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• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP84S00928R000200160006-9
• Release Decision: RIPPUB
• Original Classification: C
• Document Page Count: 13
• Document Creation Date: January 12, 2017
• Document Release Date: July 11, 2011
• Sequence Number: 6
• Publication Date: February 1, 1984
• Content Type: REPORT

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~ M
Directorate of
Intelligence
A Combative Politician
New Zealand's Robert Muldoon:
EA 84-10016
February 1984
Copy~O~
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Intelligence
New Zealand's Robert Muldoon:
Division, OEA,
contribution from DOffice of Central
Reference. Comments and queries are welcome and
may be directed to the Chief, Southeast Asia
Confidential
EA 84-10016
February 1984
A Combative Politician
Office of East Asian Analysis, with a
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New Zealand's Robert Muldoon:
A Combative Politician 25X1
Key Judgments Prime Minister Muldoon will be seeking his fourth term in elections late
Information available this year. He will have to convince voters that he has accomplished a good
as of 25 January 1984 deal in trying to bolster New Zealand's troubled economy:
was used in this report.
? Unemployment that has reached a record 6 percent may overshadow the
decisive leadership he has given the country for eight years.
? Muldoon also runs the risk that voters may be weary of his abrasive-
ness-a trait atypical of New Zealanders.
On the other hand, although the opposition Labor Party now leads in polls,
its electoral chances are undercut by deep ideological divisions and its
inability to advance any credible alternative to Muldoon's economic
programs.
Muldoon is a staunch, albeit sometimes sharply questioning, ally of the
United States. He is generally satisfied with access to the US market of
New Zealand's agricultural exports that are vital to its economy. But he re-
mains alert to any US action-such as disposal of surplus butter-that
would impinge on his country's foreign markets.
A Labor victory would create difficulties in the US relationship. Labor, in
seeking to capitalize on widespread nuclear fears that span the political
spectrum in New Zealand, has served notice that it would follow the
practice of the last Labor government and deny port calls by US nuclear-
powered naval ships.
iii Confidential
EA 84-10026
February 1984
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Muldoon's Foreign Policy Views
Foreign Trade. In line with New Zealand s high
dependence on earnings from agricultural exports,
Muldoon says, "Ourforeign policy is trade,"meaning
that trade considerations generally take precedence
over political factors. For example, New Zealand
imposed only minimal sanctions on the Soviet Union
after its invasion of f1fghanistan and on Iran during
the US hostage crisis in order not to jeopardize
growing markets.
United States. Muldoon has revitalized the US rela-
tionship within the Australia-New Zealand-United
States (ANZUS) alliance. He has underscored his
commitment by permitting port visits by US nuclear-
powered warships, a policy that has a political cost in
view of widespread nuclear fears among New Zea-
landers. His occasional outspokenness on US foreign
policy is intended to be helpful, not carping, accord-
ing to foreign affairs officials in Wellington. In 1977,
for example, he believed the United States was paying
too much attention to Europe and neglecting the
Pack and ANZUS, a criticism that reflected his
occasional worries that the United States does not
reciprocate the importance he places on the ANZUS
alliance.
Australia. New Zealand places great importance on
relations with its large neighbor, despite the almost
familial irritants that crop up between them. Last
year the two countries signed the Closer Economic
Relations agreement under which they agreed to
phase out trade tariffs, despite lingering doubts by
some protected industries in both countries. Muldoon
has a high regard for Australian Labor Prime Minis-
ter Hawke, despite their ideological differences. He
and Hawke's conservative predecessor, Malcolm Fra-
ser, had an ill-concealed dislike for each other.
South Pack. New Zealand acts as ir~ormal
ANZUS mentor of its neighboring South Pack
islands. The unobtrusive New Zealanders work well
among the islanders, and 70 percent of New Zea-
land smodest foreign aid program is committed to
the South Pack. Although Muldoon in past years
was accused of belittling the independent island
nations, he now shows sympathy for them and has
good relations with island leaders.
