various books and through social contacts, and emulated in Victoria.39 However, Australia’s more complex Federal system and the Commonwealth’s central role in industrial relations, saw some of Victoria’s industrial relations legislation somewhat blunted.
Institutional similarities, social networks and active recruitment of New Zealand policy entrepreneurs also facilitated the most basic method of policy transfer —copying. This was a multilayered process. Victorians had at hand the New Zealand legislation. They also had access to and even employed some of those centrally involved in its inspiration, development and implementation. Copying of course is a useful cognitive shortcut, “the simplest type of lesson drawing”,40 particularly in times of time and resource constraint and urgency brought on by crisis — whether this crisis be real, perceived or created. It also provides a useful legitimation — someone and some other country has seen it fit and appropriate to introduce these policies, where “experience has a unique status as a justification effectiveness; it [...] is not just based on ‘head in the clouds’ speculation”.41 New Zealand as an exemplar of neoliberal reform gave its legislation a particular legitimacy. Institutional similarities supported perceptions that the New Zealand model could be introduced easily. In sum, this study underlines the importance of international links in developing policy, at both national and sub-national levels. It highlights the crucial importance of the Australian-New Zealand relationship in understanding the governance of both countries, and the role of Trans-Tasman elites in this process.
39 Roger Douglas, Unfinished Business (Auckland, 1993); Ruth Richardson, Making a Difference (Christchurch, 1995). 40 R. Rose, “What Is Lesson Drawing?”, Journal of Public Policy, Vol. 11 (1991), p.4. 41 Ibid., p.4.
