3

Neoliberalism in Australia

Drawn from Quiggin, John. 1996. Great Expectations: Microeconomic Reform and Australia. Sydney: Allen & Unwin, Chapter 3.

In many ways, the Australian experience of micro-economic reform parallels the international developments discussed in Chapter 2. An important theme in this chapter is the need to take a sceptical view of arguments suggesting that Australia has had a uniquely poor economic performance and must adopt micro-economic reform policies to catch up with the rest of the world. Nevertheless, it is important to see how the approach taken to micro-economic reform in Australia reflects a response to specifically Australian concerns and to the form of earlier interventionist policies.

The growth of the State in Australia

At least until the Second World War, Australian governments were interventionist by world standards. A number of factors have contributed to this outcome. First, the British colonies in Australia were initially established as combinations of barracks and prisons. It was inevitable that governments should have a dominant role in the development of such societies. Second, the early achievement of an essentially democratic State encouraged the view of government as an instrument for the achievement of shared social goals, rather than as a dangerous power to be hedged around and controlled. Finally, in a huge continent with a small population, only governments had the resources to undertake capital-intensive enterprises such as the construction of railway systems.

As will be argued below, Australia became less distinctive in this respect after the Second World War. In important respects, such as the reliance on tightly targeted flat-rate transfer payment schemes and private superannuation, Australian governments were less inclined to increase outlays than those of other countries in the Organisation for Economic Co-operation and Development (OECD). Thus, by 1994, Australia was, by some measures, the lowest-taxing country in the OECD.¹ The image of an interventionist government in Australia is somewhat out of date.

Nevertheless, a knowledge of the history of government intervention in Australia is important. Although similar reforms have taken place overseas, particularly in other English-speaking countries, the distinctive features of the Australian policy environment have shaped and constrained the course of micro-economic reform. An appreciation of history aids assessment of the debate surrounding micro-economic reform, a central theme of which has been the claim that Australia has been particularly ill-served by its economic institutions and hence is in greater need of radical micro-economic reform than other countries.

The Harvester judgment and the New Protection

With the Federation of Australia in 1901, the role of government was expanded. A vital development was the interaction of the arbitration system governing wages and conditions of employment, and the tariff policy adopted by the federal government. This policy was referred to by its leading advocate, Alfred Deakin, as the New Protection. Under the New Protection policy, tariff protection would be conditional on the payment of adequate wages, with the standard of adequacy being determined on a basis of social need rather than on market criteria. Although attempts to make this conditionality explicit were rejected as unconstitutional, the ideas of the New Protection were effectively implemented in the famous Harvester judgment. In this case, heard in 1907, the Arbitration Court, headed by Justice Henry Higgins, laid down the principle that the basic wage should be sufficient to provide for the needs of a family of five, estimated at 42 shillings a week.

The ideas of the New Protection were given intellectual substance by the report of the Brigden Committee (1929). The committee argued that, while protection yielded a lower per capita income than would free trade, it increased the demand for labour, and, therefore, the size of the population that could be supported at a given real wage, such as that laid down in the Harvester judgment. More generally, this point may be restated as saying that protection of a labour-intensive industry leads to an increase in the equilibrium real wage. This result was formalised as the Stolper–Samuelson theorem (Stolper and Samuelson 1941).

The attempt to secure social equity through the wages system was supported by a series of innovative welfare policies, including age pensions, workers’ compensation and the beginnings of a system of unemployment relief. These policies were based on the assumption that families with an employed (male) breadwinner would be adequately protected by the arbitration system and sought to assist those who temporarily or permanently fell outside this group. Thus, it has been described as a ‘wage-earners’ welfare state’ (Castles and Mitchell 1994).

