Skip navigation.

Labor’s wilderness years - Australian lessons for New Labour

Chris Pierson


First published in Renewal volume 13, number 2/3 (2005), pp. 118-29


The fate of the Australian Labor Party suggests New Labour's achievements are vulnerable.


On 6 May 2005 the Labour Party in Britain was returned to office for an unprecedented third term. Yet this still powerful position was built on a sharply reduced proportion of the popular vote – just 36 per cent of those who bothered to turn out (down from 41 per cent in 2001), and comprising 22 per cent of those who were eligible to vote. In these circumstances, and for the first time in almost a decade, it is possible to imagine Labour losing. Those who want to avoid this fate need to think long and hard about how and why Labour could lose – and what the Labour legacy might be, for both party and country.

Those who are brave enough to undertake this thought experiment could do very much worse than to consider the lessons of the recent experience of the Labor Party in Australia (ALP). The ALP is a party that came out of the political wilderness (having secured just one federal election victory in thirty-three years) to win a quite unprecedented five consecutive general elections between 1983 and 1996. This electoral success was built around its own version of a ‘renewed’ social democracy, with extensive economic deregulation and substantial welfare reform. Since Keating’s defeat in 1996, the ALP has experienced four successive election defeats and gone through four party leaders (now under the recently restored Kim Beazley). In this paper, I focus on the aftermath of Australia’s version of the ‘new’ social democracy. I consider what lessons, if any, can be drawn from this Australian experience and offer some general conclusions about the prognoses for doing the new social democratic politics.


The ‘new’ social democracy in Australia

The ALP under Bob Hawke that won the federal election of 1983 had certainly not been returned to power offering a ‘new’ kind of labourism. Indeed, it had promised to address the recession, unemployment and industrial relations difficulties of the preceding Fraser government largely through the restoration of a more traditional and consensual political practice. But the crucial decision to float the Australian dollar and deregulate the financial system, opening the way for a whole series of micro-economic reforms in the coming decade, came very early in the first Hawke Administration (in December 1983). This was not the springing of a well-prepared surprise (as with Gordon Brown’s moves to afford partial autonomy to the Bank of England in the immediate aftermath of the May 1997 election) but rather the response of Treasury (and its new and youthful frontman, Paul Keating) to a sustained run on the Australian dollar. This crucial first step was followed over the following decade by reductions in tariff protection, reforms to the tax regime (which left Australia with a less progressive taxation regime), a series of privatisations (including Qantas and the Commonwealth Bank), wholesale reform of superannuation (to create a mandatory private secondary pension scheme), a gradual loosening of the apparatus of statutory wage setting (which had been at the core of Australian labour relations since the early years of the twentieth century) and, with it, more enterprise-based bargaining and greater wage dispersion. As the legal framework surrounding judicial wage-setting was relaxed, the Labor government came to place increasing emphasis on a more proactive supply-side labour market policy (most notably under the rubric of Working Nation, the white paper on job creation published in 1994). In terms of the five ‘programmatic realignments’ that White (2001) identifies with the third way (the regulatory state, the advocacy of ‘mutualism’, tax reform, an employment-centred social policy and an asset-based egalitarianism), the ALP government has a good claim to have become a precocious third way innovator.

A crucial feature of Labor’s reform programme was the series of Accords that it negotiated with the Australian Confederation of Trades Unions (ACTU). Although Keating was initially sceptical about the possibilities of securing and sustaining an incomes policy with the ACTU, this gave way, after 1985, to a series of agreements in which successive steps in the microeconomic reform of the Australian economy were traded off with the unions for improvements in the social wage and/or tax cuts. This remarkable exercise in consensual policymaking which, in the 1990s, came increasingly to focus on reform of the legislative framework for statutory wage-setting and workplace industrial relations, was to survive all the way down to the electoral defeat of 1996. Chastened by the evidence of ‘loss without limits’ experienced by trades unions under Thatcher in Britain, ACTU preferred a strategy of negotiated change with a broadly sympathetic Labor government. This was not enough to countermand a very substantial decline in union densities (from 42 per cent in 1986 to 31 per cent in 1996) and growing wage dispersion (Warhurst and Parkin, 2000, 339). Nor did it prevent Keating celebrating the unprecedented unemployment of the early 1990s as part of ‘the recession that Australia had to have’ (Keating, cited in Kelly, 1992, 617).