Southeast Asia. New Zealand maintains cordial rela-
tions with members of the Association of Southeast
Asian Nations (ASEAN), providing economic assist-
ance within its limited means. As a token of his
interest in the area, Muldoon has kept a 900-man
military battalion in Singapore, reversing his Labor
predecessor's plans to withdraw the unit. In contrast
to Australia, New Zealand-out of respect for.the
ASEAN position-has continued to recognize the
Kampuchean Pol Pot group despite abhorrence of Pol
Pot's excesses while in power.
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New Zealand's Robert Muldoon:
A Combative Politician
An Atypical New Zealander
After more than eight years in office, 62-year-old
Prime Minister Muldoon dominates New Zealand
politics to an unprecedented degree.
has gained three
successive terms in office since 1975, but his govern-
ment, with only aone-seat parliamentary majority,
faces a tough fight for reelection late .this year. C
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commitment to the Australia-New Zealand-United
States (ANZUS) alliance, which has been central to
New Zealand's foreign policy since World War II.
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P Muldoon
has
stressed New Zealand's strategic and economic de-
pendence more than his predecessors have, but he
views US foreign policy as a legitimate, vital concern
of his government and expects the United States to
accept well-meaning criticism from time to time.
Muldoon expects his meeting with President Reagan
in Washington on 24 February will bolster his elector-
al chances. Even though neutralist sentiment is grow-
ing among New Zealanders, most still place primacy
on their country's ties with the United States. During
his Washington visit he will probably underscore his
Inauspicious Beginnings
Muldoon was born into a poor Auckland family. After
his father was incapacitated by a stroke when Mul-
doon was eight, his mother eked out a living for the
family. According to one of Muldoon's biographers,
she was a formidable member of the local branch of
the Labor Party and imbued Muldoon with a passion
for politics. She also imparted her aggressiveness and
dedication to the work ethic.
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Muldoon studied cost accounting while in the service
and after the war continued his studies in London for
18 months. He won an award as the best accounting
student of the year in 1946, the first overseas student
to do so. He returned to Auckland in 1947 to join an
accounting firm, in which he rose to become a senior
partner.
Muldoon's political activity began on his return to
New Zealand, and he joined the conservative Nation-
al Party. Muldoon was slow to make his mark in
politics and was elected to Parliament for the first
time in 1960, on his third try.
A Blossoming Politician
Muldoon was in his element in Parliament and quick-
ly became a national figure through his penchant for
speaking out forcefully on a wide range of issues. He
also stood out among the National Party's "Young
Turks," backbenchers with a tendency to quarrel with
their own party leaders as well as with the Labor
opposition.
Muldoon's reputation as a political comer was under-
scored in 1963 when Prime Minister Holyoake ap-
pointed him chairman of an influential committee
that scrutinized government expenditures. Muldoon
took full advantage of the public exposure afforded by
the job by traveling around the country ferreting out
and publicizing cases of wasteful government spend-
ing. Among members of the party, he began to be
seen as Holyoake's protege. This image was strength-
ened by his appointment as undersecretary of finance
in 1963, a prestigious position for one who had served
only three years in Parliament.
Muldoon continued to rankle his parliamentary col-
leagues with his outspokenness, and Holyoake seemed
to conclude that his prote-
ge needed some bridling. That appeared to observers
at the time as the reason for Holyoake's not selecting
Muldoon in late 1966 when he filled Cabinet vacan-
cies with three less controversial members of Parlia-
ment. The interpretation that Muldoon was being
held back gained further credence a few weeks later
when Holyoake appointed Muldoon as Minister of
Tourism, the bottom-ranked Cabinet position.
Shortly thereafter, however, Muldoon's career got a
fortuitous boost when the Minister of Finance sudden-
ly died. Holyoake named Muldoon to the vacancy,
apparently concluding that he could not ignore Mul-
doon's demonstrated abilities as finance undersecre-
tary. With Muldoon's elevation in the Cabinet, his
mother quietly let her membership in the opposition
Labor Party lapse in order not to complicate her son's
political advancement.
Setting His Sights Higher
By this time Muldoon had become an established
public figure, known for his ruthlessness to parliamen-
tary opponents. He relished the notoriety and nur-
tured his public image of irascibility. According to
political observers, Muldoon was obviously set on the
prime-ministership and hoped that Holyoake-in con-
sidering retirement-would choose him over Deputy
Prime Minister John Marshall. On Holyoake's retire-
ment in early 1972, however, he followed party
custom by asking the party to elect Marshall as his
successor. At the end of 1972, the Marshall govern-
ment received a stunning defeat at the polls that
brought a Labor government into office for the first
time in 12 years.
