The
Hawke government had been in power since the general election of
1983, and had been re-elected in the snap election of
1984. Hawke, in partnership with
Treasurer Paul Keating, had pursued an ambitiously reformist agenda over the course of his time in office, which included floating the Australian dollar, reducing tariffs on imports and completely reforming the tax system. However, the government's popularity dropped sharply throughout the course of its 1984–87 term, mostly due to a series of blunders such as its failed 'tax summit' (designed to gain support for Keating's proposed consumption tax), and declining terms of trade, which Treasurer Keating argued threatened to reduce Australia to the status of a
banana republic unless tough measures were taken to correct the balance of trade. Meanwhile, for much of the 1984–87 term, the opposition Liberal-National coalition led in the polls, leading to speculation that it could regain office in 1987. However, both coalition parties were also wracked by infighting throughout the parliament. In September 1985,
Andrew Peacock, who had led the party to a surprisingly good result in the 1984 general election, was replaced as leader of the Liberal party by the then Deputy Leader and Shadow Treasurer
John Howard, after a botched effort to remove the latter from the Deputy Leadership and replace him with Queenslander
John Moore, resulting in Peacock's resignation. Nonetheless, the party remained divided, as Howard was seen by some Liberals as being too far to the right, and these opponents of the Howard policy agenda rallied to Peacock, who was eventually sacked from the shadow ministry in March 1987, following unfortunate remarks regarding Howard by Peacock to Victorian state opposition leader
Jeff Kennett in an infamous car phone conversation. Moreover, Howard and National Party leader Ian Sinclair faced challenges from the right as well as the left of the coalition, in the form of
Queensland premier Sir
Joh Bjelke-Petersen. Premier since 1968, Bjelke-Petersen was a hardline conservative who aggressively opposed the "socialist" Hawke Labor government, and believed that he could transfer the style of politics that had served him so well in his native Queensland to the federal stage. Following a decisive electoral victory in Queensland in
1986, the so-called
Joh for Canberra campaign began in earnest, supported by much of the Queensland business establishment (the infamous "white shoe brigade"), with Bjelke-Petersen announcing that he intended to run for the Prime Ministership on 1 January 1987. At the end of February 1987, the Queensland National Party decided to withdraw its twelve federal members of parliament from the Coalition, and demanded that federal National Party leader
Ian Sinclair also withdraw because of "basic differences in taxation and other philosophies and policies" between the Liberal and National parties. Within the Queensland National Party, the party president Sir
Robert Sparkes enforced support for Bjelke-Petersen, making practical opposition within the Queensland ranks unlikely. The Coalition formally split in early May, with the National Party voting to break the federal coalition, and Ian Sinclair looking increasingly impotent and unable to ensure the loyalty of National Party members. However, it was at this point that Bob Sparkes reneged on his loyalty to Bjelke-Petersen and withdrew from the campaign. With his pool of supporters steadily decreasing, the likelihood of an effective challenge to the federal Coalition from Bjelke-Petersen began to collapse. When the election was called on 27 May, Bjelke-Petersen was in the United States, and quickly decided to withdraw from his bid for federal power. However, the federal coalition had been broken, and Howard's credibility as a challenger to the Hawke government had been severely damaged. ==Voting intention==