The Hawke–Keating government is an all-encompassing term to describe the duration of the Hawke government and the Keating government, which together spanned from 11 March 1983 to 11 March 1996. Both governments were formed by the Australian Labor Party, and were led from 1983 to 1991 by Bob Hawke as prime minister, and from 1991 to 1996 by Paul Keating as prime minister, with Keating serving as Treasurer throughout the Hawke government. During the Hawke–Keating government, the Labor Party won five successive federal elections, its most electorally successful period to date; the 13-year uninterrupted period of government also remains the Labor Party's longest spell in power at the federal level. This period in Australia’s political history is also referred to as the Hawke–Keating era.
The Hawke–Keating government began after the Fraser government was defeated at the 1983 election and ended with defeat at the 1996 election, which ushered in the Howard government. In between those elections were further victories in 1984, 1987, 1990 and 1993. The Hawke–Keating government has been described by Labor figures as the party's most successful period in government in its history, and has generally been reviewed positively by historians for its degree of achievement. Scholars and politicians have noted the importance of the powerful political and personal partnership that developed between Hawke and Keating to the success of the government.Edwards, J.,(1996), p.44Edwards, J.,(1996), p.6, p.48
Economic reforms The economic reforms pursued by the Hawke–Keating government has been claimed by numerous economic commentators and journalists since to have been the basis for both the modernisation and internationalisation of the Australian economy, and for triggering an unprecedentedly long period of economic growth, with Australia's gross domestic product increasing every year for 30 years after 1991; commentators have also credited the government's policies with bringing to an end what had been chronic inflation and balance of payments difficulties for Australia, enabling longer periods of stability and growth in both GDP and unemployment.
Macroeconomic modernisation According to the journalist Paul Kelly, "the most influential economic decisions of the 1980s were the floating of the Australian dollar and the deregulation of the financial system".Kelly, P., (1992), p.76 Although the Fraser government had played a part in the process of financial deregulation by commissioning the 1981 Campbell Report, opposition from Fraser himself had stalled this process.Kelly, P., (1992), p.78 Shortly after its election in 1983, the Hawke government took the opportunity to implement a comprehensive program of economic reform, in the process "transform(ing) economics and politics in Australia". Hawke and Keating together led the process for overseeing the economic changes by launching a "National Economic Summit" one month after their election in 1983, which brought together business and industrial leaders together with politicians and trade union leaders; the three-day summit led to a unanimous adoption of a national economic strategy, generating sufficient political capital for widespread reform to follow.
Among other reforms,Achievements of the Federal Labor Government 1983-1996 the Hawke government floated the Australian dollar, repealed rules that prohibited foreign-owned banks to operate in Australia, dismantled the protectionist tariff system, privatised several state sector industries, ended the subsidisation of loss-making industries, and sold off part of the state-owned Commonwealth Bank. The government also pursued the establishment of a new signature industrial relations and wages policy, the Prices and Incomes Accord. This was an agreement directly between the Australian Council of Trade Unions (ACTU) and the government to guarantee a reduction in demands for wage increases, in exchange for the government providing a significant increase in social programmes, including the introduction of Medicare and the Family Assistance Scheme; in so doing, the government was able to reduce inflation and unemployment over the decade.The Hawke Government: A Critical Retrospective, edited by Susan Ryan & Troy Bramston In the wake of the introduction of these macroeconomic reforms, in 1984 Keating was named Euromoney Finance Minister of the Year.
Industrial relations policy
As a former ACTU President, Hawke was well-placed to engage in reform of the industrial relations system in Australia, taking a lead on this policy area as in few others. Working closely with ministerial colleagues and the ACTU Secretary, Bill Kelty, Hawke negotiated with trade unions to establish the Prices and Incomes Accord in 1983, an agreement whereby unions agreed to restrict their demands for wage increases, and in turn the government guaranteed to both minimise inflation and promote an increased social wage, including by establishing new social programmes such as Medicare.
Inflation had been a significant issue for the previous decade prior to the election of the Hawke government, regularly running into double-digits. The process of the Accord, by which the government and trade unions would arbitrate and agree upon wage increases in many sectors, led to a decrease in both inflation and unemployment through to 1990. Criticisms of the Accord would come from both the right and the left of politics. Left-wing critics claimed that it kept real wages stagnant, and that the Accord was a policy of class collaboration and corporatism. By contrast, right-wing critics claimed that the Accord reduced the flexibility of the wages system. Supporters of the Accord, however, pointed to the improvements in the social security system that occurred, including the introduction of rental assistance for social security recipients, the creation of labour market schemes such as NewStart, and the introduction of the Family Income Supplement.Australia's welfare wars: the players, the politics and the ideologies by Philip Mendes In 1986, the Hawke government passed a bill to de-register the Builders Labourers Federation federally due to the union not following the Accord agreements.
