The First Labour Government of New Zealand was the government of New Zealand from 1935 to 1949. It set the tone of New Zealand's economic and welfare policies until the 1980s, establishing a welfare state, a system of Keynesian economic management, and high levels of state intervention. The government came to power towards the end of, and as a result of, the Great Depression of the 1930s, and also governed the country throughout World War II.
Significant policies
Industrial
Significant improvements in working conditions took place, partly through greater competition for labour and partly through legislative provisions.
A Factories Act amendment introduced a 40-hour, five-day working week, with eight public holidays: Christmas Day, Boxing Day, New Years Day, Good Friday, Easter Monday, Anzac Day, Labour Day, and sovereign's birthday. Legislation in 1945 and 1946 made the new 40-hour workweek almost universal, in industry as well as in shops and offices[1].
Minimum wage rates for workers in both the public and private sectors[2].
The Agricultural Workers Act (1936) improved conditions for rural labourers by setting a minimum rate of pay and required a decent level of living conditions[3].
The Shops and Officers Amendment Act (1936) specified a maximum workweek of forty-four hours for people working in banks and insurance[4].
The Industrial Efficiency Bill (enacted in October 1936) gave the government wide powers to regulate industries[5].
A large public works programme was initiated to provide employment on full wages instead of relief.
The Industrial Conciliation and Arbitration Act (1936) restored full jurisdiction to the Arbitration Court and required the court to make general orders fixing basic wages for both men and women which would apply to all awards and agreements in force[6].
The Court of Arbitration was required in 1936 to lay down in its awards and agreements a basic wage sufficient to keep a man, his wife and three children in a fair and reasonable standard of comfort.
The Minimum Wage Act (1945) established a minimum wage for all workers aged twenty-one and above.
Legislative provision was made in 1944 for an annual two weeks holiday for all workers[9].
Underground mine workers were granted a seven-hour workday in 1948 and 1949.
Compensation was increased for the dependants of deceased workers (1936)[10].
The Government Railways Act (1949) established a Government Railways Industrial Tribunal with the power to stipulate salaries and wage rates, hours of work, and other conditions of employment for railway workers.
The government experimented with cooperative shops in the rapidly expanding post-war suburbs[11].
A National Employment Service was established (1946) with the principal function of promoting and maintaining full employment[12].
In the 1930s, Labour was a supporter of the League of Nations (a forerunner to the United Nations), seeing the League as the best way to prevent another major war. However the League proved to be ineffectual, and was unable to prevent the Japanese invasion of Manchuria or the Italian invasion of Abyssinia. Under Labour, the New Zealand representative in the League spoke strongly against appeasement of aggressors, particularly the Italian invasion of Abyssinia and the German occupation of Czechoslovakia. When World War II broke out, New Zealand immediately declared war on Germany, with Savage saying that 'where Britain goes, we go'. During the war, conscription was introduced. This led some to accuse Labour of hypocrisy, as it had strongly opposed conscription in World War I. The government argued that while the First World War had been an unnecessary imperialist scuffle, the Second World War was a just war against fascist aggressors. Following the war, Fraser became involved in the setting up of the United Nations, and was especially concerned that small countries not be marginalised by the great powers.
Peacetime conscription was introduced in 1949, which proved to be an unpopular decision[14].
Economic
Government spending was increased in an effort to stimulate the economy.
The State Advances Corporation was set up in 1936 to provide cheap, long-term, urban and rural financing on first mortgages. It was also provided with the powers to lend to local authorities for the construction of workers’ housing and to make advances for developing existing industries and for setting up new ones[15].
The Reserve Bank of New Zealand was immediately nationalised, transferring control from private bankers to the Minister of Finance.
The Reserve Bank Amendment Act (1936) bought out the Bank’s private shareholding of £500,000[16].
The Bank of New Zealand was nationalised (1945) [17].
A State Advances Corporation Act was set up which stimulated house-building and provided cheap loans to farmers.
The Finance Act of 1936 restored all cuts in wages and salaries imposed during the depression period.
A Bureau of industry was established (1936) to plan new industries and reorganise existing ones by a system of licensing[18].
The New Zealand National Airways Act (1945) brought internal airways into public ownership in line with previous government participation in the overseas Tasman Empire Airways[19].
Large-scale hydro-electric installations were built on South Island rivers and lakes[20].
Introduced wide-ranging tariffs and other import controls.
The graduated land tax was reintroduced at high rates.
The top rate of income tax was significantly increased, from 42.9% (and 57% for ‘unearned income’ such as rent, interest or dividends) in 1939 to 76.5% by 1949.
The 1942 budget, which raised taxes, marked the beginnings of Keynesian thinking being explicitly followed in New Zealand.
