page_title: Howard Government
section_title: Economy
hierarchical_section_title: Howard Government / Fourth term: 2004–2007 / Economy
caption_attribution_description: English: Official portrait of Julie Bishop, Australian Minister for Foreign Affairs, from the Department of Foreign Affairs and Trade website. Français&#160;: Portrait de Julie Bishop, ministre des affaires étrangères d'Australie. Portrait official du site des affaires étrangères.
context_page_description: The Howard Government refers to the federal executive government of Australia led by Prime Minister John Howard between 11 March 1996 and 3 December 2007. It was made up of members of the Liberal–National Coalition, which won a majority of seats in the House of Representatives at four successive elections. The Howard Government commenced following victory over the Keating Government at the 1996 federal election. It concluded with its defeat at the 2007 federal election by the Australian Labor Party, whose leader Kevin Rudd then formed the first Rudd Government. It was the second-longest government under a single Prime Minister, with the longest having been the second Menzies Government.
  Two senior ministers served in single roles for the duration of the Government; Peter Costello as Treasurer and Alexander Downer as Minister for Foreign Affairs. The leader of the National Party served as Deputy Prime Minister. Three men served in this capacity during the Howard government: Tim Fischer until July 1999, followed by John Anderson until July 2005 and then Mark Vaile. Decisions of the Executive were made either by the Cabinet or by the appropriate Minister.
context_section_description: The Howard Government's fourth term took place during a period of exceptional economic growth and prosperity. During the term over 855,000 new jobs were created, unemployment declined to just over four percent and inflation generally remained within the Reserve Bank of Australia's (RBA's) target range of 2–3 percent Due in part to changes made to the way in which the rate was calculated, creating the appearance of an improvement. The Government also completed repaying the Commonwealth's debt and recorded surpluses in each of its budgets during the term. Australia's strong economic performance was largely attributed to the reforms made by both the Hawke-Keating Government and Howard Government and the growth in the world economy over the same period. Growth in Australia's productivity did slow during the Howard Government's fourth term, however, and many areas of Australia's infrastructure reached capacity and required reform. The Howard Government's ability to drive these reforms was limited by the lack of a working relationship with many of the state and territory governments.
  The RBA's use of monetary policy was a significant issue during the Government's fourth term. A key element of the Government's campaign in the 2004 election was the argument that only a Coalition government could keep interest rates low. As a result, the ALP was able to use the RBA's six interest rate increases over the term to criticise the Government. The interest rate increases and strong growth in house prices during this period contributed to housing affordability reaching an all-time low.
  Changes to fiscal policy introduced in the 2004–05 budget included a 'baby bonus', increased tax benefits for families with children, and lower income tax rates for all Australians. The family benefits introduced by the Howard Government led to middle-income households becoming the largest single group of social welfare recipients. The superannuation system was also changed in 2007 to allow most people to withdraw their superannuation tax-free after they reached the age of 60 and to increase incentives for semi-retired people to work part-time. Once the Commonwealth debt was repaid, the Government used its financial surplus to establish a 'Future Fund' to pay its superannuation liabilities and a Higher Education Endowment Fund was established in the 2006–07 Budget. The Government also negotiated and signed several free trade agreements between 2004 and 2007, including one with the United States which had been mostly negotiated during the third term.
  On 15 September 2005, the Senate passed the Telstra (Transition to Full Private Ownership) Bill 2005. The first sale one third sale had been in 1997, under the Telstra (Dilution of Public Ownership).
  The Howard Government's 12th and final budget was brought down by Treasurer Costello in May 2007. In his Budget address, Costello told Parliament that Australia had recorded the longest economic expansion in its history and had unemployment at a 30-year low:
  Our economy is about 1½ times larger than it was back in 1996. We have another 2 million Australians who have found jobs since then. And average wages have increased 20 per cent in real terms. In the decade before 1996 inflation averaged 5 per cent a year. Since then inflation has halved, averaging the low and stable rate of 2½ per cent a year. Ten years ago the Australian Government owed a net debt of $96 billion. The Government was paying an interest bill of $8.5 billion a year. Today we are debt free in net terms. And our net interest payments are zero. This is saving taxpayers $8.5 billion a year. Back in 1996 the Budget was in deficit. We were living beyond our means. Today we are living within our means. For the 10th time, I am outlining a Budget that will be in surplus.
  In the 2007 Budget, Costello also announced a number of measures aimed at the education sector: including a Higher Education Endowment Fund, literacy and numeracy initiatives for schools, and measures to support vocational education and training and higher education. The Higher Education 
caption: Julie Bishop served as Minister for Education, Science and Training from 2006. The final Costello Budget contained a number of education initiatives.
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