The worst finance minister in recent times was Robert Muldoon; the best include Labour's Michael Cullen, at least in his early days, according to tax expert John Shewan.

Shewan had his last day as chairman of PricewaterhouseCoopers New Zealand yesterday, and among other things will now take up the position of adjunct professor of accounting at Victoria Business School.

One of the last big projects Shewan completed at PWC was to review New Zealand's last 34 government Budgets.

The best finance ministers included Ruth Richardson, Michael Cullen and Bill English "all in their own way", during different eras, Shewan said. Cullen, especially, was an "unsung hero" for holding government spending down early in his time as finance minister.

Bill Birch and Winston Peters were treasurers during a "non-reformist period of lost opportunities".

Shewan said that one of the lessons of history was that, "You have to keep reforms going, otherwise you end up facing bitter medicine in the end.

"Politicians take their foot off the accelerator when times are good," he said.

In the course of clearing up his office earlier this month, Shewan found a government booklet from 1981, from the height of the Muldoon era. There were 45 pages of incredibly generous tax incentives for business.

That marked a turning point in Shewan's career, when Sir Ron Trotter, who was a mentor and headed Challenge Corporation in those days, criticised the incentives.

"Ron said to me, `This is nuts, we should not be getting this stuff'," Shewan said.

Trotter believed the company should not be getting money from the Government for doing things it would have done anyway, and it was just a windfall gain.

"That made me push my reset button, because I had thought incentives were a great idea," Shewan said.

The 45 pages of incentives were now completely redundant, Shewan said. The entire suite of "gimmes" was repealed by Roger Douglas.

SHEWAN hails from Whanganui, which he said helped him to understand small and medium-sized businesses.

He worked in the wool store in Whanganui and for Wright Stephenson and at a bakery for the Goodman Group in his early days. Ironically both companies became big clients during Shewan's long accounting career.

"You learn a lot from those [early] experiences," Shewan said.

Shewan's father was manager of farm distribution company Farm Products in Whanganui, and so Shewan spent a lot of time around farms in his early days.

He was encouraged to take up accounting because his father believed it would give him a good background for business. But if he had his time again, he would add economics and law.

Shewan moved to Wellington in 1973 to attend Victoria University and lived at Weir House, which he said was a great institution, but quite a change from his earlier days.

"I'm a firm advocate of booting your kids out when they go to university," Shewan said.

One of his teachers was Don Trow, one of the great men of accounting in New Zealand, who had taught a huge number of accountants.

Shewan did honours in 1976 and became a junior lecturer.

But in the following year, a mature student accused him of never working in the real business world.

So Shewan took a job in 1978 with what became PWC, for what he thought would be 12 months – but what turned into a 34-year career.

NOW, re-reading the first two pages of the 1978 Budget, "you could be in 2012" Shewan says.

Muldoon was prime minister and the finance minister who in the Budget said it was a challenging time and the world was being hit by a number of big shocks including the oil crisis.

New Zealand was being hit by world conditions then as it is now.

"There was a lot of pressure on the economy; [in 1978] government was headed for a deficit and New Zealand faced tough medicine," Shewan said. "All very familiar."

But the tough medicine was very different from today – it was all about government intervention.

The Government tried to change people's behaviour by decree and bullying under the Muldoon era.

"In 1978 that seemed to make sense," Shewan said. "I thought [then] if there was a market failure, the Government should intervene".

"But I was so wrong, as history testifies. Those policies of very strong government intervention and incentives and then responding to macro events like high inflation with a price and wage freeze, it was a dangerous mixture that blew up," Shewan said.

By the end of 1982, New Zealand was gloomy and despondent and in "deep trouble" Shewan said.

"It was a very sombre period," he said. But just how bad things were was not clear till after Labour was elected to power, and Muldoon refused to devalue the currency, even though National had been defeated.

"It was very scary – the model had unravelled and we were bankrupt," Shewan said.

But the lesson was "never let a fiscal crisis go to waste".

"Without doubt" Muldoon was the worst finance minister of the past 34 years and did the most damage to the economy.

"But I don't think he realised. I think he genuinely believed what he did would work," Shewan said, even though Treasury and others advised against his decisions.