Muldoon then began to campaign for the party
leadership in earnest, arguing that only he-and not
the gentlemanly Marshall~ould carry the party to
victory in the next elections. He engineered Mar-
shall's ouster in July 1974 and won the leadership
over the reservations of a great number of National
Party members who admired Muldoon but did not
like him. The unexpected death the next month of
widely popular Labor Prime Minister Norman Kirk,
and his replacement by the colorless Bill Rowling,
paved the way for Muldoon's bid for the prime-
ministership.
Into the Driver's Seat
Muldoon led his National Party to the greatest politi-
cal upset in New Zealand's history in late 1975 on the
claim that he could right the country's faltering
economy and maintain high living standards without
abandoning sacrosanct welfare benefits. Having the
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Muldoon's limited achievements in solving New Zea-
land seconomic problems have not deterred himfrom
preaching international monetary reform to world
leaders at international economic meetings at every
opportunity. Now in his 14th year as Minister of
Finance, he fancies himself as one of the senior
statesmen on the international financial scene. His
views on global economic issues rejTect deeply held
convictions based on genuine concern for the world s
financial future. At present, Muldoon believes that
the world economic situation remains fragile despite
the upturn in the US economy.
Among industrialized countries, Muldoon's propos-
als have at worst been greeted with skepticism and
have at best elicited polite but guarded response. He
wants to convene a new Bretton Woods-type interna-
tional conference. He believes the international com-
munity has addressed~nancial and trade problems in
artful and ad hoc manner and instead must work
toward comprehensive rules of international econom-
ic conduct. Developed nations that have shown sym-
pathy with Muldoon's views generally believe, howev-
er, that an international economic summit is not the
way to proceed, according to US Embassy reporting.
In response, Muldoon has beenllexible enough to say
he could settlelor an approach which is less formal
than duplication of the post-World War II Bretton
Muldoon has criticized the International Monetary
Fund for imposing austerity on troubled Third World
debtors in return for balance-of payments loans. He
believes the IMF s traditional prescription requiring
recipients to adjust rapidly to balance-of payments
d~cits should be replaced with a mechanism to
provide long-term financing. To assist the world s
poorest nations, Muldoon has called for measures
that in ellect would tax the world community, al-
though he has not offered any examples.
Muldoon has also calledlor the establishment of the
financial equivalent of the United Nations Security
Council to oversee balance-of-payments adjustments
in developed economies. He would have the council
not only scrutinize d~cits but also seek adjustments
in countries with large surpluses.
He has called for a wholesale reduction in trade
barriers notwithstanding his own country's excessive
sheltering of local producers. He argues that because
international loans must be paid from a country's
export earnings, the tendency of countries to promote
exports and discourage imports has had the effect of
lessening world trade and, consequently, economic
growth.
Woods Conference.
outsider's advantage of being able to attack unsuc-
cessful government policies, he made a convincing
election campaign case that it was time for a change.
Muldoon, who also took the finance portfolio, typical-
ly took no settling-in period to get the feel of what he
should do. He quickly made what he considered
necessary cuts in government subsidies on food, post-
age, transportation, and hospital care, steps that
showed considerable political courage in view of the
emotional attachment of New Zealanders to welfare
benefits.
Muldoon has not been content with being both Prime
Minister and Finance Minister but makes most of the
important decisions on a broad range of issues. He is a
tough taskmaster and devastates any associate who is
not in full command of the facts of a matter, accord-
ing to political observers. He has his staff's loyalty,
however, because of his enormous capacity for work
and his impressive memory.
Muldoon has been the most traveled New Zealand
Prime Minister. In his first two years in office, he
spent 150 days out of the country-mostly to push his
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views on the international economy and financial
reform-and has maintained a heavy travel pace
since.