Life after Labor: assessing the Hawke–Keating years

Although he was quite happy to wear the mantle of the radical reformer, Keating resisted the idea that the ALP of 1983–96 had struck out in some new direction. The undoubted changes after 1983 were presented as an accommodation to externally imposed imperatives – above all Australia’s growing vulnerability to the dynamics of globalisation. But these reforms were to be seen as a ‘refurbishment’ rather than an abandoning of Australia’s ‘labor tradition’.

In retrospect, Keating was willing to find rather more that was new – and exemplary – in his period at the head of the ALP government (after 1991). The ALP government had, he suggested, created ‘a socio-economic model which was unique in the world and which subsequently helped shape the thinking of other social reform governments’. But still, as Keating had it, ‘we didn’t call what we were doing the third way. For Australia, we saw it as the only way’ (Keating, 1999). Only with the accession of Mark Latham to the leadership of the party did the ALP have a real enthusiast for the language of the third way at its helm. And by this time it had lost three elections and as many leaders.

There were plenty who took issue with Keating’s judgement. Paul Kelly (1992), whose The End of Certainty remains the definitive source for the blow-by-blow story of the Hawke–Keating years, was critical though broadly sympathetic. In Kelly’s view, Hawke and Keating certainly did represent a break, indeed a revolutionary break, with Labor’s past. But they were to be commended for making the hard choices that their Liberal predecessors had ducked and for occupying what they made the centre ground – as ‘internationalist rationalists’ holding the ring against both ‘hard liberals’ and ‘sentimentalist traditionalists’. Many in the Labor camp were much less sympathetic. Under the twin imperatives of electoral expediency and what they peddled as ‘economic reality’, they had dismantled much of what earlier Labor reformers had struggled to put in place. ‘Realism’ no longer meant reining in one’s ambitions, it meant accommodating to the hegemony of neo-liberal ideas of a market-made efficiency and the imperatives of ‘competitiveness’.

When Labor finally fell, pretty much exhausted, the story had already moved on – and the defeat of the Keating government saw further attempts to define the content of what was now quite explicitly treated as a distinctive Australian model (potentially available for export). Looking back almost a decade after Keating’s defeat in 1996, our perspective is rather different. To what extent has the ALP been able to recover electorally from the defeat of 1996? And (especially given that the answer to this question is ‘not very much’) to what extent were the reforms advertised under the logic of a ‘supply-side socialism’ immune to reform in a neo-liberal direction under John Howard? And, finally, to what extent did Labor moderate inequalities of economic outcome during its period of office and to what extent has this moderation survived the transfer of power to a Coalition administration?


The electoral legacy

On some accounts, the New Labour project – like its Australian forerunner – is above all an electoral one. It was (and is) about making Labour an election-winning machine (almost) irrespective of the ideological and policy concessions that are needed to get there. More positively expressed, social democratic politicians require power to change things and, in practice, parties that seek electoral power must compromise between their long-term political ambitions and electoral expediency. Similarly, it has been argued (with at least one eye on Swedish experience) that social democratic parties have a particular need to secure long-term electoral hegemony in order to deliver on their ‘decommodifying’ agenda. However one views this compromise, the electoral record of the ALP since 1996 is a sobering one for Labour in the UK to contemplate.