Australian social welfare policies were most distinctive in the period from the Federation to the Great Depression. Hancock’s classic study Australia, first published in 1930, critically examined features of the political economy of Australia, including tariffs, the arbitration system, public enterprises and the role of the State as a driving force in economic development:

The Australians have always disliked scientific economics and (still more) scientific economists. They are fond of ideals and impatient of technique. Their sentiments quickly find phrases and their phrases find prompt expression in policies. What the economists call ‘law’ they call anarchy. The law which they understand is the positive law of the State—the democratic State which seeks social justice by the path of individual rights. The mechanism of international prices, which signals the world’s need from one country to another and invites the nations to produce more of this commodity and less of that, belongs to an entirely different order. It knows no rights, but only necessities. The Australians have never felt disposed to submit to these necessities. They have insisted that their governments must struggle to soften them or elude them or master them. (Hancock 1930, 66–67)

It is this set of attitudes that recent advocates of micro-economic reform have set out to overcome. At one level they have been successful. Over the past 20 years, the tariff has been virtually abolished for most industries, the structures of financial regulation have been swept away, public enterprises privatised or prepared for privatisation, and the power of the arbitration system has been greatly reduced. The need to become ‘internationally competitive’, and the package of policies this implies, is accepted by political leaders of both major parties, by bureaucrats and business leaders, and by the majority of economic commentators.

Yet, on the whole, the Australian public remains unconvinced. The view that governments must struggle to ‘soften, … elude … or master’ the harsh demands of the marketplace remains part of the Australian ethos.² Almost without exception, when the policies of micro-economic reform have been put to the electoral test, they have been rejected.³ Popular opposition to reform crystallised in the late 1980s around the phrase ‘economic rationalism’ (Pusey 1991) and does not appear to have abated significantly. In the absence of any clear economic benefits from reform, policies have not been implemented with popular support but have rather been imposed on the basis that ‘there is no alternative.’

The clash between public and elite opinion makes the economic assessment of micro-economic reform an issue of more than academic interest. Given the chance, many Australians would willingly turn back the clock of reform. A careful assessment of the gains and losses of micro-economic reform, and of the areas in which reform has succeeded and failed, may help to guide the path of reform and to identify policies that would yield greater benefits to ordinary Australians than the policies adopted in the past.

The Australian settlement?

One of the most comprehensive presentations of the case in favour of micro-economic reform is given by Paul Kelly, former editor of The Australian newspaper. Kelly (1992) describes what he calls ‘the Australian settlement’, which he claims dominated Australian society and economic policy from 1901 until the 1980s. Kelly identifies the economic elements of the settlement as consisting of industry protection, arbitration, and State paternalism. He links these economic policies with White Australia and Imperial benevolence, which he initially defines as ‘dependence on a great power, (first the UK, then the USA) for its security and finance’, but subsequently describes exclusively in terms of attitudes to the UK.⁴ Kelly’s package represents an extension of the ‘Federation trifecta’, consisting of protection, arbitration and White Australia, criticised by Henderson (1990).

The link between interventionist economic policies, and the ideas of imperialism and White Australia is misleading. The ideas of White Australia and Imperial benevolence certainly dominated policy up to World War II—the White Australia policy was, in fact, a British Australia policy, and it was regularly claimed that Australia was ‘98 per cent British’ (Hancock 1961, 128). However, the fall of Singapore in 1942 spelled the end of political reliance on the UK, and of Australia’s role as a British outpost.

The White Australia policy was undermined by the mass migration programs after World War II, which drew large numbers of southern European migrants, who, before the war, had been regarded as ‘a semi-coloured race’, to be subject to the most stringent controls (Hancock 1961, 126). Throughout the postwar Keynesian boom, both the White Australia policy and the Imperial connection were steadily eroded. The term ‘White Australia’ had been officially dropped in 1941, and the end of the policy came in 1966, when both the Liberal–Country Party government and the Labor opposition committed themselves to a non-discriminatory immigration policy.