Various attempts at government planning were made. The Industrial Efficiency Act of 1936 established a Bureau of Industry to guide the Minister of Industries and Commerce on planning and development, whilst the Organisation for National Development was set up in 1944 with the aim of studying and making plans for a post-war society.
Import and exchange controls were introduced in response to exhausting sterling reserves[21].
A comprehensive price stabilisation scheme was introduced during the Second World War, with subsidies on staples like bread and butter[22].
Via the 1944 Milk Act, the government extended a guaranteed price at a sufficient and attractive level to town milk suppliers to divert milk from butter and cheese production for urban supply[23].
In 1947, dairy farmers were provided with a joint industry and a government Marketing Commission with an independent chairman and the power to fix the guaranteed price and control their own marketing overseas[24].
The Sharemilking Agreements Act 1937 made provision for safeguarding the interests of sharemilkers under sharemilking agreements[25].
A Meat Stabilisation Account (established in 1942) built up large reserves which were used after the war for various forms of assistance to farmers[26].
Land development schemes were pushed ahead and the area being developed was greatly extended [27].
Coal mines gradually came under public ownership[28].
An Organisation for National Security was established (1937), with officials preparing sets of controls to be implemented in the case of war breaking out. During the Second World War, price controls were extended to prevent profiteering[29]and subsidies on avrious foodstuffs were introduced[30].
Several amendments to the wartime Economic Stabilisation Regulations after 1942 were made in order to enable some levelling-up of wages for poorly paid workers[31].
Wartime inflation was successfully controlled, with prices rising by only 14% during the Second World War[32].
Welfare
The government provided the unemployed[33] and the recipients of charitable aid[34]with a Christmas bonus upon taking office.
The Pension Amendment Act (1936) extended pensions to a wider section of the population, including Lebanese, Chinese, invalids, and deserted wives[37].
The Social Security Act of 1938 introduced a comprehensive system of social security. The rates of family allowances and of existing benefits for the unemployed, miners, invalids, widows, the blind, and the aged were increased. The qualifying age for old-age benefits was reduced from 65 to 60. Family allowances were extended. New welfare benefits were introduced for orphans and those whose incomes had ceased on account of sickness. Provision was made for emergency benefits for persons suffering hardship who were not entitled to any other benefits.
Universal Superannuation, a universal benefit for all New Zealanders aged sixty-five and above, was introduced (1940)[38].
Payments for deserted wives were introduced.
Family allowances, originally payable to the second child onwards, were gradually to the whole population. In 1940, the child allowance was extended to the second child and in 1941 the family benefit was extended to all children in families earning less than £5 a week[39]. Universal family benefits were introduced in 1946[40].
An improved invalid pension for the totally blind and incapacitated was established (1936).
Compensation was increased for the dependants of deceased workers (1936)[41].
Most fees for healthcare and secondary education were removed.
The state housing programme was begun, providing rental houses for low-income workers.
Farmers were provided with guaranteed prices for their produce.
The Mortgagors and Lessees Rehabilitation Act (1936) provided relief to farmers mired in mortgage debt[42].
Free inpatient treatment for the whole population was introduced (1939).
Free outpatient treatment, free pharmaceuticals, and part payment of general practitioners' bills were introduced (1941).
The introduction (in 1941) of the Pharmaceutical Supplies Benefit provided for a wide range of drugs to be supplied free on the prescription of a registered medical practitioner[43].
Domestic Assistance benefits were introduced (1944) to provide assistance during a mother's incapacity, or in cases of hardship. The services were to be supplied through some approved organisation[44].
Further health care benefits were introduced, including physiotherapy benefits (1942), district nursing (1944), and laboratory diagnostic benefits (1946)[45].
The School Dental Nurse Service (originally introduced in 1920) was significantly expanded and free dental treatment was introduced for adolescents[47].
The State Advances Department (later Corporation) introduced quality controls for all houses it helped to finance. The government set new standards in design and construction, experimented with area planning, constructed some impressive apartment buildings, and democratised the bungalow[48].
The government effectively tackled the housing crisis at that time, with a new Department of Housing Construction building 3,445 houses within three years. From 1937 to 1949, nearly 29,000 state houses were built[49].
A 'needy families' scheme, administered by the Child Welfare Branch, was established (1941). This scheme provided assistance, primarily by re-housing large or poor families to maintain the household unit, and had assisted over 900 families and more than 5000 children by 1946[50].
The Tuberculosis Act (1948) introduced measures for controlling this disease[51].
A Fair Rents Act was passed (1936) with the intention of prohibiting excessive rents[52].
In 1945, benefit rates were substantially raised, including a supplementary amount for widows with children[53].
At the point of discharge, service personnel were provided with a gratuity of 2s6d for every day spent overseas and 8d per day for service in new Zealand. The money was paid into a Post office Savings Bank Account and received a 5% bonus each 31st of March on the sum remaining in the account. Nearly £23 million was paid out in gratuities[54].
