By 1983, governments around the world had begun programs of economic liberalisation, including Margaret Thatcher’s England and Ronald Reagan’s United States.
Doing the same here was always going to be more problematic, given our “draconian” and “rigid” labour laws, Henry said.
“The centralised wage indexation system that we had was so rigid that opening the economy up – and being able to do it in a way that didn’t completely traumatise the economy and society – that was the biggest challenge and I really doubt that anybody else could have done it.”
Hawke immediately called unions and business together to negotiate the Prices and Incomes Accord, under which workers would accept real wage cuts in return for increases to the “social wage”, through tax relief and payment boosts.
“It was a stroke of genius, really,” Henry said. “Hawke managed to keep the support of the trade union movement, while overseeing the dismantling of this giant piece of machinery that they were once the masters of.
“The rates of industrial disputation fell dramatically, despite the fact that people were not getting real wage increases. We were able to secure a very rapid rate of employment growth throughout the 1980s.”
Hawke and his treasurer, Paul Keating, would later clash on who could claim credit for the decision to float the Australian dollar, but Henry, who worked in Keating’s office for the last five years of the Hawke government, says Hawke deserves the credit for initiating tax reform.
“Option C [for a consumption tax] was Keating’s baby, but the national tax summit of 1985 – that was all Hawke’s idea.”
The summit led to important reforms to broaden the base of the income tax system, introducing capital gains and fringe benefits tax.
Economist Ross Garnaut served as principal economic adviser to Hawke during his time as prime minister. On Friday, Garnaut declared Hawke “Australia’s greatest prime minister”.
“Working for Hawke was the professional experience of a lifetime. One of the most informed, retentive and analytically strong minds with which I have interacted,” he said.
Garnaut said Hawke combined a dual focus on both economic efficiency and social justice.
“A committed democrat and social democrat, he is the reason why democracy is in less trouble here than in the US and Europe. His economic reforms were so deep and durable because of the social democratic context.”
Bernie Fraser was appointed by Hawke as treasury secretary in September 1984. He recalled playing tennis – doubles – on Saturdays at The Lodge with Hawke and David Morgan, then a senior official of Treasury, who went on to chair Westpac.
“I used to play tennis with Bob,” he said. “We had a beer afterwards and everyone had an enjoyable time. He was so easy to get on with. He just made you feel relaxed, you could speak your mind.”
Fraser said Hawke had a respect for the public service, which is lacking today.
“I think he’ll be sadly missed by many public servants and myself included. He actually believed in public service and used the public service. I think there is a contrast to today.”
Fraser said Australia was a richer nation today because of both Hawke and Keating.
“We weren’t the first to deregulate banking systems; it was happening in other countries. History was moving in that direction, that’s true. But there always needs to be a few leaders who can sense the moment and get on that wave of history and do things – and do things that make the country better for a long time – and Hawke and Keating did that.”
Jessica Irvine is a senior economics writer with The Sydney Morning Herald.