In
1976, Cain was elected to the
Victorian Legislative Assembly as MP for
Bundoora. He became
shadow Attorney-General under the leadership of Frank Wilkes. After Wilkes narrowly lost the
1979 election to the
Liberal premier,
Dick Hamer, Cain challenged him for the leadership, becoming leader in September 1981. Cain was a
Keynesian, opposed to the doctrines of
economic rationalism, and he increased government spending in the hope of stimulating growth and investment. Following the lead of
Neville Wran (who had been
New South Wales Premier since 1976), Cain demanded Government-owned enterprises pay dividends to the treasury. These dividends were increased every year, forcing these enterprises to borrow to pay the dividend. Other schemes such as the
Victorian Economic Development Corporation, and the
Victorian Equity Trust promised good returns. Such schemes worked so long as the national economy remained buoyant. One of Cain's major achievements (and one in which he took especial pride) was the introduction of Victoria's Freedom of Information laws. No other state had passed such laws, though afterwards each state followed Victoria's lead. Cain was also responsible for the appointment as Governor of
Davis McCaughey, then aged 71, who served from 1986 to 1992. A highly respected
theologian, McCaughey was a popular choice after the controversy surrounding the resignation of
Rear Admiral Sir
Brian Murray, who had been accused of having improperly accepted free air travel.
Second term Historically, Labor had not been very successful in Victoria. However, Cain remained very popular with the Victorian electorate, and was easily elected to a
second term in 1985 over the Liberals under
Jeff Kennett, the first time a Labor government had been reelected in Victoria. Labor also won the
Victorian Legislative Council seat of Nunawading after a tied vote forced the parties to draw from a hat to decide the winner, giving Labor control of the upper house for the first time ever. However, a fresh election was ordered by the Court of Disputed Returns after it was found that the Chief Electoral Officer should have cast deciding vote. The Liberals won the seat, and Labor lost its slim majority. Within a week the chairman of the Victorian
Nuclear Disarmament Party lodged an official complaint about a deceptive NDP how to vote card handed out at the booths. It was claimed that Labor members were recognised handing out this card and that the allocation of preferences to the ALP on the card damaged the NDP. During its second term Cain's government began to run into difficulties with the state budget. The stock market crash of 1987 created a crisis which forced the government to cut spending, alienating some trade union supporters. The
State Bank of Victoria, in particular its merchant banking arm
Tricontinental, ran up a huge portfolio of bad loans, without adequate fiduciary supervision. however, the government at the time could not afford to initiate the investment for the project so the Docklands project stayed on the drawing board. There was a bid for the 1996
Olympic Games and another proposal was to turn the Docklands into a technology city known as the
Multifunction Polis (MFP). This was followed by a budgetary crisis. The deputy premier,
Robert Fordham, took some of the blame and resigned. This led to the elevation of Education Minister
Joan Kirner to deputy premier. In February 1990, it was rumoured that
Pyramid, a privately owned building society, was in difficulties. Ministers in Cain's government accepted assurances from Pyramid directors that the society's position was sound, and passed these assurances on to the public. In fact, it was insolvent. When it failed, causing thousands of investors and depositors to lose their money, the government was blamed by investors and the media. This was followed shortly after by the collapse of
Tricontinental Bank, which threatened to bankrupt the Victorian Government-owned State Bank, Victoria's largest financial institution. The bank eventually had to be sold to the
Commonwealth Bank, which was shortly thereafter privatised by the federal government. By this time Cain was becoming frustrated at the reluctance of his government's caucus members to approve his plans for tax rises and spending cuts to reduce the growing budget deficit. He issued an ultimatum at the Labor Party Conference – "back me or sack me." When the undermining of his position continued, he resigned on 7 August 1990. During an interview after his resignation, he remarked, "We appointed a few dills but we weren't crook." Kirner was elected Labor leader in Cain's place and became the first female Premier of Victoria. By this time, Labor had bottomed out at 22 percent in opinion polling. Kirner was unable to make up the lost ground, and Labor was heavily defeated at the
1992 Victorian state election. Cain did not run in this election. ==Life after politics==