When National came to power in the , Richardson had enough support within the party to be made Minister of Finance, though Bolger preferred Bill Birch for the post. Many people believed that the National Party would adopt more cautious, conservative policies than the radical Labour government. On coming to office, however, the new Government was confronted with a much worse fiscal and economic position than the out-going Government had disclosed. In particular, the state-owned
Bank of New Zealand required a multimillion-dollar recapitalization. The forecast budget surplus was quickly revised, upon National coming into office, to a large budget deficit.
Economic and Social Initiative As part of the December 1990 ‘Economic and Social Initiative’ white paper, welfare benefits were substantially reduced. Announced on 19 December 1990 and taking effect from 1 April 1991, the changes included weekly cuts of $14 to the Unemployment Benefit, up to $25 for recipients aged 18-24, $28 to the Domestic Purposes Benefit, and $27 to the Sickness Benefit. The abolition of the Family Benefit cut a further $6 per week from family incomes, while single parents under 18 were no longer eligible for the Domestic Purposes Benefit. Following a backbench revolt over proposed cuts to Carer’s Benefit, Richardson shrank from cutting the Invalids Benefit. GP subsidies were also reduced, prescription drug fees rose, and the government abandoned a GP contract scheme introduced by the previous Labour government to reduce doctors fees. The fact National had not forshadowed such a drastic welfare reform caused dismay among many party supporters. Several notable National MP's, such as
Michael Laws,
Cam Campion,
Gilbert Myles, and
Hamish MacIntyre crossed the floor to vote against the government on several occasions.
Mother of all Budgets In July 1991, Richardson delivered what became known as the “
Mother of all Budgets”. The phrase originated from an offhand remark to a journalist making a phone inquiry prior to its release, in which she stated it would be "the mother of all budgets". The comment was captured by a
Television New Zealand news camera and quickly became associated with the harshness of the National government's economic policies. The term would come to haunt her career. The 1991 Budget was no less far-reaching than the 19 December 1990 package. Reforms in tertiary education owed nothing to National's 1990 election commitments. Despite a promise to abolish tertiary fees entirely, they were retained and effectively deregulated, allowing institutions to set their own fee levels. The
public health system underwent a major restructuring, with a separation between funding and provision. Area Health Boards were abolished and replaced by Crown Health Enterprises, while newly established Regional Health Authorities purchased health services under contract to the Crown. This effectively corporatised the public health system. A $50 overnight charge schedule was introduced for persons using the public hospital system. In housing, the government introduced market rents for
state housing tenants. This resulted in soaring rents for many tenants, which in some cases tripled. The most controversial issue for the National government, however, was retirement income. In 1989, the previous Labour government had introduced a Guaranteed Retirement Income (GRI), which abolished the 80% average national income threshold, indexing it to prices and wages. In practice, this was a modified continuation of the previous National Superannuation scheme. In 1985, Labour had introduced a Superannuation Surtax to claw back some of the entitlement from retirees. National pledged to abolish the surtax in the 1990 election, promising to do so within the first 100 days. Instead, National abolished the surtax, but introduce an abatement scheme and included GRI in the
Social Security Act. This effectively transformed GRI into a state benefit, causing outrage across the country. After a series of concessions, National abandoned the policy, with one exception: the Surtax returned, was increased from 20% to 25%, and the exemption lowered. This episode soon became emblematic of the perceived dogmatic extremism of Richardson and cost the government dearly. The radicalism of Richardson brought her into conflict with several National ministers. Tax policy was one area where Richardson and the more moderate members of Cabinet failed to even agree on basics. In early 1993, Bolger personally summoned Richardson and said he intended to split the roles of Minister of Finance into two roles, Treasurer and Minister of Finance. Richardson later said she gave Bolger "chapter and verse" and rejected the idea outright. She in particular came into conflict with
Minister of Revenue Wyatt Creech, who opposed much of her agenda. These tensions would remain unresolved until after the 1993 election, whereupon Bolger removed her from the portfolio. Although National was re-elected in the , it was by the narrowest of margins (one seat) and many people within the party believed that Richardson's presence was damaging to National. In addition, Bolger and his allies had still not been reconciled with her. In order to partially reflect the strong discontent in the electorate with the reform process (National arguably only won because the opposition vote was split between three parties) Richardson lost her role as Minister of Finance to Birch, and was offered the role of Minister of Justice. Richardson refused, preferring to take a role on the back-benches. Soon afterward, she decided to leave Parliament altogether, forcing a by-election. In 1993, Richardson was awarded the
New Zealand Suffrage Centennial Medal.
Legacy Though her period as Finance Minister was comparatively short, Richardson's legacy in subjects such as
fiscal responsibility and
economic liberty is large. Many of the reforms she championed have endured and remain an example for a modern Public Financial Management. With the first public sector balance sheet produced it was used to avoid a double down-grade to the
Sovereign credit rating. Since these public sector reforms, New Zealand has achieved and maintained significantly positive net worth, notwithstanding several shocks to the economy, including the
2008 financial crisis and the Christchurch earthquake in 2011, where most comparable governments like Australia and Canada, or larger countries such as the UK and US, have a negative net worth. The
2021 New Zealand budget presented by the
Sixth Labour Government boosted levels for beneficiaries by the highest amount in decades in what was framed as a direct response to Richardson's 1991 "Mother of all Budgets" by largely restoring benefit levels. During the budget day speech, finance minister
Grant Robertson said that it had been 30 years since the 1991 budget and that the 2021 budget would "address the most inequitable of the changes made 30 years ago." Prime Minister
Jacinda Ardern commented that "On too many occasions in New Zealand's history, the changes that leave an indelible mark on the next generation do so for the wrong reason." In response to the 1991 budget's legacy Richardson defended it, by stating: "My budget was driven by a desire to lift economic growth and to make employment attractive." The cut in major benefits in the 1991 budget had long-lasting effects on welfare and poverty in New Zealand. Benefits were effectively not raised until a
small increase in 2016 under the
Fifth National Government by finance minister
Bill English, with the 2020 and 2021 budgets largely restoring the pre-1991 levels. Richardson's cut in benefits is largely seen as having corresponded with an increase in long term general poverty and wealth inequality in New Zealand. ==Subsequent career==