The macro-economic environment supporting the Australian micro-economic reforms have been satisfactory is some respects, but notably deficient in other areas. It is imperative to examine these developments briefly, since, if the major problem areas are not resolved, they have the potential to disrupt the genuinely significant achievements and frustrate the path towards an internationally oriented and efficient economy. The purpose of this section is to examine briefly the salient features of the macro-environment. This article also alludes to some of the effects of the reforms. It does not attempt to provide a comprehensive assessment, which would be beyond the scope of this chapter, and arguably premature.
Throughout most of the reform period, fiscal policy was reasonably conservative. The Australian Labor administration inherited a large fiscal deficit in 1982/3, in consequence partly of a severe recession. The government proceeded to reduce this deficit progressively through the decade. By 1987/8 a modest surplus had been achieved, and was maintained for the next three years, before another serious recession forced a change in policy. For a short period, also, the administration reversed the post-war trend towards an ever-larger government presence in the economy. Economic growth remained quite buoyant during this period, although inflation continued to exceed that of major trading partners, while remaining below 10 per cent after 1983. The recession of the early 1990s was the major mistake in macro-economic management over this period.