Australia’s Economic Revolution

“In Australia, an economic revolution took place”

Paul Keating, 23 February 2004


1983. No, this isn’t a blog about the novel of a numerically similar title. Nor is it an Orwellian analysis of ‘Big Brother’ and the Australian government, although you will find plenty of political newspeak and doublethink. No, this blog is about the way in which we consider Australia’s economic history. Over time, the economic reforms that have taken place since 1983 have largely been shown to have succeeded in achieving medium to long term prosperity for Australia. These reforms are the foundation of Keating’s economic revolution quoted above.


Before we explore these reforms, we need to go back to 1983. Inflation and unemployment are both in double digits. A vicious wage spiral is in effect, Australia’s productivity is at an all time low, and Bonnie Tyler is about to top the charts with “Total Eclipse of the Heart”. Things are looking grim. Bob Hawke’s Labor government has been given the go ahead by the Australian public to deliver on the election promise of “Bringing Australia Together”. With Paul Keating in the position of Treasurer, the context was set to begin enacting the “economic revolution”. 


So how had the need for revolution come about? In 1994, Paul Kelly described Australia as having existed in three economic stages:


  • The first stage began with the initial settlement of the Australian continent. It relied on minerals and agriculture, with a heavy focus on exporting these goods. 


  • The second stage arose as Australia reached federation and entered what is referred to as the Australian Settlement model. It was inwardly oriented and focused on preserving Australian jobs and industry. Historian Ian McLean argues that this stage was necessary for Australia’s successful development. Kelly disagrees, believing that this mentality had crippled Australia.


  • The third stage came about in 1983 and saw the previously ‘closed shop’ economy of Australia open itself to the world, effectively ending the Australian Settlement.


The reforms did not occur overnight. While 1983 can be identified as the starting point, the reforms continued on throughout the Prime Ministerships of both Hawke and Keating, and later, the Liberal government of John Howard. 


Without going into too much detail, the reforms had several aims for the Australian economy. These were to:

  •  make it more internationally competitive
  • increase domestic productivity, 
  • reduce government regulation 
  • decentralise the labour market 


The revolution restructured the economy and moved it away from the Australian Settlement model, but no single politician forced through the changes alone. 


The historical battleground of this “economic revolution” appears to occur in two distinct places:

•Was the Australian Settlement model really so bad?

•Who was responsible for the “economic revolution”?


The first question is contested by Kelly, McLean, as well as commentators such as Peter Hartcher and George Megalogenis. It is heavily tied in with questions of Australia’s national identity and the importance of it’s past. McLean, for example, is reluctant to write off the Australian Settlement as he sees it as a crucial part of what made Australia prosper. Kelly, on the other hand, doesn’t see the Australian Settlement as prosperous, but instead a burden. Whatever the answer to this question, it doesn’t diminish the importance of the reforms that occurred from 1983 to 2007.


The second question is debated by the politicians themselves, as well as the historians and other commentators. It is a question of how these people shape their own legacies. Hawke, Keating, Howard and a slew of other politicians all argue the importance of the reforms from their own perspective. The historiography of this topic is still developing today, most recently with the airing of “Keating” on the ABC.  The narrative surrounding the reforms is still being developed, and is shaped by the political influences of those who comment on it.  


The essay on which this post is based viewed this history through the lens of the narrative that has developed around it. 


Was this truly an economic revolution? The economy was drastically restructured but this didn’t happen quickly, nor did it happen exclusively from 1983. Historian and Labor MP Andrew Leigh traces the reforms back to 1973 with Gough Whitlam’s 25% tariff cut. In 1978 then Treasurer John Howard called for the Campbell Committee, who recommended the implementation of a number of the Hawke-Keating reforms. Meanwhile, the reforms slowly rolled out over the period, as wholesale changes would have been damaging to the short term health of the economy and the political life of the Labor government. 


The term revolution may be a flourish of creative license from a former Prime Minister who was at the heart of economic reform between 1983 and 2007.  This period was certainly one in which change was enacted with courage and conviction, often in the face of adversity. The changes made were bold and nothing of the sort had been seen in Australia before. To call them a revolution is a stretch, to refer to them simply as “change” is underwhelming. However they’re described, the economic reforms in this period and the narrative surrounding them are certainly hotly contested.