By the early 1970s, when economic interventionism reached its peak, the last vestiges of the White Australia policy were swept away, and the UK, which entered the European Community in 1973, became irrelevant in economic as well as political terms. The link between the White Australia policy, the Imperial connection and interventionist economic policy is long dead. All were widely supported policies of the Federation era, but in the current policy debate, most prominent opponents of micro-economic reform are also opponents of racially discriminatory immigration policies and of a nostalgic emphasis on Britishness. The attempt by advocates of micro-economic reform, such as Kelly and Henderson, to link the policies they oppose with the White Australia policy is a rhetorical device, exploiting the principle of guilt by association.

A more fundamental difficulty with the idea of an Australian settlement put forward by Kelly and Henderson is the failure to take any account of the changes in the political and economic framework brought about by the 30 years of full employment that followed the Second World War (Smyth 1998). No adequate explanation of this exceptional period in our economic history has yet been developed. At the time, however, full employment was seen simply as the result of the adoption of Keynesian macro-economic policies.

The belief that government intervention could guarantee full employment naturally translated into broad confidence in the capacity and responsibility of governments to manage other aspects of the economy. On the other hand, the apparent capacity of fiscal policy to maintain full employment undermined the main rationale for tariff policy as a device for protecting employment. Increasingly, economists came to see tariffs as an indirect and inefficient micro-economic approach to what was properly seen as a macro-economic problem. If anything of value is to be derived from ideas of an Australian settlement, a proper account must be taken of the role of Keynesian full employment policy.

The White Paper and the postwar boom

From World War II onward, Australia’s social and economic institutions became more like those of the rest of the developed world. In part, the pressures of the Great Depression forced Australian governments to pay greater attention to the economic logic of the marketplace. Unprofitable state enterprises such as butcher shops and tobacconists were abandoned, and the doctrine that wage rates should be based on an industry’s capacity to pay became the central determinant of wage setting. More notably, other countries became more like Australia. Whereas Australia’s state-owned railways and public utilities were an exception in the 19th century, by the early postwar period it was the USA’s insistence on retaining such enterprises in private ownership that looked exceptional. After World War II, the early Australian experiments with the social welfare system were matched, and on most measures outmatched, by European welfare states.

Nevertheless, the period from 1945 to 1975 was one of steady expansion of the role of government in Australia. The enhanced micro-economic role of government was underwritten by radical changes in macro-economic policy. Australia entered the postwar world with an explicit commitment to the maintenance of full employment, embodied in the 1945 White Paper on Full Employment in Australia. The White Paper was the defining document for economic policy between 1945 and 1975. For the first and possibly the only time, the Australian government accepted an obligation to guarantee full employment and to intervene as necessary to implement that guarantee.

Particularly with respect to trade policy and financial regulation, the perceived demands of macro-economic management overrode any concerns about micro-economic efficiency. A noteworthy example of these priorities was the adoption of quantitative import controls by the Menzies government as a response to balance-of-payments difficulties. At the same time, the apparent success of governments in maintaining stable full employment where markets had failed supported the view that government judgements of social needs were likely to be superior to reliance on market outcomes.

The Liberal–Country Party governments that held office through most of the postwar boom advocated a middle course between the laissez-faire doctrines of conservative parties before World War II and the socialist objective proclaimed by the Labor Party. In the intellectual climate of the times, this led to a gradual expansion of the role of government. However, government policy lacked any real coherence or intellectual basis. The advocates of intervention were ill-prepared to meet the critique of their policies advanced by supporters of micro-economic reform from the 1970s onward.

The most notable example was the ‘protection all round’ policy advocated in particular by the Country Party under Sir John McEwen. In practice, this policy involved assisting the import-competing manufacturing sector and those segments of the rural sector oriented to the domestic market at the expense of the major exporting industries. However, the fact that nearly everyone received some assistance obscured the fundamental point that assistance to one industry is, in effect, a tax on others. It is not surprising that the concept of the ‘effective rate of protection’ was first developed in Australia. A variety of defences can be advanced for protectionist policies, but ‘all round’ is difficult, if not impossible, to rationalise.