Despite a percentage fall in real money wages from 1983 to 1991, the social wage of Australian workers was argued by the government to have improved drastically as a result of these reforms, and the ensuing decline in inflation.Developments in Australian politics by Judith Brett, James A. Gillespie, and Murray Goot The Accord was revisited six further times during the Hawke government, each time in response to new economic developments. The seventh and final revisiting would ultimately lead to the establishment of the enterprise bargaining system, although this would be finalised shortly after Hawke left office in 1991.
Taxation, budget and interest rates The Australian taxation system was significantly reformed during the period of the government, with income tax and company tax rates reduced and the introduction of a fringe benefits tax and a capital gains tax; the latter two reforms were strongly opposed by the Liberal Party at the time, but were never reversed by them when they eventually returned to office in 1996.Kelly, P., (1992), p. 175 Partially offsetting these imposts upon the business community was the introduction of full dividend imputation, a reform insisted upon by Keating.Kelly, P., (1992), p. 174 During this period, Keating advocated for the introduction of a consumption tax to address the chronic balance of payments problems being faced by Australia; after initially supporting this approach, Hawke later blocked the tax on the grounds of its unpopularity. Keating later caused considerable public comment and a degree of controversy, when he declared on a radio programme in 1986 that if Australia did not address the balance of payments, the country risked degenerating to the status of a "banana republic". The government increased efforts to deal with the issue, and no consumption tax to generate a significant increase in incomings, the government began a process to significantly reduce government outlays instead, resulting in some criticism from the grassroots of the Labor Party, who opposed any cuts to spending. Despite this criticism from some, the government was able to produce a national budget surplus for the years 1988, 1989 and 1990, with the surplus of 1988 proving to be the largest budget surplus in Australian history.
Towards the end of the 1980s, the government was heavily criticised by some for maintaining consistently high interest rates, which Hawke and Keating argued were necessary to reduce economic growth gradually so that demand for imports did not grow out of control. Throughout the 1980s, both the global and Australian economies grew quickly, and by the late 1980s, inflation had grown to around 9%. By 1988, the Reserve Bank of Australia began tightening monetary policy, and household interest rates peaked at 18%. It has been suggested by some that the Bank was too slow in easing monetary policy, and that this ultimately led to a recession. In private, Keating had argued for rates to rise earlier than they did, and fall sooner, although his view was at odds with the Reserve Bank and his Treasury colleagues. Publicly, Hawke and Keating had said there would be no recession – or that there would be a "soft landing" – but this changed when Keating announced the country was indeed in recession in 1990, several months after the Hawke government had won an unprecedented fourth consecutive term in office. Announcing the recession, Keating memorably stated that the recession was a "recession Australia had to have". The remark was referred to by political journalist Paul Kelly as "perhaps the most stupid remark of Keating's career, and it nearly cost him the Prime Ministership." Kelly did also concede that, "...however, it is largely true that the boom begat the recession."
Compulsory superannuation and enterprise bargaining During Keating's period as prime minister, the government legislated one of its most far-reaching achievements, the introduction of the National Superannuation Scheme, implemented to address Australia's long-term problem of chronically low national savings. This initiative built on policies that Keating had pursued whilst Treasurer, and was aimed at ensuring that most Australians would have enough money to retire. In 1992, the compulsory employer contribution scheme became a part of a wider reform package addressing this retirement income dilemma. It had been demonstrated that Australia, along with many other Western nations, would experience a major demographic shift in the coming decades, due to ageing population, and it was claimed that this would result in increased pension payments that would place an unaffordable strain on the Australian economy.
Keating's solution was a "three pillars" approach to retirement income, requiring compulsory employer contributions to superannuation funds, permitting further contributions to superannuation funds and other investments, and introducing, where this was insufficient, a safety net consisting of a means-tested government-funded age pension. The compulsory employer contributions were branded "Superannuation Guarantee" (SG) contributions. As a result of this policy, along with the gradual increases in the minimum contribution amount, Australia grew to become the fourth largest holder of pension fund assets in the world, with a balance of nearly AU$3 trillion in superannuation assets by 2020.