For further reading I would suggest looking into the following:


The End of Certainty by Paul Kelly (1994, 2nd Edition)


The second edition is the way to go with this one. Originally written in 1992, it is a long book but by no means comprehensive. Packed with bias and praise for the Labor government of Hawke-Keating


Why Australia Prospered by Ian McLean


A comprehensive economic history, making for heavy reading. At times dismissive of the value of the Hawke-Keating-Howard years, but a very reliable account of the economic landscape prior to 1983


For those that don’t like to read, I’d suggest visiting this YouTube link to see Paul Keating speak at the launch of his biography, Unfinished Business. It gives a good indication of Keating’s thoughts on the time before 1983 and the reforms he helped enact afterwards.



7 comments on “Australia’s Economic Revolution

  1. edsandrejko says:

    I agree that the actions of the Hawke/ Keating governments made a great difference to Australia. However, I wonder if those reforms would have been possible if the prosperity of the late 1950s and 1960s had continued throughout the 1970s and 1980s. Do people only accept reform and change when circumstances appear dire?

    • danielqatmq says:

      Thanks for your reply, that’s a great question.

      First of all, it’s important to point out that reactions to reform weren’t all positive. In particular trade unions were against some of the tariff dismantling, while there were plenty of opponents in business and banking too. In addition, in the 1984 election Hawke’s Labor actually suffered a swing against them of 1.46%.

      As per your question, I think it’s best served by paraphrasing a bit of Paul Keating. Keating was particularly against the slow rate of progress in the 1950s and 1960s, in both the Labor and Liberal camps. He referred to this as politics by incrementalism. It meant that change occurred in very small steps.

      I believe that in the face of continued prosperity the same reforms still would have occurred, but at a slower rate. The reforms were also part of a wider international movement to see more open markets. That international pressure would have encouraged movement towards reform anyway

  2. juliedwoods says:

    As someone whose eyes tend to glaze over at the discussion of anything economic, I found this a really interesting read which I think makes the piece successful in its aim. Clarifying terms, breaking it up into sections (and the odd pop culture reference!) makes it very accessible for the reader unfamiliar with economic theories and history. I feel better educated for reading it! I think you’ve done a good job of explaining Australian Economic History, as well as identifying some areas of contention that either need further analysis depending on your point of view, or for history to play out so we can look at them in retrospect.

  3. jakeemmerson says:

    Its funny that in high school and in university courses we are taught these stages of Australian history and it seems that only the social element are focused on; immigration, quality of life, etc. And I think the three stages you have outlined greatly reflect the social elements of those times. Kind of pieces it all together. However, I don’t think that they were ‘revolutions’ in the case that we know of European type ‘revolutions’, it seems more of an evolution – that circumstances changed slowly over time thus changing the economy slowly.

  4. ryanbodycote2 says:

    A very interesting read!, I found it quite easy to get an initial understand of Australian economic history because the formatting was very accessible and you were very clear in getting across your message. Do you think that getting rid of the ‘Closed Shop’ economy that was based on the Australian Settlement Model was the beginning of the end for some production industries in Australia? And do you think that the Hawke/Keating government were aware that they were effectively killing off some production industries (i.e the automotive industry) in the long term by opening up Australia to the world?

    • danielqatmq says:

      Thanks all for your comments.

      As for your questions, Ryan, I believe that they were well aware that these reforms would kill off some industries however I don’t think it was their sole intention. It was more a case of those industries that couldn’t adapt, were to fall by the wayside. It was more important to increase the general competitiveness of the economy than protect certain industries. The philosophy was that increasing competitiveness would increase growth, which would mean that those industries that suffered would be replaced by newer, more competitive industry

  5. nicolekbest says:

    Firstly, can I just say that you have made something I would normally find so extremely boring both humorous and interesting! I had no idea of the economic history of our nation! Keating’s dream that it was a revolution is, I agree, a bit of a stretch and classic political rhetoric, however it does appear that what occurred had major impacts upon Australia’s continued viability within the global economy. I loved the way you set the scene- it really contextualised the history for me in a way that was tangible for someone with little economic understanding. I also love the inclusivity of the youtube clip! Great post! Really enjoyed reading it!

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