Wellington - Sir Roger Douglas, architect of sweeping free market changes that transformed the New Zealand economy two decades ago, was returned to parliament as part of the swing to the right in Saturday's election.

Douglas, now 70, was Finance Minister from 1984-88 in the Labour government that steered such radical reforms that a senior aide to Britain's Conservative Party said even its "Iron Lady" leader Margaret Thatcher would not dare to go so far.

He is back in parliament as a member of the free market ACT party he helped set up in 1993 and which is expected to be in coalition with the conservative Nationals who ousted Labour's coalition.

Douglas is such a fierce free marketeer that even the Nationals' leader John Key said before the election he would not have him in his cabinet because he was too extreme.

Douglas shrugged this off before the poll, saying that the National Party "needs some backbone - and that's what I'm going to do."

He told the TV3 channel after being elected, "I think John Key's in for a bit of a shock tomorrow when he gets Treasury and Reserve Bank reports.

"I think this country is going to go through a period of adjustment that we haven't seen for a long time."

ACT's election manifesto included cutting the public service and creating competitive markets in health, education and welfare.

It was probably Douglas' return to government that prompted ousted Labour prime minister Helen Clark to say in her concession speech, "I do hope that all we have worked to put in place does not go up in flames on a bonfire created by the right wing of politics." (dpa)