Victoria bounces back from hard times

The 80s were good for Victoria, with household incomes sitting 10 per cent above the rest of the nation and unemployment at 4.6 per cent in 1989. But recession swept through the state in the following years, with unemployment rising to 11.9 per cent and output falling 7 per cent compared with 1 per cent nationwide.

Things got so bad at one point that ANZ was said to be the states biggest landholder as a result of loan defaults.

Things were worse in Victoria in part because the nationwide manufacturing decline accompanying tariff cuts was magnified here by the heavy dependence on secondary industry.

In part it was a loss of confidence caused by the loss of the State Bank and the collapse of the Pyramid Building Society group and other investment houses, including the Victorian Economic Development Corporation. In part it was because a heavily indebted state government became frozen and was unable to respond.

The incoming Kennett government in 1992 slashed government spending, wiping out 50,000 public sector jobs and refocusing policy. It aimed to raise Victorias profile and morale with major international events and conferences, push the states potential in research and development, tourism and the new economy, the arts and services generally.

It cut debt by selling such key assets as the power and gas industries, which netted the state $23 billion, and eventually selling the railways and tramways.

Things slowly improved as the nation recovered through the 90s but Victoria continued to lag in employment growth to the end of the decade. But confidence was returning and in 1998 the net interstate emigration that had continued for more than 20 years turned around as more people moved here.

Then treasurer Alan Stockdale says the rebuilding of Victoria through the 90s created a more resilient mentality, which showed during the Asian crisis in 1998.

I asked (Treasury secretary) Ian Little to find out why things had not turned down in Victoria as much as we expected, he says. He said it seemed that our industry had changed its mindset and was more confident.

Instead of closing factories and laying off workers, business developed new markets in the US and Europe to replace lost business in Asia.