Labor’s electoral ascendancy at the federal level after 1983 was never quite so overwhelming as a cursory look at its record of unparalleled success might suggest. In ousting an unpopular government in 1983, it did secure (just) 50 per cent of the first preference vote. Thereafter, its primary vote fell (with the rather extraordinary exception of 1993). In 1990, it secured a fourth term in office despite (narrowly) losing the two-party preferred vote to the Coalition and seeing its own primary vote fall to 39.4 per cent. The victory in 1993 under Keating’s leadership (with the party’s first preference vote at 44.9 per cent) was remarkable and unexpected. But 1996 saw a dramatic reversal in the party’s fortunes. The ALP secured just 38.8 per cent of the first preference vote – its worst performance since 1931 – and it lost more than a third of its seats in the House of Representatives. Although it recovered much of this ground in 1998, in the federal election of 2001, its first preference vote fell to 37.8 per cent. The 2004 election saw a further swing to the Coalition which reduced Labor’s share of first preferences to 37.6 per cent and of the two-party preferred vote to 47.3 per cent. For the first time, John Howard secured a narrow majority in the House of Senate.

For both the ALP and New Labour, the reform of internal party structures and the refashioning of policy objectives were at least in part about reversing a pattern of long-term electoral decline. At its simplest, the judgement was that a party that sought to fashion electoral majorities could no longer hope to build success on a (diminishing) base in the ‘traditional’ working class, nor on the prosecution of its narrow, ‘sectional’ interests (represented, above all, in trade unions). It had at the very least to appeal to ‘aspirational’ workers, to those beyond its traditional organised base and to those in ‘new social movements’ who saw Labor as the natural vehicle for their own interests. Ironically, it was Gough Whitlam – on some accounts, the first and last great Australian social democrat – who had wrested the party away from the control of trade union bosses. Just as ironically, it was the ACTU that negotiated (with Keating) the decade of microeconomic reforms which saw both the numbers and the effectiveness of trades unionists repeatedly retrenched. Certainly, the ALP recast its appeal and, to some extent, its constituency in the ‘long decade’ after 1983 – a period that brought it unparalleled electoral success.

But when Labor fell from power so dramatically in 1996, it stood accused of having lost by abandoning its core supporters, not least – as the ascendancy of the Coalition came to be identified with a seemingly successful appeal to ‘Howard’s battlers’ – those ‘ordinary’ working-class voters who had become disillusioned with Keating’s supposed obsession with the special interests of minorities and the issue of the Republic. There is some statistical evidence to back this judgement. The big shift in electoral support towards the Coalition (or at least away from Labor) between 1993 and 1996 appears to have come primarily from manual workers. Changes in the voting behaviour of non-manual workers in this period were quite marginal (Bean, 2000, 76–80). In the preceding decade(s), class dealignment seems to have helped the ALP rather than its opponents. In a pattern familiar from the UK, the ALP had extended its appeal amongst the professional and especially public sector middle classes. In the 1980s and 1990s – perhaps most skilfully in the context of the 1990 federal election – it had exploited its reputation as the natural vehicle of ‘progressive’ causes to secure the second preferences of Democrats and Greens. Of course, it was then vulnerable to disillusion among these groups when it was seen not to deliver. In 1998, it was able to win back many of those voters who had defected to the Coalition in 1996 (perhaps through its stance on the introduction of a goods and services tax) but in a context where class was an increasingly unreliable indictor of voting intention.

The challenge for New Labour is clear enough. It would be a grave error to underestimate the scale of Labour’s electoral achievement since 1997. The turnaround in the electoral fortunes of Labour and Conservative between 1992 and 1997 is almost unprecedented. Labour’s share of the vote had not been this big for thirty years. Even after the adjustment of the 2001 election, Labour still had a majority of 166 over all other parties in the House of Commons. Despite a substantial loss of votes in May 2005, the Party still enjoys a lead over the Conservatives in the House of Commons of some 150 seats. This is a remarkable achievement for a party that many had written off in the 1980s as ‘unelectable’. But Labour’s ascendancy is neither quite so grand nor necessarily as invincible as its domination of the House of Commons might suggest. Even in 1997, Labour secured the support of less than a third of those eligible to vote. In 2001, with a much reduced turnout, this proportion had fallen to less than a quarter and now in 2005 to something closer to a fifth. Of course, this does not mean that Labour is fated to lose but it does mean, especially given the virtual consensus around declining party identification, that Labour is vulnerable and perhaps more vulnerable than some have recognised. The experience of the Conservatives in Britain and of Labor in Australia show what can happen to an erstwhile hegemon.