The Big Test
Muldoon's chances of reelection will depend on how
New Zealanders assess his handling of the country's
faltering economy, according to recent public opinion
polls in New Zealand (see appendix). Unemployment
almost certainly will be the major election issue. Polls
show that about half of New Zealanders view unem-
ployment as the most serious national problem, with
public concern over it double that over any other
problem, such as the economy in general or foreign
trade. Unemployment late last year had risen to a
record 6 percent, an unacceptable level in a country
with a tradition of full employment. Even the Minis-
ter of Labor admits that prospects are poor for ari
improvement in the unemployment picture over the
next year, and the Labor Party is charging that the
government understates the unemployment problem
by counting as jobless only those who register.
A particular focus for Muldoon in his eight years in
office has been in finding new markets for New
Zealand's narrow range of agricultural exports-
wool, meat, and dairy products-which account for
nearly 50 percent of exports. Muldoon has had some
success, and he also can point out to the voters that in
recent years he has gotten the United States-New
Zealand's largest export market-to consider New
Zealand concerns when disposing surplus butter on
the world market and to maintain purchases of New
Zealand casein.' Muldoon is, however, disturbed over
the possibility that the United States will donate dairy
surpluses to Jamaica, which now gets 70 percent of its
dairy needs from New Zealand. He considers the US
plan "a body blow."
The government has slipped in public opinion polls,
which have a good record for accuracy in New
Zealand. The most recent polls show Labor in the
' Dairy products have for several years accounted for 20 percent of
New Zealand's exports, and Wellington had argued that unregulat-
ed sales of US surplus butter could intrude into New Zealand's
markets and ruin its economy. New Zealand has also been gratified
by the decision of US firms not to develop a production capability
for casein, a dairy byproduct used as a food additive and in making
plastics and adhesives. The United States takes 60 percent of New
lead, although Muldoon personally continues to run
ahead of his Labor Party counterpart, David Lange,
as the electorate's choice for prime minister. Mul-
doon's position in his party is at present unassailable,
even though he has many detractors. We believe that
most party members realize that the Labor Party's
present disarray is National's strongest asset and that
it would be folly to engage in a leadership squabble in
an election year, particularly in view of the govern-
ment's one-seat parliamentary majority.
The government has more reason for worry about the
appeal of a new and aggressively free enterprise party,
the New Zealand Party. Latest polls show that 18
percent of voters claim it as their preference. Whether
they would carry this stated preference into the ,
polling booth remains to be seen, but the new party's
supporters would more likely be drawn from the ranks
of National than from Labor
Even though the election is too close to call at this
time, Muldoon has several advantages. Whatever his,
personal faults, he has projected an image of decisive
leadership and of never shrinking from unpopular
decisions. At home one of Muldoon's assets is almost
certainly his unparalleled visibility. He rarely passes
up an opportunity for a public appearance, and many
New Zealanders probably respect his readiness to
subject himself to criticism, against which he is more
than capable of defending himself. In his frequent
foreign travels, he has pushed New Zealand into the
international scene. Most New Zealanders probably
recognize this despite carping that Muldoon's junkets
cause him to neglect domestic problems.
Should Labor Win
The election of a Labor government would have
serious implications for New Zealand's defense coop-
eration with the United States. The last Labor gov-
ernment (1972-75) closed New Zealand ports to US
nuclear-powered warships, and the current Labor
leadership has served notice that it would reimpose
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the ban on port calls.' A Labor government would also
advocate a South Pacific nuclear-free zone, as did the
last Labor government. This idea, growing out of
concern over French nuclear testing near Tahiti,
could-if carried to its limits of a total nuclear ban-
inhibit movement in the South Pacific of the US
Naval Fleet, now 40-percent nuclear powered.? Un-
able to come up with policies of its own to cure New
Zealand's economic ills, Labor sees political benefit in
identifying with a fear of nuclear contamination that
is widespread and growing in New Zealand and which
spans the political spectrum. Antinuclear concerns
have even been voiced by several government back-
benchers in Parliament. Sentiment is such that Mul-
doon-despite his commitment to the US alliance-
would be loath to agree to a port call by a US nuclear-
powered warship for several months prior to elections,
an arrangement that prevailed in 1981, the last year
Muldoon took New Zealand to the polls.
' Labor Party leader Lange has said a Labor government would
consider port visits only on receiving US assurances that ships were
not carrying nuclear arms, a condition unacceptable to the United
States. He says he is personally satisfied that nuclear propulsion is
safe and that his reservations are centered on nuclear weaponry.