A National Employment Service helped service personnel to find civilian employment[55].
A Rehabilitation Department was established in 1943. Service personnel were eased back into civilian life through a wide range of assistance schemes involving housing and furniture loans (with a total of 64,000 being granted, while another 18,000 returnees were allocated state houses), business (11,500 were granted loans), land settlement schemes (with 12,5000 settled), university bursaries and general educational assistance (with 27,000 beneficiaries), and trade-training (with 11,000 returnees provided with assistance[56].
Generous tax breaks and low-cost housing loans at 3% interest from 1946 onwards were introduced for young couples[57].
To prepare for returning servicemen looking for farms and houses, the Servicemen’s Settlement and Land Sales Act (1943) provided the government with the power to acquire land suitable for subdivision and to control prices in all land sales[58].
An extensive rehabilitation scheme for returned servicemen was set up after the war, with the development of farms for ex-servicemen, equipped with house constructed on state house plans, modified for their farm house function by including porches for outdoor clothing and boots. In the cities, ex-servicemen were given priority for jobs and state houses, while new “pressure cooker” courses at universities and teachers colleges provided men with opportunities unavailable before the war. The rehabilitation scheme also provided opportunities for Maori ex-servicemen[59].
Education
The age at which children could commence school from six years to five years was restored (1936).
Five-year olds who had been kept from school as an economy measure were readmitted[60].
A "new freedom" was introduced in primary schools, with an attempt made to diminish formal instruction in the elementary years of schooling and replace it by experiential learning.
The Proficiency Examination was abolished (1938) to enable all pupils to proceed to full secondary schooling. This widened entry to secondary education and provided greater flexibility to the primary curriculum[61].
Cuts in teachers’ salaries were reversed and unemployed teachers moved back into teaching so that class sizes could fall[62].
Grants to kindergartens and adult education were restored and spending on bus transport for isolated pupils, the correspondence system, Maori education, libraries, crafts, materials, and school maintenance was increased[63].
Free post primary education was introduced for everyone up until the age of 19.
A National Library service was set up (1938) and the government built or improved many country libraries with the help of the American Carnegie Foundation[64].
Free secondary education was made compulsory for everyone under the age of fifteen (1944) [65].
University education was made more affordable and widely available[66].
Adult education was promoted, as exemplified by the establishment of the National Council for Adult Education (1938) and the provision of a government subsidy to the Workers’ Educational Association from 1937 onwards[67].
The curriculum was revamped, with new subjects such as social studies introduced in 1945 to replace the old rote-learned geography and history, and science and maths teaching were overhauled[68].
Surplus apples were provided to schoolchildren from 1941 to 1945[69].
A free school milk scheme was introduced (1937)[70]. This was extended during the Second World War[71].
A broader primary school curriculum was developed[72].
Maori living standards were considerably improved. The secret ballot was introduced for Maori citizens, unemployment benefits and opportunities for housing finance were equalised, spending on Maori education and health was increased, social security provision was improved and the first Maori welfare officers were provided, and contentious land claims in the South island and Waikato were settled[78].
The well-being of Maori improved as a result of the extension of health services by the Department of Health, the improvement of public health standards, and the expansion of land development schemes.
Maori housing standards were significantly improved. The government provided funding for the Native Housing Act (passed by the Coalition government in 1935) in 1937. By 1940, 1,592 new houses were provided by this measure as well as under the land development schemes. By 1951, 3,051 homes (16% of Maori homes) had been constructed. The number of occupied huts and whare fell from 4,676 in 1936 to 2,275 in 1951, the number of camps and tents from 1,528 to 568, and overcrowded houses and shacks from 71% to 32% of all Maori houses[79].
Spectacular improvements in Maori health took place[80].
Maori children benefited from the general upgrading of the education system[81].
The Maori Social and Economic Advancement Act (1945) established tribal committees and executives, from the marae to the regional level, concerned especially with welfare and marae administration. Welfare officers were appointed to the Department of Maori Affairs, and Maori wardens were given welfare functions under tribal committees. By 1949, there were 381 committees and 63 tribal executives[82].
Attempts were made to promote race relations by educating young Pakeha teachers about Maori culture[83].
The Native Affairs Department was replaced with the Maori Affairs Department (1947)[84].
Welfare officers and Maori wardens were appointed who came to play a major role both in the cities and in tribal areas as Maori started to move from remote pa to provincial towns[85].
Maori enrolment in public primary schools administered by education boards was significantly increased[86].
Rural secondary education for Maori was improved by the construction of eight Maori district high schools between 1941 and 1951, with emphasis on vocational training, especially metalwork and woodwork[87].