Elsewhere (Pierson, 2002), I have (perhaps rather generously) described the strategy of the ALP under Hawke and Keating as sponsoring a kind of ‘social democracy on the back foot’. The ‘old’ Australian model had evidently failed. Australians were unable to compete in international markets. Without reform, Labor’s constituency faced a future of growing unemployment and declining standards of living (or so the reformers insisted). Under these circumstances, Labor turned to a variant of Scharpf ’s (1991) ‘socialism in one class’. It recognised that microeconomic reform and increased productivity would come largely at the expense of workers. The expectation was that if workers did not appropriate the full value of productivity gains, thus redistributing in favour of capital, this would improve the climate for investment, thus sponsoring further jobs-creating economic growth. In the long run, enhanced growth would increase employment and strengthen the position of an indebted federal state. At the same time, and increasingly as continued growth yielded a taxation dividend, Labor could invest in the social infrastructure (health and education) and ensure that something was done to protect the most vulnerable (especially children in poor families).

Did Labor really have a distinctive left supply-side social democratic strategy? And, in so far as it did, to what extent did it survive the accession of a Coalition government with a real neo-liberal strategy to prosecute? I address this question, first in terms of a policy inheritance and second in terms of economic and social outcomes.


The policy legacy

Here I shall focus on just one example, the flagship reform of the final Keating administration – the active labour market measures encompassed in the 1994 white paper Working Nation (Keating, 1994). Improving employment through enhancing employability is a core strategy of the new social democracy. In the UK, it was articulated through New Labour’s Welfare to Work commitments, partially built around the earlier example of the ALP’s Jobs, Education and Training programme (JET). Work is seen as ‘the royal road to welfare’ – or rather the royal road from welfare. Securing individuals’ well-being is above all about increasing their opportunities for waged work. Welfare-to-work programmes have seen an attempt to expand this opportunity to previously excluded groups – lone parents with young children and the disabled among them.

Working Nation described itself as a paper on ‘employment and growth’. It identified the government’s key ambition as the forging of ‘a dynamic social democracy’ and its immediate aim as a reduction in the unemployment rate to 5 per cent by the year 2000 (Keating, 1994, 1). At the core of the government’s strategy lay the ‘job compact’. This guaranteed to the long-term unemployed a package including: individual case management, training and support to ensure ‘job-readiness’, the possibility of a training wage. It also included a job guarantee of employment, preferably in the private sector, for a minimum of six months – ensuring to ‘every Australian … a right to a job’ (30). In this context, Working Nation spoke of a ‘reciprocal obligation’ between the government and the long-term unemployed: the government would provide employment or training; the unemployed were ‘under an obligation to accept a reasonable offer of a job or lose entitlement to income support for a period’ (Keating, 1994, 116).

Verdicts on the early effectiveness of the Working Nation reforms were mixed. Some (Finn, 1997; Junankar, 2000) saw in it a qualified success. Others (O’Neill, 1999) saw it as an expensive way of ‘churning’ the unemployed. The incoming Coalition government, which had won the election of March 1996, saw it as an expensive failure and promptly ditched it. The Coalition government significantly reduced the funding for programmes designed to help people to find work. It largely replaced existing job search arrangements with a ‘Job Network’ of competitively tendered services from commercial and not-for-profit operators. Under the rubric of ‘mutual obligation’, and through its ‘Work for the Dole’ scheme, it increased the emphasis on the responsibility of individuals to find themselves work and increased the coercive element in existing arrangements for the income support of the unemployed (initially the young unemployed, though this was later extended to other categories of the unemployed population). The Howard government was more inclined to deploy the rhetoric of ‘dole bludgers’ and ‘job snobs’ and to blame the unemployed for their own workless status. It defined growing ‘welfare dependency’ as a problem that government policy should seek to address.