However, Lange clearly intimated in a speech in Washington last
month that as Prime Minister he would be obliged to abide by
prevailing sentiment in his party against visits by nuclear-powered
vessels, whether they were nuclear armed or not
` The Labor government in Australia presented its proposal for a
nuclear free zone at the 1983 South Pacific Form meeting, but it
failed to win a consensus.
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Appendix
The State of the Economy
Despite a few signs of recovery in the last six months,
economic activity in New Zealand remains weak. The
Organization for Economic Cooperation and Develop-
ment (OECD) estimates that real gross domestic
product will decline slightly in fiscal year 1983 (April
1983-March 1984-the worst performance since
1977. The manufacturing sector has been particularly
hard hit. Industrial production in 1983 is nearly
10 percent below the level of a year earlier, and
unemployment has risen from less than 10,000 in
1977 to nearly 77,000 in September 1983, a record 6
percent of the labor force.
New Zealand's unemployment is, in fact, much worse
than official statistics disclose. Wellington only counts
as unemployed those workers who register with the
Department of Labor. The Labor Party and many
domestic economists, however, argue~orrectly in
our view-that the number of registered unemployed
seriously understates the actual degree of joblessness.
They claim that certain categories of workers not
eligible for unemployment benefits (such as married
women and 15 year olds) are systematically underrep-
resented because they have little incentive to register.
The well-respected New Zealand Institute of Eco-
nomic Research estimates that, if these groups
are counted, the true unemployment rate exceeds
8 percent.
The one bright spot Muldoon can point to is success
against inflation. The wage/price freeze imposed in
June 1982 for one year was extended in mid-1983 and
is now scheduled to be lifted at the end of this
February. The freeze has been successful in achieving
Muldoon's goal of ending nine consecutive years of
double-digit inflation. Consumer prices rose less than
4 percent in 1983, compared with 16 percent in 1982.
Nonetheless, the failure of nominal interest rates to
fall sharply indicates that the domestic financial
market remains unconvinced about the underlying
success of Muldoon's anti-inflation policy. The Inter-
national Monetary Fund (IMF) is also concerned that
a scramble for wage increases could develop after the
freeze expires. Muldoon appears to recognize this
New Zealand: Consumer Price Inflation
and Unemployment , 1976- 83
Consumer Price Inflation Unemployment
Percent Thousand persons
danger, and, according to the New Zealand Insititute
of Economic Research, plans to limit wage increases
to 2.5 percent in 1984.
In any case, substantial disagreement exists among
financial analysts about the pace, if any, of the
economic recovery in New Zealand in 1984. The
OECD and the New Zealand Reserve Bank foresee
little growth, but the US Embassy and several private
economists predict growth between 2 and 4 percent.
We believe these forecasts vary because of differing
assumptions about the posture of economic policy-
particularly monetary policy.
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New Zealand governments-including Muldoon's-
have traditionally primed the economy with both
fiscal and monetary policy in an election year. Since
Muldoon took office in late 1975, the average annual
rate of growth in the money supply during nonelection
years has averaged only 3.6 percent. During the
election years of 1978 and 1981, however, the money
supply expanded at an average of nearly 20 percent.
The IMF argues that the expansionary effect of these
policies, although beneficial in the short term, cannot
be maintained because of large current account defi-
cits that have ranged between $1 billion and $1.5
billion each year since 1980.
Muldoon has taken considerable heat over the issue.
In addition to IMF criticism, the OECD last year
scolded Wellington for the policy zigzags of recent
years, arguing that they upset financial markets and
have been taken with little attention to inflation or
balance-of-payments considerations. Thus far the op-
position Labor Party has not chosen to make this an
election issue, probably-as many analysts believe-
because it was guilty of the same practices in 1975,
the last year it was in office.
For his part, Muldoon is trying to focus voter atten-
tion away from unemployment and toward his record
on inflation. For this reason, we believe he is unlikely
to again turn on the monetary spigot. In fact, the most
recent budget statement indicates the government is
determined to adhere to a policy of monetary re-
straint. If Muldoon chooses to maintain a tight rein on
the money supply, he will probably face the electorate
late this year with a much weaker economy than in his
two previous reelection bids.
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