In 1984, Baxter resigned from the Legislative Council to contest the federal seat of Indi, challenging sitting Liberal member Ewen Cameron. The bid was unsuccessful, as Baxter came third behind Cameron and the ALP candidate, and Cameron was easily re-elected on Baxter's preferences. Baxter subsequently contested the by-election for his old seat in February 1985, and was once again elected to the Legislative Council. Over the next three years, he served on three more committees, responsible for Economic and Budget Review, WorkCare and Social Development.