The damage was huge and took a long time to fix.

"I'm sad we haven't learnt from those mistakes," Shewan said, given the huge blowout in government spending between 2004 and 2008.

"That will be another era that will be judged extremely harshly when government spending grew 60 per cent. It takes a long time to recover from that," he said.

In the early 2000s, the Clark government enjoyed huge Budget surpluses. "And in my view Michael Cullen did a good job in keeping a lid on spending between 1999 and 2005," he said.

But in 2005 the government campaigned to bring in massive spending increases such as interest-free student loans and Working for Families, which led to significant "middle class welfare".

"Often the worst policies are the ones announced on the hoof during an election campaign with no consultation," Shewan said.

They are typically very dangerous.

In 2005, Labour was trying to win the election with big-spending policies.

"But all governments are guilty of it, Muldoon and the Clark governments," he said.

And once such policies were brought in, they were extremely hard to unwind, especially under an MMP election system.

"People support policies that help them most," he said.

However Shewan gives credit to Cullen.

"Cullen is an unsung hero for being ruthless in stopping fiscal promiscuity in the early period of the Clark administration," Shewan said.

"He was a clever and talented guy, for whom I had great respect though I crossed swords with him [on some issues]."

Cullen did salt money away in the New Zealand Superannuation Fund, when the Government was running big surpluses.

BY THE early 2000s it was clear New Zealand faced some big infrastructure spending in the years ahead, including roading projects like Transmission Gully, and upgrading Auckland roads, tertiary education and irrigation.

"It is devastating we [New Zealand] are now sitting with no money when we need to spend big money in those areas," he said.

Irrigation was "low-hanging fruit" to boost economic performance in areas such as Canterbury, Hawke's Bay, Wairarapa and Marlborough, but there was no money to do it.

In the good times, the Government should stash money away, so when the economy dipped the country could rev up the big projects.

"Instead we blew it in 2005, when spending increased 60 per cent on programmes that are hard to justify," Shewan said.

Shewan also rejected the view that government reforms of the early 1990s failed.

Early 1990s finance minister Ruth Richardson faced staunch opposition because she tried to cull unaffordable policies.

"Ruth paid the political price for that," Shewan said.

That made him nervous about how governments unravel any policies.

But the reality was that the reforms were followed by the longest period of economic growth in New Zealand since World War II, with a boomer 6.4 per cent annual growth in 1994, followed by growth all the way through till the 2007 downturn.

"It wasn't solely due to the reforms," Shewan said.

"Richardson was unfairly criticised for what had to be done."

Present finance minister Bill English had come in during an extraordinarily challenging period, when the economy was already heading for the rocks, even before the Global Financial Crisis hit, then the GFC did hit, followed by the Christchurch quake.

"He has achieved basically zero growth in government spending – that's a huge achievement," Shewan said.

JOHN SHEWAN'S KEY LESSONS FROM 30 YEARS OF BUDGETS

Incentives matter: At work or play, the average Kiwi behaves in an entirely logical way.

"As Sir Robert Muldoon discovered, when governments introduce poorly designed incentives and subsidies, bad behaviour and high waste are inevitable".

Focus on the big picture: The key things for economic performance are a stable and predictable macroeconomic environment, openness to trade and investment, effective labour and capital markets, relatively low taxes and regulatory burdens and sound public finances.

Don't stop reforming: Radical reforms, such as those of the Roger Douglas era, can be avoided with regular housekeeping.

"We are not good at this".

The best time to tackle structural reform is when the economy is strong, rather than waiting for a fiscal crisis to trigger change.

JOHN SHEWAN

Age, 57

Born, Whanganui

Education: Wanganui Collegiate and Victoria University

Retiring as chairman of PricewaterhouseCoopers New Zealand

Chairs the Victoria Business School advisory board, sits on the Centre for Accounting, Governance and Taxation research advisory board

Member of the Victoria University of Wellington tax working group

Victoria University distinguished alumni award winner in 2010

Companion of the New Zealand Order of Merit for services to business, 2012

Interests: Marathon running, sports and supporting the Hurricanes rugby team

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