The recovery was also supported by the strategy adopted by the central bank, the Reserve Bank of Australia, which piloted a gradual decrease in the official interest rate. This, maintained at high values until 1991, was retouched downwards eight times in 1992, reaching in 1993 the lowest level of the last twenty-five years. The central bank was able to implement an easing of monetary policy without fearing the growth of consumer prices, above all because the cooling of domestic demand, due to the recession, favored a rapid decrease in inflation (- 6 % between 1990 and 1992). As a result of the recession, the external accounts also showed a marked improvement, given that the decline in imports allowed the formation of a commercial asset, which was in any case matched by a current account liability, albeit a decrease compared to to the past.
However, the recession has caused a sharp worsening of conditions on the labor market, bringing the unemployment rate above 10 %, a high value not only in absolute terms (about one million unemployed) but also in relation to the average of OECD countries. The employment emergency is the central issue of the Labor government which, under the leadership of P. Keating, has launched a new cycle of reforms, insisting on liberal policies, albeit within the framework of a concertation that saw the ACTU actively involved in the definition of the new lines of industrial policy.
According to ACT-TEST-CENTERS, the government’s measures included the revision of the centralized wage-setting system. In March 1993, the Industrial Relation Reform Act (which remained in force from 1994 to 1996) was approved, with which greater emphasis was placed on bargaining established at company level to take into account the specific needs of each company. A safeguard clause was then introduced which set certain minimum levels of growth for the lowest incomes and established an agreement that wage policy should be decided taking into account the inflation targets set by the central bank. Starting in 1993 in fact, the Reserve Bank has begun to administer monetary policy with the aim of keeping the inflation rate between 2 and 3 % in the average of the economic cycle. While acting in such a way as to counteract the effects deriving from expected increases in demand, the Reserve Bank has oriented itself towards a tolerant attitude towards short-term deviations of the inflation rate from the margins set as a target, in order to stabilize fluctuations in income. real. Still within the framework of a structural reform of the economy, the government has accelerated the privatization of some public enterprises (in fact the national company Qantas was privatized and about 50% of the country’s main bank, the Commonwealth Bank) and the Competition Policy Reform Act passed in 1995, with which traditionally protected sectors were opened to competition.
The government’s economic policy has produced results of some significance for economic growth and inflation control. The latter, in particular, between 1992 and 1996 fell below 3 %, with the exception of 1995, where the change in the general price level exceeded 4%.%. On the other hand, the results in terms of unemployment were less incisive, which, in the face of fairly pronounced economic growth, remained trapped at high levels. The government has tried to revitalize the recovery on the labor market by financing the launch of infrastructure programs (especially in the railways) and projects aimed at creating new jobs, but achieving results below expectations. While the unemployment rate remained stable between 9 and 8 % until 1997, the growth in social and welfare spending had negative effects on the internal financial equilibrium. The public deficit in relation to GDP has in fact grown significantly, stabilizing around4 % in the three-year period 1992 – 94, although a marked improvement has occurred since 1995, following an increase in the tax levy (on corporation tax) and higher revenues deriving from the pursuit of the privatization program. To consolidate the efforts of financial recovery, in 1995 the government launched a program (Charter of public honesty), centered on fiscal management criteria inspired by transparency and accountability, for the recovery of conditions of efficiency and productivity in the public administration.
With the victory of the liberal-national coalition in the political elections of 1996 there was a departure from the guidelines implemented by Labor in the economic field. While, on the one hand, the liberal aspects of economic policies have been accentuated (start of privatization of the telephone company Telestra, deregulation in the transport sector), on the other hand the main concern of the new government was to drastically reduce the role of trade unions and to introduce elements of flexibility on the labor market. With the Workplace relation bill of 1996 the possibility for small businesses to dismiss without just cause was introduced and the replacement of the centralized mechanism for determining wages, based on trade union mediation, with a system of individual contracts at company level was accelerated. In terms of the management of macroeconomic variables, the government has accentuated the rigor of fiscal policies, implementing a highly restrictive maneuver on the side of expenditure: with the plan to reduce public spending, launched in 1997, the government has brought the public sector back into profit. that in 1997 he reached a surplus of 0, 2% of GDP. Monetary policy maintained a cautiously expansive stance, thanks to which it was possible to mitigate in 1997 and 1998 the effects caused by the economic slowdown of the main Asian partners on the country’s domestic product. The unemployment picture showed no significant improvement: despite a slight decline in the unemployment rate, which fell in 1998 to 8, 2%, the labor market continued to show conditions of severe weakness. To this must also be added the still inadequate level of domestic saving which translates into a persistent current account deficit (destined to reach one of the highest values of the last twenty years at the end of the decade) and consequent indebtedness with foreign countries., equal to around 40 % of GDP in 1998. Finally, the reform of the tax system, centered on the introduction of the Goods and services tax (tax on direct consumption), capable of stimulating the formation of higher levels of domestic savings and favoring a consolidation of public finances, represents one of the central objectives for Australian economic policy and indicates the direction of the commitment in the coming years.