Unsurprisingly, the Coalition government claims considerable success for its new regime – and unemployment levels have continued to creep downwards since 1996, following a trend that began in 1994 (see Shergold, 2002). Critics have pointed to the growth in (perhaps involuntary) part-time employment, a continuing dearth of job opportunities and persistent levels of long-term unemployment throughout this period. For us, the real issue is that of continuity with the preceding Labor regime. There seems little doubt that the jobs regime after 1996 was more coercive than its Labor forerunner and that much greater responsibility (and opprobrium) was placed on individual job seekers. It is clear that much of the funding for training and education which was a core component of Working Nation (and of the ‘reciprocal obligation’ of which it spoke) was simply abandoned by the Howard government. Nonetheless, in this, as in other areas, there was a real continuity before and after 1996. In their (2000) commentary, Michael Keating and Deborah Mitchell, not the likeliest allies of the Coalition, argue that ‘since its election in 1996 the Howard Coalition government has broadly continued many of the directions of social policy established over the previous thirteen years under Labor’ (Keating and Mitchell, 2000, 128).

There may be, as Labor’s supporters are inclined to argue, a real difference between Labor’s ‘reciprocal obligation’ and the Coalition’s ‘mutual obligation’ but it has been hard to make stick the claim that this is a difference of kind rather than of degree. Indeed, in a number of areas, the Coalition took initiatives of the Hawke–Keating era and pressed them towards what many saw as their ‘logical’ conclusion. This would be true, for example, of the Coalition’s attitude to privatisation and to the further reform of national-level wage arbitration. Labor opposition to these measures was undoubtedly hamstrung by the claim that it had itself pursued much the same policy direction while in office.


The social and economic legacy

All this makes it the more important to consider the substantive social and economic legacy of Labor in Australia. Did Labor manage to protect the most vulnerable in its decade of reform – and did this amelioration survive the election of a Coalition government? There are a whole range of imponderables here (the counterfactual of income dispersion without government intervention, the extent to which government interventions can impact on inequalities, the time-lag between government action and measurable impacts, changing methodologies and so on). My comments are correspondingly circumspect.

The first thing to note is that income inequalities grew throughout the period that Labor was in office. After a period in which income differentials had narrowed (down to the end of the 1960s) and then stabilised (through the 1970s), inequality increased significantly from the start of the 1980s (Saunders, 1993). Much of this change reflected a rapid growth of incomes for the top ten or indeed 1 per cent of the profile. Of course, Hawke and Keating accepted that a growth in income differentials would be an inevitable part of their reform package. Their claim was to have moderated a change which the opening of the Australian economy to international pressures made inevitable. It is impossible to establish counterfactually how rapidly inequality would have grown under a Coalition government through the 1980s – and the ALP did seek to offset some of the consequences of growing income disparity through improvements in public services – for example, the reintroduction of a public health care system (Medicare) and new welfare benefits (including the 1988 family allowance supplement). What we can say in defence of the ALP is that income inequality did not rise as quickly in the 1980s as it did in those countries which most welcomed market-led reform (the US and the UK). And, in a comparison which leaders of the ALP were keen to draw, deregulation did not advance income inequality as rapidly as it did across the Tasman Sea in New Zealand where a ‘new’ Labour government was also engaged in wholesale reform. At the same time, many states (notably Sweden) survived the 1980s with their much lower levels of inequality little changed (data from Saunders, 1993; World Bank, 2004).

If we move to the period after Labor lost power in 1996, it now seems clear that income inequality has increased. The Gini coefficient in Australia rose by 3 per cent between 1994–95 and 2000–01. The P90/P10 percentile ratio (which measures income inequality between the top and bottom 10 per cent) rose by 5.3 per cent (Saunders, 2003, 8). Having said this, the difference between ALP and Coalition governments on inequality is again clearly a matter of degree. Labor was willing to countenance a quite rapid growth in income differentials through the 1980s and early 1990s as the price of economic growth. This makes it hard to criticise a Coalition government that has seen continued economic growth accompanied by an incremental increase in income inequality.

A somewhat similar story can be told about the incidence of poverty and social deprivation. Overall, poverty rates fell during the years of ALP government. Poverty rates in 1982 (the year before the election of the first Hawke administration) stood at 14.6 per cent for all Australians, 13.2 per cent for adults and 18.2 per cent for children. In 1999, after three years of marginal worsening under the Coalition, the poverty rate for all Australians had fallen to 13 per cent, 12.3 per cent for adults and 14.9 for children. This was despite a worsening of the situation through the 1990s (Harding and Szukalska, 2000; Harding, Lloyd and Greenwell, 2001). (In Harding, Lloyd and Greenwell’s 2001 discussion, the poverty line is set at half average income.)