The Whitlam government

The Whitlam government was elected in 1972 with a program based on a mixture of incompatible elements. On the one hand, at the aggregate level, Whitlam favoured Keynesian macro-economic policies and a substantial expansion of the role of government. On the other hand, the government’s stance on tariff policy and, to a lesser extent, with respect to government business enterprises, foreshadowed later developments in micro-economic reform.

Whitlam pursued an essentially free-market industry policy and, indeed, boasted that his was the first genuine free enterprise government in Australian history. The most noteworthy examples of Whitlam’s free market approach to industry were the 25 per cent across-the-board tariff cut of July 1973 and the bitterly resented decision to abolish the bounty paid to farmers for purchases of superphosphate. Of more long-term significance was the establishment of the Industries Assistance Commission (later the Industry Commission) in 1973, replacing the old Tariff Board. Since its establishment, the commission has acted as a public advocate of micro-economic reform in every area of the economy.

Another important decision, the significance of which was not recognised at the time, was the abolition of the old Postmaster-General’s Department, through which telephone and postal services were supplied, and its replacement by two statutory corporations, Australia Post and Telecom Australia (now Telstra). This decision may be seen in retrospect as the beginning of a process in which large numbers of government services have been first corporatised and ultimately privatised. It should be emphasised, however, that the Whitlam government saw the creation of statutory authorities as a method of increasing the efficiency of public sector provision, and, therefore, of supporting the continued expansion of the public sector.

In other areas of policy, the Whitlam government took a more interventionist stance. It pioneered the imposition of requirements for environmental impact statements. The establishment of the Medibank health insurance system represented a major expansion of direct government involvement in an area where policy had previously been confined to the use of subsidies and tax concessions. Whitlam greatly increased public expenditure and the role of the national government in areas such as education. Most notably, the government’s policies with respect to international capital flows were diametrically opposed to its position in favour of free trade in goods. Foreign direct investment was restricted, and devices like the variable deposit requirement were used to control short-term capital flows.

The mixture of interventionist and laissez-faire ideas in the Whitlam program seems intellectually incoherent and has certainly never received an adequate defence. It might be possible to construct such a defence around the idea of a large, but rationally organised, public sector operating in areas characterised by scale economies and externalities, complementing a private sector in which unrestricted competition prevails. But if such an idea is present in Whitlam’s defence of his government’s record (Whitlam 1985), it is hard to discern.

The retreat of the State since 1975

Despite some important micro-economic reforms, the Whitlam government remained expansionist and interventionist until 1975. In some respects, the Hayden budget of 1975, which embodied a reduction in the budget deficit at a time of high unemployment, may be seen as signalling a retreat from this position. Nevertheless, the era of the retreat of the State began in earnest with the election of the Fraser government.

The Fraser government, 1975–83

The election of the Fraser government in 1975 marked the abandonment of the goal of full employment. Macro-economic policy under Fraser was based on the slogan ‘fight inflation first’. Although it was not recognised at the time, the abandonment of the full-employment objective had the effect of undermining government intervention in general, and, hence, of laying the basis for micro-economic reform. More generally, the Fraser government was the first since World War II to translate the traditional Liberal rhetoric of free enterprise into an explicit commitment to cut back the role of government.

Fraser’s macro-economic policy focussed primarily on the need to reduce aggregate real-wage levels. This view had some plausibility at the time. Real wages had risen substantially under the Whitlam government. Treasury introduced the concept of the ‘real wage overhang’, representing the rise in real wages above that which could be justified by productivity growth. Labour market policy under Fraser was dominated by the attempt to drive average real wages down, and, more generally, to weaken the power of the trade unions. The passage of sections 45D and 45E of the Trade Practices Act 1974, prohibiting secondary boycotts, certainly had this effect. Although the intention was to restore the authority of the Arbitration Court, sections 45D and 45E have proved useful to employers seeking to bypass arbitration and push through labour market reforms.⁵

Finally, Fraser sought to roll back the growth in government expenditure and taxation that had occurred over the postwar period. Success in this area was limited. Although there was plenty of public support for tax cuts (the ‘tax revolt’ in the USA dated from this period) and some support for the general idea of reduced government spending, there was little support for specific cuts in expenditure. Moreover, growth in unemployment and in the proportion of the population aged over 65 implied a substantial increase in welfare expenditure without any change in policy.

