Broadly speaking, economically, Australia in the 1980s and 1990s transitioned from a protectionist economy with extensive government ownership of utilities such as telecommunications, power, and government-owned consumer banks, to an economy more in keeping with the post-Thatcher/Reagan neoliberal consensus, where utilities increasingly were sold off for profit, and where, increasingly, aspects of the economy were left to free market forces to decide.

This transition was largely accomplished by the more left wing party, the Australian Labor Party, which was in power between 1983 and 1996, with Bob Hawke as Prime Minister and Paul Keating as Treasurer (and prime mover behind the changes) until 1990-1991, when Keating challenged Hawke unsuccessfully, moved to the backbench, and then challenged successfully to become Prime Minister. The Liberal Party government of John Howard, who was generally rather conservative, accelerated some of these changes when it came into power; they went to an election in 1998 touting a Goods and Services Tax, which promised to replace a bewildering array of tariffs at different levels on particular goods and services with a 10% tax on most items.

When the Labor government came to power in 1983, the Australian economy was in a mess, too-reliant on traditional industries. The Australian economy had been suffering from from 'stagflation' - a stagnant economy where there was significant inflation - for a decade by this point; most years in the previous decade there had been inflation of over 10%. In 1983 the economy sharply contracted, and unemployment skyrocketed to the highest levels since the Great Depression. It was prominently noted by Bill Hayden (who was Labor leader until shortly before the election was called, when he was rolled by Hawke) that a 'drover's dog' could have won the election for Labor as a result.

In December 1983, soon after they came to power, for example, the Labor government 'floated' the Australian dollar, changing it from a currency which was pegged to the US dollar at a particular rate, to one which would rise and fall depending on currency markets' beliefs about the worth of Australian currency. This played a role in reducing the strong inflationary pressures on the Australian dollar in 1983, but also exposed Australia more sharply to international economic shocks, like the one in 1987. Additionally, Labor established a series of agreements with the trade unions, generally known as 'The Accord', where they agreed to expand social services - bringing in Medicare, expanding unemployment benefits and pensions, etc, in exchange for basically helping Australia transition to 'economic rationalism' (i.e., a modern neoliberal economy) by restricting wage increases to economically sustainable levels. Government budgets went into deficit over the next 3-4 years (to pay for the expansion of social services), before stabilising to a surplus, and government spending increased as a share of GDP.

All of this had the effect of exposing the Australian economy to economic shocks in the international market, and Australia ultimately suffered as a result of the 1987 American stock market crash and the economic response to that crash - as with many other OECD economies in the early 1990s, the Australian economy suffered a recession in 1990-1991, which Paul Keating famously said was 'the recession we had to have', a correction to the excesses of the 1980s (the reserve bank increased interest rate levels to very high levels to try and avoid fuelling an assets boom, which increased mortgage prices to very high levels). Unemployment, in particular, skyrocketed during this period, to levels even higher than in 1983, and only slowly decreased as the economy normalised into the mid-1990s. Additionally, the government budget went into deficit again, in order to try and stimulate the economy (outside of the assets boom).

Broadly speaking, as you can see in some graphs here from a government paper, military spending as a proportion of GDP slowly decreased from the mid-1980s to the mid-1990s, as a percentage of the overall government budget, from something like 8-9% to something like 6-7% of the budget (which largely means that military spending didn't really increase along with increased receipts as the economy grew, I'd say, with occasional cutbacks in some budgets). However, I couldn't find any convenient data about relative levels of spending on the different arms of the armed forces.

References:

• Paul Kelly, The End Of Certainty