Anderton was born on 21 January 1938 in Auckland. He undertook all his education there, eventually graduating as a qualified teacher. He spent only two years in a teaching role, however, before moving on to work as a child welfare officer. In 1960, he became involved in organization for a Catholic youth movement, and later worked as the secretary for the Catholic diocese in Auckland. He later moved into business, working as an export manager for a textiles company before establishing Anderton Holdings, a manufacturing company, in 1971.
His political career began when he was elected to the Manukau City Council in 1965, and again in 1974. He subsequently joined the Auckland Regional Authority in 1977. At the same time, he worked his way up the internal hierarchy of the Labour Party, which he had joined in 1963. He became the party's president in 1979, a year before his term with the Auckland Regional Authority ended. He was also a long-standing member of the party's policy council.
In 1984, Anderton successfully stood as the Labour candidate for Sydenham, an electorate in the city of Christchurch. However, he soon came into conflict with the party's leadership, and became one of the most outspoken critics of Minister of Finance Roger Douglas. Douglas, along with his allies (Richard Prebble and David Caygill, were determined to implement radical reforms of the country's economic system, known unofficially as "Rogernomics". This involved a monetarist approach to controlling inflation, the removal of tariffs and subsidies, and the privatization of state assets - all of this was regarded by Anderton as a betrayal of the party's left-wing roots, and a severe deviation from the party's election platform).
Anderton's severe criticism of Douglas and his reforms earned him the enmity of many within the party, including some of those who shared Anderton's frustration - his public comments were seen as damaging the party's public image. He did, however, become highly popular with the public, as most New Zealanders shared his opposition to the reforms. He also won widespread praise for keeping to Labour's campaign pledges even when the rest of the party abandoned them.
Although many ordinary members of the Labour Party (who were unhappy at the way the party's parliamentary wing was behaving) backed Anderton, he became increasingly isolated in parliament. When Anderton disobeyed party instructions to vote in favour of selling the Bank of New Zealand (which Labour has explicitly promised not to do), he was suspended from caucus. In April 1989, believing that Labour was beyond change, Anderton resigned from the party.
On 1 May, Anderton announced the creation of the NewLabour Party, intended to represent the "real" spirit of the original Labour Party. Its primary goals were state intervention in the economy, retention of public assets, and full employment. In the 1990 general elections, Anderton retained his Sydenham seat, ensuring that NewLabour (and Anderton's criticism) would not fade away. In parliament, Anderton attacked the policies of the new National Party government, particularly Ruth Richardson's continuation of Rogernomics.
When, in 1991, the Alliance was established, NewLabour (and Anderton) were at the centre of it. Anderton became leader of the new party, and in the 1993 elections, he was joined in parliament by Alliance colleague Sandra Lee. He briefly stepped down as leader of the Alliance for family reasons in November 1994, but was persuaded to return in May 1995.
After the 1999 elections, the Alliance formed a coalition with Labour, which had mostly purged itself of the influence of Roger Douglas. The two parties entered government together, with Anderton becoming Deputy Prime Minister. He was also given the newly created post of Minister of Economic Development, which had an emphasis on job creation and regional development initiatives.
Towards the end of the parliamentary term, however, Anderton came into conflict with the party's administrative wing. Party president Matt McCarten and his allies claimed that the Alliance was too close to Labour, and that it should take a less moderate path. Anderton replied that a certain amount of moderation was required for the Alliance to accomplish any of its goals. There were also complaints that Anderton was too dominant in the party's decision-making. Eventually, Anderton and three other MPs chose to leave the Alliance, establishing the new Progressive Coalition (now the Progressive Party).
In the 2002 elections, Anderton was returned to parliament, and once again entered into coalition with Labour. His following, however, was diminished, and no longer justified his retention of the Deputy Prime Minister's role. He remains, however, Minister of Economic Development.