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Social democratic parties have been agents in the neo-liberal transformation of public policy in recent decades. There has been debate about the reasons why social democrats have embraced market policies, with particular emphasis given to ideological trends, globalisation and electoral factors. This paper aims to shed further light on this debate by examining the case of the Australian Labor Party (ALP), which was a prominent social democratic exponent of neo-liberalism during its time in office in the 1980s and 1990s. In Labor's case, the primary cause of the shift from pledging social reform and interventionist government to neo-liberalism was the lower levels of economic growth that followed the end of the post-war boom in the 1970s. Social democrats rely on strong economic growth to fund redistributive policies. Thus when recession occurred in the 1970s it eroded the economic base to Labor's programme. While this paper focuses on the story of the ALP, it may provide some answers as to why social democrats elsewhere have adopted neo-liberalism. [ABSTRACT FROM AUTHOR]