The development of Maori land and housing was accelerated, a start was made on trade training, and Maori access to education was significantly expanded[88].
More spending was devoted to Maori schools than to European ones[89].
The government gave particular attention to Maori housing[90].
Maori were granted the same unemployment payments as the Pakeha[91].
The government gradually brought Maori pensions (traditionally lower than the Pakeha) to the level of white New Zealanders[92].
A series of treaty settlements were signed with iwi between 1944 and 1946 whose grievances had been unresolved since the 1920s. As a form of compensation for the vast land confiscations of the nineteenth century, the Waikato-Maniapoto Maori Claims Settlement Act (1944) provided a lump sum of £10,000 and annual payments for the next forty-five years to Tainui. Successive settlements allocated £5000 annually to the Taranaki Trust Board for confiscated land and compensation to Ngai Tahu of £10,000 for thirty years[93].
Formation
The immediate context of the 1935 election was the Great Depression which had started in 1929 and affected New Zealand as badly as most other Western countries. Following the 1931 election the Reform and United (also known as Liberal) parties had formed a coalition to deal with it. The Labour Party formed the opposition, arguing that the only way out of the depression was socialism. The coalition government instead supported the economic orthodoxy which was that a balanced budget was of paramount importance and that state spending had to be cut in order to offset the decline in taxation revenue. They also believed that to provide the unemployed with money without making them work was morally wrong, and so put thousands of unemployed to work on often-pointless 'relief work'. Labour argued that the government needed to increase spending and create real jobs. By 1935 - after the election had been delayed a year because of the depression - many voters who would not otherwise have trusted Labour were disillusioned with the economic orthodoxy and prepared to try something new. Labour was helped by a change of leadership in 1933, after leader Harry Holland died and was replaced by Michael Joseph Savage, who did not seem to be a frightening communist but rather a kindly uncle figure. Labour achieved an overwhelming victory, taking 53 out of 80 seats. A further two were won by the MāoriRatana movement, which formed an alliance with Labour. Despite the size of its victory, Labour won only 46.1% of the popular vote; the government vote was split between Reform and United, and both parties lost votes on the right to the Democrats and the Country Party.
The 1938 election
The government increased in popularity during its first term, as people felt the benefits of its policies and of economic recovery. It cannot realisticly be credited with ending the Depression in New Zealand, as most economic indicators were showing signs of improvement before the 1935 election[citation needed]. However government policies such as an increase in pay for relief workers, job creation and generous education policies did bring major benefits to many. Labour's share of the popular vote increased by nearly 10%, but it did not gain any new seats. While in 1935 the anti-Labour vote had been split between two major and two minor parties, by 1938 the United and Reform parties had merged into the New Zealand National Party, which was able to achieve 40.3% of the popular vote and win 25 seats. The Country and Democrat parties' share of the vote collapsed, with the Country Party losing both its seats. From this point on, New Zealand politics would be dominated by the Labour and National parties.
The 1943 election
The 1943 election was held during World War II, and had been postponed by about two years due to the war. Conscription was a minor issue in the election; although both major parties supported it, some saw Labour as hypocrites as they had strongly opposed conscription during World War I. The issue may have lost Labour some support on the left, to the Democratic Labour Party, which had been formed by dissident Labour MP John A. Lee following his expulsion from the Labour Party. However the new party received only 4.3% of the vote and won no seats. Labour was given significant help by the votes of New Zealand soldiers overseas, who turned an apparent election-night victory for National into one for Labour. The election was also notable for the defeat of Māori statesman Apirana Ngata, by the Labour-Ratana candidate Tiaka Omana. Labour was to hold the four Māori seats until 1996.
The 1946 election
By 1946 the National Party had gained in strength and credibility. However its support was strongest in rural areas, and in previous elections it had benefited from the country quota, which organised New Zealand electorates so that rural electorates had fewer voters, and therefore rural votes were worth more. In 1945 the government had abolished the quota, which may have cost National the election. Labour gained nearly 4% of the popular vote, but lost three seats, reducing its majority to four. Since the seats it held included the four Māori seats, the government was said by its opponents to rely on a 'Māori mandate'. It was insinuated that Labour would need to pass unwise pro-Māori policies in order to stay in power.
Defeat
By 1949 the government had been in power for 14 years, five of them in wartime. It seemed increasingly worn out and uncertain. The three referendums held in 1949 (in addition to the usual referendum on alcohol licensing, which was held in conjunction with every election), were symptomatic of this. Meanwhile, National had announced that it would not repeal any of Labour's welfare state policies, which endeared it to many who had supported and benefitted from these policies but were tired of the government. National won 51.9% of the popular vote and 46 of out the 80 seats in parliament. Labour would be out of power for another eight years, and would not be in government for more than a single term until the 1980s.