Although the primary focus of the Fraser government was on retrenchment at the aggregate level, the government undertook several initiatives that may be seen in retrospect as important steps towards micro-economic reform. The most notable was the establishment, in 1979, of the Campbell Committee to inquire into the financial system (the Australian Financial System Inquiry). Progress on implementing the recommendations of the committee, which reported in 1981, was limited by several factors, including the opposition of the Labor Party and the Democrats, who controlled the Senate. Nevertheless, the record of the Fraser government was one of substantial financial deregulation.

The Fraser government did not achieve its main objectives. Unemployment fluctuated between 5 and 6 per cent until the 1981–83 recession, when it peaked at above 10 per cent. Although inflation came down from the peaks experienced under the Whitlam government, policies based on control of the money supply failed to deliver a return to the low inflation rates of the 1960s. After some success in cutting back public expenditure as a share of gross domestic product (GDP), the recession of 1981–83 led to a blowout in unemployment benefits and labour market programs.

As a result of this lack of success, and of the government’s mixed record on tariff policy, it became fashionable, particularly in Liberal Party circles, to see the Fraser period as a ‘missed opportunity’ for micro-economic reform. This view, which may be traced back to Henderson (1983), gains some credence from the fact that Fraser himself has emerged as a critic of many aspects of micro-economic reform. Nevertheless, the ‘wasted years’ view of the Fraser period is essentially anachronistic, since it projects the concerns of a later period back onto the policy debates of the past. At most, this view may be relevant to the government’s final term, dominated by the 1981–83 recession. As Kelly (1992, 38) observes:

It was after 1980 that the radical liberals launched their revolt and the demand grew for free market reforms. It is wrong to attack Fraser for failing to implement these policies in 1976 and 1977 when, frankly, virtually nobody was calling for them.

Even in the period 1980–82, the key disagreements concerned macro-economic policy. Fraser was criticised primarily for resorting to Keynesian expansionary policies in response to the recession that commenced in 1981. Few participants in the policy debate at this time placed much weight on the set of policy issues that were subsequently labelled as micro-economic reform. In subordinating these issues to macro-economic policy concerns, the Fraser government adhered to the economic orthodoxy of the day. As Puplick (private interview 1990, quoted in Kelly 1992, 98) observes: ‘A mythology started to be built up by his former close associates about what Fraser had failed to do in office at their urging.’

Most of these points are effectively conceded by Henderson (1994, 256–60).

The myth of ‘the wasted years’ under Fraser is important, primarily because it gives support to a ‘crash through or crash’ approach to reform. Any willingness to compromise will, it is argued, open the floodgates to the interest group pressures which were seen as responsible for Fraser’s alleged policy weakness. This approach, drawing on public choice theory for additional support, was responsible for the refusal, until it was too late, of former Liberal leader Hewson to compromise on any detail of the Fightback program, and therefore ultimately for the Liberals’ loss of the ‘unlosable’ 1993 election.

The Hawke–Keating governments

The election of the Hawke–Keating Labor government in 1983 was a pivotal event in the history of micro-economic reform. During the Fraser government’s term of office, the Labor Party had generally opposed reform and advocated a continuation of the policies of the Whitlam era, though with a preference for a slower pace of change and greater attention to economic constraints. The Hawke–Keating government was elected on the basis of a fairly traditional social democratic program, embodied in its 1982 platform. The centrepiece of the platform was the idea of a Prices and Incomes Accord. Although it was subject to flexible interpretation over time, the Accord implied an expansion of the ‘social wage’ in the form of community services and welfare benefits, and government intervention in the interests of workers, in return for restraint in real and nominal wages.

