Date created:7 May 2001
Last modified: 7 May 2001
Maintained by: John Quiggin
John Quiggin

At last, Keating era ends

Australian Financial Review

1 March 2001

This year will see the long-delayed end of the Keating era in Australian politics. Although Paul Keating left office in 1996, he still casts a long shadow over Australian public life. In an irony of history, electoral revulsion against Keating-inspired policy failures and, in large measure, against Keating himself, produced a series of governments which, in style and substance, have pursued the Keating agenda.

The current Federal government, was elected in 1996 on a promise of making Australians 'relaxed and comfortable' after the Sturm und Drang of the Keating government. Yet its main focus has been on the implementation of policies that Keating tried, and failed, to push through when Labor was in office - the GST, the privatisation of Telstra, and the repudiation of what Keating memorably called 'the welfare bag of policies'. Residual resentment of Keating was sufficient to secure the re-election of the Howard government in 1998, admittedly with a minority of the two-party preferred vote.

At the state level, Liberal governments in Victoria, South Australia and Western Australia all managed two terms in office on the strength of the financial disasters that befell their Labor predecessors. These disasters were not the result of old-fashioned socialists interfering in the private sector, but followed the adoption of market-oriented policies advocated by Keating.

Brian Burke was eager to get behind the rising 'entrepreneurs' held up by Keating as the challengers to the Melbourne Club financial establishment responsible for Australia's allegedly poor economic performance since 1900. The Bannon and Cain governments came to grief by dutifully adhering to the Keating gospel of financial deregulation. During the financial bubble of the late 1980s, they allowed a free rein to State banks and to private, but State-regulated, financial institutions. All three governments came to grief when Keating gave us 'the recession we had to have'.

Amazingly, Keating not only escaped any blame for these disasters but used them to push his agenda further. The need to rescue the State Bank of Victoria was used to force through the full privatisation of the Commonwealth Bank. Privatisation of the Victorian and South Australian electricity industries and of Western Australian government business enterprises such as Alinta Gas was also justified as a necessary response to Keating-inspired financial disasters and the resulting debts.

More importantly, the newly-elected Liberal governments were eager to implement the expenditure cuts that Keating had long demanded, and sought to enforce through savage cuts in Commonwealth grants. Public education was hit particularly hard. The Kennett government closed schools and increased class sizes. Even harsher cuts were imposed by the Brown government in South Australia.

In both states, these policies had the predictable adverse outcomes, particularly with respect to retention rates (the proportion of year 7 students who complete year 12). In South Australia, which had enjoyed the highest retention rate of any Australian state (81 per cent in 1990) the rate collapsed to 71 per cent within two years of the Brown cuts, and have fallen further since then.

Retention rates have increased somewhat in Victoria since the election of the Bracks government, which has sought to reverse the worse of the Kennett cuts. But there has been no recovery in South Australia. The damage done to a generation of young South Australians by Keating, Brown and Olsen will long outlive controversies over banking and privatisation. These leaders pride themselves on having improved essentially meaningless measures of net debt, but their policies have destroyed human capital, the most important asset of any economy.

Not only did Keating's successors follow his policies in substance, they adopted his centralist, authoritarian policy style, referred to in the 1996 campaign as 'Leadership.', complete with gratuitous full-stop. Kennett's attacks on local government and Howard's appointment of hatchet-men like Jonathan Shier at the ABC are continuations of the Keating approach to public policy. Even the personal styles of Kennett and Costello are modelled on that of Keating.

The voters have had enough of all this. One way or another, the Keating era will end this year. After the WA and Queensland debacles, it seems unlikely that anything can save the Olsen government in SA. Perhaps Howard and Costello will be more successful in reinventing themselves as a 'listening' government concerned to deliver services to the bush and the outer suburbs instead of big tax cuts to the CBD elite. If they can manage this feat, however, they will only do so by repudiating the Keating legacy.

Professor John Quiggin is a Senior Research Fellow of the Australian Research Council, based at the Australian National University and Queensland University of Technology.

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