The 1992 and 1993 cabinet papers released on Sunday reveal the Keating government juggling with the desire to reform the economy through changes to industrial relations, superannuation and privatisation, while also providing stimulus in the midst of high unemployment and a sluggish exit from a deep recession.
At the end of 1991, the Australian economy was floundering. The national accounts released in December, just two weeks before Paul Keating took over from Bob Hawke, showed the economy had shrunk for five consecutive quarters. And while these figures were later revised to show the economy had already begun its tepid recovery, with unemployment at 10.4% and the Liberal opposition led by Dr John Hewson proposing a massive economic package in its Fightback! program, the onus was on Keating to deliver something quickly.
On 7 January 1992 the cabinet agreed on a statement focusing on economic recovery and industry development.
The statement, which Keating’s speechwriter, Don Watson, named One Nation, was designed with the intention of getting “beyond the economy and instilling in the country a sense of pride and common purpose independent of sporting conquests and foreign military endeavours”, as Watson wrote in his memoirs, Recollections of a Bleeding Heart.
Keating himself was no less grandiose. He told the media on its launch on 26 February that it was “a statement which I think will lead to a turning point in our economic history and our social history”.
Mostly it focused on infrastructure spending and efforts to lift economic growth and productivity, designed to create 800,000 jobs in four years, a return to surplus and a drop in the unemployment rate of three percentage points.
On 28 January cabinet discussed 43 proposals to be included in the statement. On the same day ministers were informed that the budget picture was deteriorating sharply. The mid-year review provided to cabinet estimated the 1991-92 budget deficit at $5.44bn – 15% larger than estimated in the previous year’s budget.
But such bad news was very much the norm. By May the estimate was up to $9.25bn and by the time the 1991-92 figures were fully tabulated, the deficit would be $12.63bn.
Among the measures introduced in the One Nation statement were $816m in infrastructure spending under the building better cities program over five years. Among the specific measures that were announced was construction of Sydney’s Glebe Island bridge – now known as the Anzac Bridge.
Keating also promised two lots of tax cuts – the first in 1994 and the second in 1996.
But the large spend on infrastructure, tax cuts, the jobs programs Jobstart and a one-off payment to families worth $300m did nothing to allay concerns about the state of the budget or curb the desire to continue reforms undertaken during the 1980s.
Even while agreeing to large infrastructure spends, the cabinet expressed concern at “the potential threat to the structural integrity of the budget if expectations are raised of a continuing boost to infrastructure spending”.
The cabinet was careful to ensure any spending measures were matched by commitments from states towards reform, especially of public enterprises.
The cabinet considered offering assistance to the textiles, clothing and footwear industry as it was one of the sectors most heavily affected by tariff reductions, but in the end rejected a $160m assistance package in favour of a more modest $41m “restructure” package. It noted that were they to have approved the larger amount “we may only succeed in perpetuating the tradition of high levels of protection for these industries under a different guise”.
The drive to reform the industrial relations system continued throughout 1992 and 1993. In the One Nation statement Keating argued that the government would move “quickly towards a bargaining system in which higher wages will come from increased efficiency”. In July 1992 the cabinet agreed to a submission by Peter Cook, the industrial relations minister, that would introduce an industrial relations system with the emphasis “on workplace and single enterprise agreements”.
That led to the introduction of the industrial relations reform bill in October 1993 by Laurie Brereton, which legislated the full introduction of enterprise bargaining and a limited “right to strike”, leading to a sharp drop in the level of industrial disputes.
The Keating government also focused its attention on women’s work participation. In September 1992 the cabinet agreed to amend the Sex Discrimination Act 1984 to enable complaints relating to direct discrimination against women in employment to be made directly to the sex discrimination commissioner.
In April 1993 the cabinet agreed to a childcare cash rebate scheme of up to $28.50 a week for one child and $61.20 a week for two or more children, to be “introduced from 1 July 1994” and endorsed “a commitment to meet full demand for work-related formal childcare by 2000-01”.
Changing the industrial relations system was also behind the introduction in July 1992 of the superannuation guarantee. Intriguingly, in February that year, the treasurer, John Dawkins, sought to delay its introduction owing to the increase of labour costs and a “desire to provide more time for consultation with industry on implementation details”. But his proposal was defeated in cabinet.
The government also remained committed to privatisation. In June 1992 the cabinet agreed to the sale of Qantas and Australian Airlines and in August to $1bn worth of asset sales. It also discussed the possibility of selling the Commonwealth Bank. The cabinet was told “there is no economic reason for the government to continue to own 70%, as opposed to a majority of the shares”, and that “sale down to just over 50% could be expected to yield about $1,000m” – in fact by the time the government’s share was sold down to 50% the following year, it yielded closer to $1.5bn.
But despite the One Nation spend, the growth projections continued to falter. After Labor won the March 1993 election on the back of the GST scare campaign the signs were not good. Dawkins informed the cabinet in his April 1993 economic outlook that “it is very difficult not to see Australian growth continuing to be constrained by the international economy”. The cabinet was warned that the next budget would have to include “significant savings in the medium term”.
Dawkins then told cabinet on 29 June that owing to weaker GDP growth, weaker employment growth and lower inflation, “in the absence of fiscal policy changes, revenue to GDP is unlikely to recover as it did after the economic downturn in the early 1980s”.
Publicly, Keating remained his defiant self.
Asked by a journalist on 10 July if the unemployment rate of 10.8% meant he had to admit his economic policies had failed, he responded: “Do you mean the ones that have taken Australia from an industrial museum to give it a future, or do you mean the cyclical ones?”
But the lack of growth meant cuts were needed, and among the biggest were the tax cuts promised in the One Nation statement.
In February 1993 Keating had told the National Press Club the tax cuts were “not a promise, they are law – L-A-W”. But on 22 July he was again at the press club, this time to announce that the government would bring forward the first half of the tax cuts but that the second part would be postponed until “probably in 1998”.
He again spelled it out, saying “They will be L-A-W law. And what is more, they are R-E-S-P-O-N-S-I-B-L-E, responsible law.”
But the postponement of the tax cuts severely damaged the government’s economic credibility and the 1993 budget made the wound fatal, with an increase in petrol excise and the wholesale sales tax, the removal of optometry from Medicare and the cancellation of promised childcare benefits.
Watson recalled that “old ladies jammed the office phones at night; the faxes clogged with hostile message from optometrists and builders and women’s groups”.
Dawkins quit politics in December but one of his final acts was to have cabinet agree to a change in the timing of the budget. On 30 November, the cabinet agreed it would subsequently be brought down on the second Tuesday in May rather than in August.
And while the economy grew about 4% throughout 1993, unemployment remained high – hitting 11% in August.
As a result the government initiated a green paper released in December called Restoring Full Employment, which culminated in the Working Nation policy in May 1994, by which time unemployment finally began to fall.
The One Nation program promised 800,000 jobs in four years but achieved only 660,000. The unemployment rate fell just two percentage points, rather than the promised three. The budget remained in deficit, and the promised second round of tax cuts had been dropped.
On 2 March 1996, almost exactly four years after the release of the One Nation program, the Keating government was defeated in a landslide.
• Cabinet records for 1992 and 1993 held by the National Archives of Australia reach the open access period on 1 January 2017. Information about the cabinet records, copies of key cabinet documents, including selected submissions and decisions, are available on the archives’ website