The first Hawke government took several steps along these lines. However, the leaders of the Labor Party were influenced more and more by the intellectual climate of the time, which strongly favoured micro-economic reform, particularly in the areas of tariff policy and financial deregulation. With the conversion of the leading figures in the government, signalled by the float of the dollar in October 1983, the cause of micro-economic reform had bipartisan support for the first time. Those members of the public opposed to reform, although numerous, had nowhere to go.

The floating of the dollar was a significant step in itself. Acceptance of other micro-economic reforms, and of the general desirability of cutting back the public sector, soon followed. The next important step was made in the Trilogy commitments of 1984. The commitments were:

• Commonwealth tax revenue would not be permitted to grow as a proportion of GDP.
• Commonwealth spending would not grow faster than the economy as a whole.
• The federal deficit would be reduced in money terms in 1985–86 and would not be permitted to grow as a proportion of GDP in the following two years.

From this point on, micro-economic reform proceeded rapidly. The main recommendations of the Campbell Committee were implemented by 1986. By 1988, the government had committed itself to a general reduction in tariffs, and to privatisation of enterprises such as the Commonwealth Bank. In 1990, the two-airlines agreement⁶ came to an end, and the basis was laid for competition in telecommunications. During the early 1990s, policies of competitive tendering and contracting out, and private provision of infrastructure, led to a further contraction of the role of government. Most of these policies had bipartisan support and will be continued under the Howard government.

The Hilmer reforms

By 1993, it appeared possible that the movement towards micro-economic reform had lost its momentum. The macro-economic policies that generated the recession had been endorsed by most of the economic commentators and other groups publicly identified with micro-economic reform. The credibility of ‘economic rationalism’ was gravely reduced as a result. The absence of any substantial payoff from reform in terms of an acceleration in the feasible rate of economic growth was also becoming apparent. The electoral rejection of the Fightback package, which embodied a comprehensive program of micro-economic reform, was a reflection of popular hostility to reform. The government, which had reverted to a Keynesian macro-economic stance in the One Nation package, was widely suspected of having ‘reform fatigue’.

In fact, however, the reform movement quickly regained its strength. The rallying point was the Hilmer Report on competition policy (Hilmer et al. 1993). The report itself was a relatively modest document. It primarily argued that steps should be taken to ensure that government business enterprises do not have unfair advantages in competition with private enterprises. In the policy process arising from the Hilmer Report, these principles were extended to their logical conclusions to require a comprehensive program of micro-economic reform, referred to as ‘Hilmer and associated reforms’. For example, the principle of fair competition between public and private enterprise was interpreted to require a comprehensive program of competitive tendering and contracting out for publicly provided services.

Implementation of the Hilmer reforms was agreed upon by the state and federal governments meeting as the Council of Australian Governments (COAG) in 1995. The formal results were the passage of the Commonwealth Competition Policy Reform Act 1995 and the creation of two new bodies: the Australian Competition and Consumer Commission, formed from the amalgamation of the Trade Practices Commission and the Prices Surveillance Authority, and the National Competition Council, a body designed to supervise the progress of federal and state governments towards implementation of competitive reform. More broadly, the COAG process led to a general commitment to apply policies such as competitive tendering and contracting out at all levels of government.

Australia in the OECD context

An important message of this chapter is the need to be wary of particularist accounts in which micro-economic reform is treated primarily as a response to uniquely Australian problems and policy failures. The similarities between Australia and other OECD countries are far more marked than the differences. Like other OECD countries, Australia experienced a long postwar boom, characterised by full employment and expansion of government activity. Again, like other OECD countries, the period since 1975 has been characterised by slow growth, high unemployment and contraction of government activity.

There are, however, important differences between Australia and other countries in the relative emphasis given to different aspects of reform. Micro-economic reform is not a single policy but a vast range of policies affecting different parts of the economy. In any particular case, the Australian experience has differed from that in other countries, and it therefore requires special treatment. However, the general approach adopted here is applicable to other OECD countries, and particularly to the UK and New Zealand, whose policy path has closely resembled the path taken in Australia.