The incidence of poverty among children was significantly different. This fell to 1996 (when it stood at 13.1 per cent) but rose steeply thereafter to reach 14.9 per cent (significantly above the rate for adults) by 2000. Much of the rise in average incomes (against which relative poverty is measured) is in fact driven by rapid increases in incomes at the very top of the profile. If poverty is set in relation to half median income, the increase is much less substantial (from 8.3 to 8.7 for all Australians across the 1990s) although the pattern of a fall in childhood poverty prior to 1996 and a rise thereafter persists (Harding, Lloyd and Greenwell, 2001, 5). Although single parents continue to be the group most at risk of being in poverty, the incidence of poverty in this group fell sharply in the first half of the 1990s and stabilised thereafter. Harding (1997) shows that in the period from 1982 to 1993–94 it was those in the middle of the income distribution who fared worst in comparative terms. To this extent, the ALP’s claim that it would deploy government resources to cushion the consequences of deregulation for those at the bottom of the pile may be partially vindicated.

The ALP can claim to have a reasonably good record on the moderation of poverty through its long period in office, although this was significantly dented by the long recession that was precipitated in 1991 (which also undermined its record on unemployment). The poor did share to a degree in the fruits of the growth that took place in the 1980s, a position which contrasts sharply with contemporary experience in the UK (on the latter, see Brewer et al., 2004). Income growth in the poorest deciles was much closer to the pattern of average wage earners than to those who accelerated away at the top of the income-earning profile. The ALP went some (small) way towards redeeming Hawke’s grandiose claim made in the 1987 election campaign that ‘by 1990 no Australian child will be living in poverty’ (cited in Kelly, 1992, 350). But when it left office in 1996, more than one in ten Australian adults and one in eight children were still living in poverty.


Lessons for Labour?

What does this experience suggest about the prognoses for Labour in Britain? First, although Labour came to power lacking a very clear programme for welfare reform, it did have its own version of Working Nation in the shape of the New Deal. The New Deal was itself built around the labour market reforms of the previous Conservative government, including the transition to a more active employment-seeking role for ‘jobseekers’. Among other things, this reminds us that New Labour came into office at a quite different point in the international process of deregulation compared with the ALP. The British labour market (always much more deregulated than its Australian counterpart) had already undergone fifteen years of more or less aggressive reform under the Conservatives before Labour commenced on its own path of reform. The New Deal has been heralded by the government as a success – and there is some evidence to support this judgement (including, for example, the record numbers in employment and the sense that the economy is running at something close to ‘real-world’ full employment). And, on coming to office in 1997, Labour did introduce a minimum wage and ended Britain’s opt out from (some) EU employment regulation. But many commentators remain uncertain about the success of the New Deal. Can a successful employment policy really be built almost exclusively around labour market reform? What will happen if (and when) there is a downturn in the long sustained period of economic growth? As with the Coalition agenda in Australia, the New Deal reforms are clearly vulnerable to a more coercive regime which increases (still further) the obligations on jobseekers while scaling back the (expensive) components of training and skills enhancement or compromising the accompanying regime of in-work benefits.

