History 12
Australia has been affected by changing economic circumstances 1945-1990
The 'long boom' was an extended period of economic growth and rising average incomes, spanning
the 1950s and 1960s, without precedent in the history of the Australian nation. So much so, that
Australia was often referred to as the ‘lucky country’.
The rise of the consumer society after World War II was most clearly characterised by an increase in
household spending with the growing portion of expenditure devoted to the purchase of capital assets.
The Australian economy entered the 'long boom' at more or less the same time that the Liberal government
commenced an unprecedented 23 years of national government.
The Menzies government won the 1949 election on a platform of removing the rationing and regulations of
post-war reconstruction, a program made possible by the emerging boom. The government was praised for
the consistency of economic progress and steady social development and eventually damned for inaction as
the economy eventually faltered and the boom went bust. The boom began in post-war reconstruction,
sustained by a new consumerist desire and driven by industrial production, new modes of transport and
industrial organisation and fuelled by an increasing general affluence.
The post-war emphasis on suburban contentment, baby-booming, mass consumption, planning, economic
growth and the need to populate or perish was initially a response to the trauma and dislocation of war but
the boom helped shape Australia politically, economically and socially in the period of study.
The post-war boom was characterised by a number of important features, including:
 Low unemployment – it remained under 2% for most of the 1950s – increased demand for labour
(particularly for post world war building programs)
 Increased standard of living for a majority of Australians (due to high employment rate, increased wages
and availability of credit)
 A baby boom – there was a significant increase in the number of children born between 1950 and 1960.
 Massive immigration meant an increased domestic market as well as an expansion in the skills base of the
Australian workforce.
 A increase in the price of commodities, especially wheat and wool (traditionally Australia’s main income
earners)
 Less spending on defence and greater spending on domestic services
 Large economic projects including the snowy mountain scheme, the Ord river scheme and Mt Newman
 Stable (and conservative) government – the Liberals in power from 1949 – 1972.
 Government economic policy that incorporated Keynesian principles which maintained a prominent role of
the government in the economy. This was supported by a conservative government that utilised policies of
natural protection and formal protectionist policies (tariffs placed upon competing foreign goods and
services)
 Increased government spending on social services and education. This was accompanied by a noted
demand for higher education and the emergence of a youth culture.
 A growth in suburbia (and suburban sprawl) – by 1959, two out of every three homes were owned or in the
process of being paid for, fulfilling the dream of many Australians at this time ‘to own their own home’.
 The rise of consumerism - Increased number of consumer goods including laminex benches, stainless
steel sinks and a range of labour saving electrical devices, vacuum cleaners, refrigerators, washing
machines, irons and sewing machines. This extended to entertainment goods too – the radio gram.
 Women begin to enter the workforce – driven by the desire for a second income to provide greater
purchasing power in this ‘consumer age’ and as a result, the emergence of the Women’s Liberation
Movement.
 The availability of credit meant that the everyday Australian was able to afford many of these new products
and services.
Overall, the period immediately after the Second World War and up to the 1970s was characterised by
economic boom – the low unemployment rates giving power to trade unions in demands for higher wages
and better working conditions. The ALP became increasingly marginalised faced with a government that
was able to capitalise on the boom. Generally, the period is marked by an increased standard of living, the
emergence of a consumer society, increasing levels of education, high immigration and the rise of women as
a political force. However, in the 1970s, this economic bubble was about to burst and the economic impact
of this had a significant impact upon government policy and direction into the 1990s.
1973 to 1993
Under Whitlam (1972-1975) LABOR (recession)
 The boom ended with the oil crisis – 1973 Oil Shock.Early in the 1970s, the Organisation of Petroleum
Exporting Countries (OPEC) reduced oil supply to the West.
 Inflation increased from 7% in 1972 to 13% in 1973, to 17% in 1975.
 Unemployment increased fro almost zero in the early 1970s to 4%in 1974.
 A wages explosion – 1973, the average rise in real wages was 13.6%. In 1974, this went up to a 30.8%.
The government tried via a referendum to gain control over wages and prices but was unsuccessful.
 Decreased demand for wool and beef – causing falls in real farm incomes in the early 1970s.
 Whitlam government increased spending significantly on areas such as Aborigines, health, arts, education,
women and urban renewal.
 Special purpose grants (to the States) were increased by 50% by 1975, increasing the power of the federal
government over the States.
 Tariffs were initially reduced (by 25%) to reduce demand inflation – this led to short term increases in
unemployment.
 Whitlam tried to combat inflation via a Price Justification Tribunal (PJT) and established a Industries
Assistance Commission (IAC) in 1974 to provide advice to the government on industry.
 Whitlam alienated farmers by abolishing the ‘bounty’ on superphosphate and angered them further by
underpaying them for their wool.
 There were restrictions placed upon foreign investment – this led to increased unemployment, which was
further increased when the government tried to reduce its deficit by reducing spending.
 The Loans Affair greatly reduced the credibility of the government.