Bibliography

Brigden, JB, DB Copland, EC Dyason, LF Giblin, and CH Wickens. 1929. The Australian Tariff: An Economic Inquiry. Melbourne: Melbourne University Press.

Castles, Francis and D Mitchell. 1994. ‘An Institutional View of the Australian Welfare State’. National Strategies Conference vol. 2, Canberra: Economic Planning Advisory Commission.

Hancock, William K. 1930 [1961]. Australia. Brisbane: Jacaranda.

Henderson, D. 1995. ‘The Revival of Economic Liberalism: Australia in an International Perspective’. Australian Economic Review (1st quarter): 59–85. doi.org/10.1111/j.1467-8462.1995.tb00876.x.

Henderson, G. 1990. Australian Answers. Sydney: Random House.

Henderson, G. 1994. Menzies’ Child: The Liberal Party of Australia, 1944–94. Sydney: Allen & Unwin.

Kelly, P. 1992. The End of Certainty: The Story of the 1980s. Sydney: Allen & Unwin.

Pusey, M. 1991. Economic Rationalism in Canberra: A Nation-building State Changes its Mind. Cambridge: Cambridge University Press.

Quiggin, John. 1996. Great Expectations: Microeconomic Reform and Australia. Sydney: Allen & Unwin, Chapter 3.

Smyth, Paul. 1998. ‘Remaking the Australian Way: the Keynesian Compromise’. In Contesting the Australian Way: States, Markets and Civil Society, edited by Paul Smyth and Bettina Cass, 81–93. Cambridge: Cambridge University Press.

Stolper, Wolfgang and Paul Samuelson. 1941. ‘Protection and Real Wages’. Review of Economic Studies 9, no. 1: 58–73. doi.org/10.2307/2967638.

Whitlam, Gough. 1985. The Whitlam Government, 1972–75. Melbourne: Penguin.

---

1. 1 Australia’s status as a very low-tax country arises primarily from reliance on private superannuation. The government uses subsidies and the superannuation guarantee levy to ensure widespread participation in the superannuation system, whereas most other OECD countries operate social security systems paying earnings-related retirement benefits. If this difference is discounted, Australia remains a relatively lightly taxed country, but not one of the most lightly taxed.

2. 2 The extent to which Australians are unique in this respect may be debated. Henderson (1995) gives an interesting discussion of popular resistance to reform in Australia and abroad.

3. 3 The clearest example is the 1993 federal election, which was a rejection of the Coalition’s package of reforms as a whole, including the labour market reform package Jobsback and changes to Medicare. It was not merely a rejection of the proposed goods and services tax (GST). The reforming Greiner government in New South Wales was reduced to a precarious minority status by its first electoral test, and, under the leadership of John Fahey, defeated outright at its second. The defeats of the Field government in Tasmania and the Goss government in Queensland were also due largely to popular hostility to reform. So far, the Kennett government in Victoria is the only reforming state government to have been returned with an outright majority. However, because of the bipartisan commitment to reform, the defeat of one reforming government means nothing more than its replacement by another.

4. 4 If one focusses instead on dependence on the USA, it would be apparent that this aspect of the settlement is alive and well. Indeed, both the blowout in foreign debt and the MX missile crisis, when financial markets fell sharply in response to Australian attempts to assert a limited degree of independence in foreign policy, suggests that financial deregulation reinforced Australia’s position as a client state of the USA.

5. 5 The fact that the push for labour market reform relies heavily on legislation creating new civil and criminal offences, and on the revival of common law offences, underlines the point that the use of the term ‘deregulation’ is a misnomer.

6. 6 The two-airlines policy ensured that the two domestic airlines (Ansett, which was privately owned, and TAA, which was publicly owned) offered similar schedules and routes, and prohibited entry by potential competitors.