On poverty, Labour can also claim to have made some progress. After the standstill occasioned by its pre-election commitment in 1997 to maintain Conservative spending plans for the first two years of a Labour government, Labour has made significant efforts to redistribute wealth. Since 2000, the Gini coefficient has fallen slightly, though this had not by 2002–03 fully compensated for the growth in inequality since 1996–97. In fact, in the period since 1996–97, between the 15th percentile point and the 85th percentile point, income inequality has fallen – so that within this comparatively large group, it is the poorer individuals who have gained most. Much of the work of increasing inequality lies with the populations below and above this threshold. It is the income status of the very richest and the poorest 15 per cent that explains much of the recent growth in income inequality, with incomes accelerating rapidly at the very top of the profile and falling substantially at the very bottom of the profile. If we choose to use an alternative indicator of income inequality, such as the P90/P10 measure, for example, income inequality is almost unchanged since 1996. We have to remember that some growth in income inequality is consistent with the government’s undertaking (quite substantial) work of redistribution. Brewer et al. (2004) estimate that budget changes from 2000 onwards – including large increases in some means-tested benefits and tax credits, particularly those aimed at families with children and at pensioners – lowered the implicit growth in the Gini index by about 1.5 percentage points. This contrasts markedly with the record of the Thatcher governments through the 1980s when the index rose by ten points – though it leaves absolute levels of inequality that are high by the standards of most comparably developed economies elsewhere (see World Bank, 2004).

Like its ALP forerunner, Labour made a particular commitment to address child poverty. Its target is to halve childhood poverty by 2010 and to eliminate it by 2020. Between 1998–99 and 2002–03, according to government figures, just over 1 million children had been moved out of poverty, bringing the figure from 4.2 million to 3.1 million (after housing costs) (Brewer et al., 2004, 39). Much of this work was done by tax credits for working families with children. Of course, one is at liberty to call this a failure but it is surely harder to maintain the claim that partisanship is unimportant.

At the same time, Labour has transformed the level of investment in public services. Again, following a period of very slow growth in the late 1990s, since 2000 there has been very substantial real growth in investment in public services, especially in health and education. Expenditure on health rose by a half in the eight years after 1997. In the same period, expenditure on education rose by nearly a third (HM Treasury, 2004). Of course (following Le Grand), we have to be wary about assuming that such investment is doing real work of redistribution (even if it is improving levels of social provision for those at the bottom of the income profile).

Labour can claim to have made a difference since 1997. The counter-claim that this is a continuation of Thatcherism under different colours is hard to maintain (though it is worth observing that there was already a significant change in the poverty trend between the Thatcher and Major administrations and that, albeit in a context of much slower overall growth, there was more of a decline in inequality under John Major than under the first Blair government (Brewer et al., 2004, 13–14). But the experience of the ALP suggests also that Labour and its achievements are acutely vulnerable. Labour’s electoral strength is much exaggerated by the dynamics of the plurality voting system. Against an opposition that was widely seen to be unelectable, its margin of victory in May 2005 (in the popular vote) was little more than 3 per cent. As the Coalition government in Australia has shown, the sorts of labour market regime and tax and benefit system it has put in place are quite easily changed in a (still) less progressive direction. Having once flirted with being ‘the natural party of government’, the ALP now finds itself excluded from federal government and uncertain about who or what is stands for. Given all this, it is important to remember that Labour can still make a difference to its own wellbeing. The future is not destiny – but a range of threats, opportunities – and difficult choices.



Australian Bureau of Statistics (2004) ‘Household income and income distribution, Australia’;; accessed 1 March 2005.

Bean, C. (2000) ‘Who now votes Labour?’, in J. Warhurst and A. Parkin (eds), The Machine: Labor Confronts the Future, Allen and Unwin, St Leonards NSW.

Boix, C. (1998) Political Parties, Growth and Equality: Conservative and Social Democratic Strategies in the World Economy, Cambridge University Press, Cambridge.

Brewer, M., Goodman, A., Myck, M., Shaw, J. and Shephard, A. (2004) Poverty and Inequality in Britain, Institute for Fiscal Studies, London.

Butlin, N. G., Barnard, A. and Pincus, J. J. (1982) Government and Capitalism: Public and Private Choice in Twentieth Century Australia, Allen and Unwin, Sydney.

Castles, F. and Pierson, C. (1997) ‘A new convergence? Recent policy developments in the UK, Australia and New Zealand’, Policy and Politics, 24 (3): 233–45.

Finn, D. (1997) Working Nation: Welfare Reform and the Australian Job Compact for the Long-Term Unemployed, Unemployment Unit, London.

Harding, A. (1997) ‘The suffering middle: trends in income inequality in Australia, 1982 to 1993–94’, Australian Economic Review, 30 (4): 341–58.

