Evaluating Public Sector Reform in New Zealand: Have the Benefits been Oversold?

Abstract

In the mid-1980s and 1990s, New Zealand radically reformed its public sector. Changes included corporatising and privatising state owned enterprizes; introducing performance related individual contracts for senior staff; increasing departmental management autonomy; changing financial management and reporting requirements, including moving from input-based to output based reporting; a move to strategic planning for the government; and departmental decoupling, including promoting policy-operations and funder-provider splits. The reforms drew heavily on public choice theory, new institutional economics and new public management. The New Zealand reforms have been promoted by some, such as the OECD and the Auditor General of Canada, as exemplars of public sector reform. This article argues that while there have been efficiency gains from these changes, these have sometimes been oversold The benefits have often been off-set by significant costs.