Basically, the 1970s was characterised by problems that were a result of the post war boom in Australia. A
combination of factors including changing technology (leading to unemployment), falling demand for
Australian commodities (especially wool and wheat), increased inflation (due to international incidents and
‘big spending’ policies of the Whitlam government), unsustainable wage increases and poor economic
management by first the McMahon Liberal government and then the Whitlam Labor government. Many
would say that the fate the Whitlam government met was largely a result of the economic situation in
Australia and that the government was unable to foresee the consequences of their massive spending
program and did not put in place strategies to combat a slowing of the economy (sometimes called a
recession)
Under Fraser (1975-1983) LIBERAL (recession, recovery, recession)
“Life wasn’t meant to be easy”
“Thatcher Economics – only spend what you earn”
 Fraser inherited the high inflation and high unemployment (stagflation) along with a large national debt
from the dismissed Whitlam government.
 Changing technology also led to structural unemployment.
 Other economic problems faced Fraser including; farmers experienced drought as a result of the El Nino
phenomenon.
 Fraser’s government was initially successful in combating unemployment and inflation but both increased
in 1982.
 They cut government spending in the areas of the arts, education, Aboriginal welfare and the public service
– they became known as the ‘razor gang’
 Due to problems with unemployment and the state of the economy, there was no reduction in social
security payments.
 To combat unemployment, Fraser created employment schemes that gave employers incentives to take on
new trainees/apprentices.
 The Price Justification Tribunal created by Whitlam was modified so as to carry out price surveillance, not
the control of prices.
 The government encouraged mineral exploration and development with the aim to revitalise the mineral
industry.
 Income tax cuts were introduced in 1978
 Compulsory Medibank was abolished and replaced with a voluntary system in 1981.
 During the 1980s, the world experienced a sharp recession. This affected Australia and undermined
Fraser’s economic policies.
 Despite measures to combat unemployment (500 000 jobs were created under Fraser 1977-1982),
unemployment still rose. 5.2% in 1977, increased slightly in 1980, dropped in 1981 and in 1982 it rose
significantly to 6.7%
 Inflation was 9% in 1977 but rose to 11% in 1982
 Fraser’s government became increasingly ‘right wing’ deriving much of their support from the business
community but was confronted with rising conflict on the industrial front.
Fraser’s government had a difficult task to restore Australia’s economy and initially was quite successful.
There was a fair degree of confidence in the Fraser government in its first term but this confidence was
gradually lost by the early 1980s.
Under Hawke (1983-1991) LABOR (the roller coaster)
Hawke was a pragmatic (practical) Prime Minister who was realistic and reformist. This period was marked
by a policy of ‘economic rationalism’ led by Hawke and Keating as Treasurer.
Government activities and policies
 As with Fraser, the Hawke government inherited the economic problems of high inflation, unemployment
and foreign debt. Interest rates were rising and stayed high for most of the 1980s.
 Business confidence had been severely eroded and was not good under Hawke (being a Labor
government) and the economy went into a recession.
 Hawke saw many areas for change but did not want to make the same mistake as Whitlam by making too
many changes straight away – he aimed instead to make changes through consensus and agreement
among unions and employers.
 Hawke arranged a meeting known as the ‘Summit’ which involved members of the government, union
leaders, businessmen, premiers and other important group leaders. This meeting discussed economic
problems facing Australia and its main outcome was the ‘Accord’
 The ‘Accord’ was an agreement between the government and the unions about wages and jobs. It agreed
that wages would be controlled by an Industrial Relations Commission to stop excessive wage rises. The
government in turn, would seek to improve workers’ conditions. It also created policies to try and improve
the profitability of Australian industries and create more jobs.
 They increased spending on the public sector to create jobs for the unemployed. Increased some indirect
taxes (e.g. alcohol). They also introduced policies to reduce tax evasion (e.g. tax file numbers). As a result
the government benefited from increased revenue from taxation.
 They floated the Australian dollar – this made it more competitive worldwide and meant that the value of
the dollar was controlled by international market, not the government.
 Allowed foreign banks to operate in Australia. Private companies were also allowed to compete (i.e. offer
the same/similar service) as public companies.
 They encouraged students to stay at school in an attempt to decrease youth unemployment and provided
AUSTUDY payments to those eligible.
 Capital gains tax was introduced, lower marginal tax rates in 1985 (reducing the burden on lower income
earner) as well as an increase in the corporate tax rate (increasing taxes on big companies/corporations).
 Medicare replaced Medibank – now taxpayers were required to pay a percentage of their income to the
government (to pay for Medicare)
The Hawke government was fairly successful early in their term and had the confidence of all sectors of the
economy. The Hawke government was the most popular government since Menzies (which marginalised
the Liberal Party). They received business support due to the ‘Accord’ but to some extent lost the support of
the unions (who believed that Hawke was too right wing).
They were also able to make gains against unemployment and foreign debt. However, both remained high
during Hawke’s time. The government was confronted with problems associated with other social problems
such as increased poverty and a growth in crime. The Accord and financial deregulation were both very
successful policies that helped to achieve the key aims of the Hawke government.
In 1991/1992, Australia along with the rest of the world slid into a recession.