Harding, A. and Szukalska (2000) ‘Financial disadvantage in Australia – 1999, the Smith Family, Camperdown, NSW’;

Harding, A., Lloyd, R. and Greenwell, H. (2001) ‘Financial disadvantage in Australia 1990 to 2000, the Smith Family, Camperdown, NSW’;

HM Treasury (2004) Spending Review, HM Treasury, London.

Junankar, R. (2000) ‘The new world of Australian labour market programs’, Drawing Board, 1 (1);

Keating, M. and Mitchell, D. (2000) ‘Security and equity in a changing society: social policy’, in M. Keating and G. David (eds), The Future of Governance: Policy Choices, Allen and Unwin, Sydney.

Keating, P. (1987) ‘Traditions of Labor in power: Whitlam and Hawke in the continuum’, in ALP (NSW branch), Traditions for Reform in New South Wales, Pluto/ALP.

Keating, P. (1994) Working Nation: The White Paper on Employment and Growth, Australian Government Publishing Service, Canberra.

Keating, P. (1999) ‘The Labor government 1983–1996’, speech delivered in Sydney, March; accessed at

Kelly, P. (1992) The End of Certainty, Allen and Unwin, St Leonard’s, NSW.

Nairn, B. (1989) Civilising Capitalism: The Beginnings of the Australian Labor Party, Melbourne University Press, Melbourne (first published in 1973).

Notermans, T. (2000) Money, Markets and the State: Social Democratic Economic Policies Since 1918, Cambridge University Press, Cambridge.

O’Neill, S. (1999) Changes to Employment Assistance: More or Less Effective, Research Paper Number 26, Parliamentary Library, Parliament of Australia, Canberra.

O’Reilly, D. (2002) ‘After the third way’, Round Table, 367: 625–37.

Phillimore, J. (2000) ‘The limits of supply-side social democracy: Australian Labor, 1983–96’, Politics and Society, 28 (4): 557–87.

Pierson, C. (2002) ‘Social democracy on the back foot: the ALP and the “new” Australian model’, New Political Economy, 7 (2): 179–97.

Pierson, C. (2003) ‘Learning from Labor? Welfare policy transfer between Australia and Britain’, Commonwealth and Comparative Politics, 41 (1).

Pierson, C. and Castles, F. (2002) ‘Australian antecedents of the third way’, Political Studies, 50 (4): 683–702.

Reich, R. (1992) The Work of Nations, Vintage Books, New York.

Saunders, P. (1993) ‘Longer run changes in the distribution of income in Australia’, Economic Record, 69: 207, 353–66.

Saunders, P. (2003) Examining Recent Changes in Income Distribution in Australia, SPRC Discussion Paper No. 130, Social Policy Research Centre, University of New South Wales, Sydney.

Scharpf, F. W. (1991) Crisis and Choice in European Social Democracy, Cornell University Press, London.

Schwartz, H. (1998) ‘Social democracy going down vs social democracy down under? Institutions, internationalized capital, and indebted states’, Comparative Politics, 30 (3).

Schwartz, H. (2000) ‘Internationalization and two welfare states: Australia and New Zealand’, in Fritz Scharpf and Vivien Schmidt (eds), Welfare and Work in the Open Economy, Vol. 2, Oxford University Press, Oxford.

Shergold, P. (2002) ‘The OECD review of Australia’s labour market policies’, Australian Economic Review, 35 (1): 92–6.

Streeck, W. (1992) Social Institutions and Economic Performance: Studies of Industrial Relations in Advanced Capitalist Economies, Sage, London.

Warhurst, J. and Parkin, A. (eds) (2000) The Machine: Labor Confronts the Future, Allen and Unwin, Sydney.

White, S. (2001) ‘The ambiguities of the third way’, in S. White (ed.), New Labour: The Progressive Future, Palgrave, London.

Wiseman, J. (1996) ‘A kinder road to hell? Labor and the politics of progressive competitiveness in Australia’, Socialist Register, 93–117.

World Bank (2004) ‘Analyzing inequality’, at

Privacy policy