The Incumbent New South Wales Premier Bob Carr won a second term with a 7% swing of vote against the Liberal National Party led by Kerry Chikarovski.

The Labor Party's victory at the 1995 election was built on a number of specific promises, backed by a well directed marginal seat campaign.

The major dynamic of the Carr Government's first term was to be the clash between the old fashioned promises that won the 1995 election and the new orthodoxy of public sector financial accountability.

While the term microeconomic reform was not yet in use when the Greiner Government was elected in 1988, New South Wales became the first State that committed itself to a fundamental examination of the role and activities of the public sector.

Devoting extra resources, persuading the majority of the medical profession to participate and improving hospital processes allowed the Government to meet the commitment.

The Federal government cut of funding to hospitals that followed made the waiting list numbers rise again and increased the scepticism of the public to any claim .

This was disastrous for the Government's standing, forcing it in October 1996 to announce a toll cash-back scheme for private use in an effort to recover lost support.

The Victorian Government had raised billions in this way, and New South Wales had already divided the generating capacity into separate corporations that made privatisation possible.

The policy had the additional advantage of removing the financial risk faced by the State since the introduction of a national electricity grid with full competition between suppliers.

Retiring former Ministers caused five by-elections in May 1996, Labor receiving a bonus when former Federal MP Harry Woods won the North Coast seat of Clarence from the National Party, increasing the Government's majority to three.

Collins was deposed by a surprise coup in December 1998 and replaced by Kerry Chikarovski, the first woman to lead a major party in New South Wales.

Optional preferential voting was responsible for Labor holding Clarence, with the failure of Liberal voters to direct preferences denying the National candidate victory.

The rules for nominating candidates to the Legislative Council were tightened to prevent this from happening again, as well as the abolition of group ticket preferences in response to Malcolm Jones of the Outdoor Recreation Party being elected with 0.2% of the vote.