Muldoon's big-spending economic policies were widely perceived to be unsuccessful, and when he called a snap election in 1984, Labour were returned to power under David Lange . Just as National had eschewed traditional right-wing economics in favour of a "managed economy", Labour now changed tactics, addressing the massive economic problems by shunning the traditional left-of-centre approach. Instead, they grasped the baton of Thatcherite economics and sprinted off with it. Under Finance Minister Roger Douglas's Rogernomics , the dollar was devalued by twenty percent, exchange controls were abolished, tariffs slashed, the maximum income tax rate was halved, a Goods and Services Tax was introduced, Air New Zealand and the Bank of New Zealand were privatized, and state benefits were cut. Unemployment doubled to twelve percent, a quarter of manufacturing jobs were lost, and the moderately well-off benefited at the expense of the poor; nevertheless, market forces and enterprise culture had come to stay. As one of the world's most regulated economies became one of the most deregulated, the longstanding belief that the state should provide for those least able to help themselves was cast aside.

In other spheres Labour's views weren't so right-wing. One of Lange's first acts was to refuse US ships entry to New Zealand ports unless they declared that they were nuclear-free. The Americans would do nothing of the sort and withdrew support for New Zealand's defence safety net, the ANZUS pact. Most of the country backed Lange on this but were less sure about his overtures towards Maori who, for the first time since the middle of the nineteenth century, got legal recognition for the Treaty of Waitangi. Now, Maori grievances dating back to 1840 could be addressed.

The rise in apparent income under Rogernomics created consumer confidence and the economy boomed until the stock market crash of 1987, which hit New Zealand especially hard. The country went into freefall and all confidence in the reforms was lost. Labour's position, consolidated in the 1987 election, now became untenable, and in the 1990 election National's Jim Bolger took the helm. Throughout the deep recession National continued Labour's free-market reforms, cutting welfare programmes (a policy dubbed "Ruthanasia" after its perpetrator Ruth Richardson) and extracting teeth from the unions by passing the Employment Contracts Act, which established the pattern of individual workplaces coming to their own agreements on wages and conditions. By the middle of the 1990s the economy had improved dramatically and what for a time had been considered a foolhardy experiment was seen by monetarists as a model for open economies the world over. Meanwhile, the gap between the rich and the poor continues to widen and New Zealand's classless society is increasingly exposed for the myth it always was.

While many have relished the good life, those at the bottom of the pile have suffered. In her resignation speech, Cath Tizard , the most popular and charismatic Governor-General New Zealand has had for years, levelled a thinly veiled attack at the government for its record on health care, but succeeded only in raising anti-monarchist hackles at her vice-regal intervention. Nonetheless, the kind of republican rabble-rousing championed across the Tasman in recent years largely falls on deaf ears in Aotearoa , where, despite the maturing of the nation in the last decade or so, and a progressive realignment with the Pacific and Asia, most seem happy to maintain links with Britain.

Ever since New Zealand achieved self-government from Britain in 1852, it had maintained a first-past-the-post Westminster style of parliament, with the exception of the scrapping of the upper house in 1950 and the provision for four (later five, and now six) Maori seats. Maori can chose to vote for their general or Maori candidate but not both. Through the late 1980s and early 1990s both parties had promised electoral reform and, in the depths of the recession in 1993, New Zealand voted for Mixed Member Proportional representation (MMP), a system which purports to give smaller parties an opportunity to have some say. In the two MMP elections since then, this has certainly proved to be the case. In 1996, National and Labour shared the majority of the vote, but the balance of power was held by New Zealand First , a new Maori-dominated party headed by former National MP, Winston Peters , who shaped their policies of reducing Asian immigration, increasing government spending and accountability, and getting long-term unemployed back to work. They eventually formed a coalition with National under Jim Bolger and introduced a new Maori spirit in parliament, with far more Maori MPs than ever before and maiden speeches received with a waiata (song) from their whanau (extended family group) in the public gallery. Unfortunately, most were political neophytes and NZ First self-destructed in short order after a spate of scandals. Bolger's poor handling of the situation saw his support wane, and his attendance at a Commonwealth leaders' conference left the field open for a palace coup, in which Jenny Shipley became New Zealand's first female prime minister. Her brand of right-wing economics and more liberal social views succeeded in holding the coalition together but failed to bolster the polls on the lead up to the 1999 election. Suddenly, out of left-field came the Green Party , long-sidelined but newly resurgent under MMP. The vagaries of the MMP system meant that, on a nail-biting election night, the Greens were teetering between getting no seats at all and racking up six seats, a tally they eventually achieved with the counting of special votes. They formed a government with Labour and the Alliance, and sent New Zealand's first Rastafarian MP to parliament, one Nandor Tanczos . Resplendent in waist-length dreads and a new hemp suit he has become both a bogeyman for the opposition and something of a hero to disenfranchised youth. As if the political landscape weren't topsy-turvy enough, the staunchly conservative Wairarapa district returned the world's first transgender MP, Carterton's former mayor, Georgina Beyer .

Nine years in opposition left Labour (the senior coalition partner) with a considerable agenda for change, and they haven't held back. Logging of beech forests on the West Coast has been stopped, the Employment Contracts Act has been replaced by more worker-friendly legislation, and they've unilaterally abolished knighthoods. Support remains strong, but some are already voicing doubts about how long the honeymoon period can last.

Meanwhile, Maoritanga looks set to play an ever increasing role in the life of all New Zealanders as Maori consolidate the gains of the past few years. In the twenty-first century the number of New Zealanders who consider themselves Maori may well surpass the number of pakeha , and it remains to be seen just how significant that will be.