Policy by Contract: Social Pacts in Australia and New Zealand.”. Paper presented at

Governments often make public deals with interest groups, yet the conditions under which these bargains emerge are not well understood. This paper explores these policy contracts in the context of “social pacts”, where governments sign explicit policy agree-ments with peak level union federations for electoral gain. I develop a theory of pacts and then apply it to an empirical puzzle emerging from events in Australia and New Zealand, 1983-1996. Facing similar macroeconomic crises and with historically similar wage bargaining institutions and levels of union density both elect Labor governments which then make opposite choices: the New Zealand government embarked on a period of radical deregulation, relying on unemployment and monetary policy to discipline wage demands while the Australian Labor Party and Council of Trade Unions signed a formal Accord, enhancing unions ’ relevance in wage bargaining and policy making. Relying on original interviews with key policy makers in both countries, I conclude that the organizational relationship between the union peak associations and the La-bor parties were the critical differences that made intertemporal political transactions possible (and self-enforcing) in Australia but not in New Zealand