page_title: Early 1990s recession in Australia
section_title: Response of Hawke Government to stock market crash
hierarchical_section_title: Early 1990s recession in Australia / Response of Hawke Government to stock market crash
caption_attribution_description: Bob Hawke, 23rd Prime Minister of Australia.
context_page_description: The early 1990s recession saw a period of economic downturn affect much of the world in the late 1980s and early 1990s. The economy of Australia suffered its worst recession since the Great Depression.
context_section_description: The Hawke Labor Government initially responded to the crisis by asking the Conciliation and Arbitration Commission to defer its national wage case. Commodity prices dropped and the Australian dollar sharply declined. The Reserve Bank conducted a $2 billion intervention to hold the dollar at 68c but it crashed to 51c. In December 1987, Keating said that the Australian economy would weather the storm because the Hawke Government had already balanced its Budget and brought down inflation.
  The Government postponed major policy adjustments, planning a mini-Budget for May. Hawke wrote to US President Reagan calling on the US to reduce its Budget deficit. The Business Council called for wage reductions, decreased government expenditure, a lower dollar and deregulation of the labour market. Seven months into the crisis, Hawke told the State Premiers that the "savings of Australia must be freed" to go into business investment for export expansion, and funding to the states was cut. A phase out of tariff protections was continued and company tax was cut by 10% to 39%. In the May mini-Budget, payment to the states was cut by $870 million and tax cuts deferred. The Government declared cost cutting was completed.
  A surge in commodity prices began in 1986 and assisted the economy to a small 1987 surplus of $2.3 Billion. With commodity prices now over their peak, economic conditions were entering a decline, with high interest rates, a growing current account deficit, declining demand, increasing foreign debt and a wave of corporate collapses. Furthermore, the collapse of the Eastern Bloc economies, was to see wool and wheat prices decline, savaging Australia's agricultural sector.
caption: Prime Minister Bob Hawke. The Hawke-Keating Government oversaw the economy of Australia during the early 1990s recession.
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