Lazarus Rising. John Howard

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      To this day, Whitlam remains a legendary figure to devoted followers of the Labor Party and others in the community. Nobody can doubt his flair and style, his considerable sense of humour and his erudition. He did something for the Labor Party which seemed for so many years unattainable. He won government. Having won government, he proved to be a very poor Prime Minister. Sentimentality towards him should not smother that reality.

      After the election Fraser did what I suspected might happen. Having made some positive comments about my efforts during the campaign, he kept me as Treasurer but gave the finance portfolio to a separate minister. Like Phillip Lynch, I had administered both portfolios from the time of my appointment as Treasurer.

      Before any of this occurred, he had to resolve Phillip Lynch’s position. Phillip’s health had been restored, and he had easily retained his seat of Flinders. Stephen Charles, a well-regarded Melbourne silk, had prepared a report on Lynch’s financial affairs, clearing him of any wrongdoing. Fraser called an ad hoc meeting, including Charles, Reg Withers, government leader in the Senate, Senator Fred Chaney and me. Although Charles had given Lynch a clean bill of health, Fraser was querulous at the meeting. He questioned one particular transaction, which, to me, seemed quite normal. When asked my opinion I said so. Reg Withers had the same view. That seemed to end the matter.

      Lynch remained as deputy leader, but opted to become Minister for Industry and Commerce, specifically ringing and telling me that this is what he wanted. Thus, at the age of 38 years and 4 months, I became, unconditionally, Treasurer of the Commonwealth.

      Again, I had every reason to be grateful to Malcolm Fraser for giving me what was a huge promotion.

      Being Treasurer gave me access to the best concentration of brains in the federal bureaucracy. There are plenty of other departments with extremely talented people, but for concentration of brain power, the Treasury is hard to beat. The dominant figures in the Treasury at that time were Sir Frederick Wheeler as secretary and John Stone, the deputy secretary (economic). Wheeler was, with Sir Arthur Tange, Secretary of the Department of Defence, the last of the traditional mandarins of the federal public service. I liked Wheeler a lot.

      I admired the way in which he had stood up for due process at the time of the Khemlani Affair, in the Whitlam years. He was tough and cunning and a firm believer in the independent sanctity, if I can put it that way, of the federal bureaucracy and most particularly the Treasury. His minutes were succinctly and strongly written. For all that he no doubt had the view that Treasurers came and went but the Treasury went on forever, I always thought he would give me advice that he believed was in the national interest. He was also a heavy smoker, and that suited me at the time because I was still addicted to the habit.

      John Stone, who took over from Wheeler in 1979, was the brightest public servant with whom I ever dealt. That did not automatically make him the best, because, on occasions, his judgements did not match the purity of his intellectual arguments. He nevertheless held resolutely to all of the conclusions that he reached, and was quite uncompromising in the advice which he offered to his minister. Some ministers were nervous when I proposed appointing Stone head of Treasury, because they thought he was too doctrinaire in his economic thinking. My attitude was that people should be appointed to senior public service positions on merit. Passing over Stone would have been to deny that fundamental principle.

      Early in April 1979, not long after Stone had been appointed secretary, Fraser asked Stone if he would prepare a memorandum of advice for an incoming Conservative Government in Britain, as to what should be done to fix their ailing economy. Fraser wanted to give it to Lord Peter Carrington, who was to see Fraser in Canberra. He was an old friend of Australia, and became Thatcher’s first Foreign Secretary, staying in the post until the Falklands War.

      Thirty years on, the Stone memo makes fascinating reading. For example, he wrote, ‘Meanwhile union power has become a threat not merely to economic stability, but to civil liberties and the very concept of the rule of law upon which the British society has been founded and of which it has been for so long such a notable exemplar.’¹ The full memo appears as an appendix to this book.

      Thatcher visited Canberra, very briefly, not long after her election in May 1979. She had been at a G7 meeting in Tokyo and came to Australia, ostensibly to discuss the situation in Rhodesia in advance of the Commonwealth Heads of Government (CHOGM) meeting in Lusaka. During her brief visit Mrs Thatcher attended a cabinet meeting, giving an uncompromising outline of what she intended to do in her own country. After she had left, quite a number of my colleagues were rather sceptical about some of her intentions, asserting that she was unrealistic. They had underestimated her.

      I had badly needed expert advice on economic issues during the election campaign, as the Treasury had to maintain a certain distance during the caretaker period embracing the campaign.

      This is when I met John Hewson. Already a professor of economics although only in his early 30s, John Hewson had had an impressive career at the Reserve Bank and the International Monetary Fund (IMF). He had joined Phillip Lynch’s staff on a part-time basis, and worked closely with another economics professor, John Rose, who worked, also on a part-time basis, in Fraser’s office. They were a real tandem. They provided joint advice to the Prime Minister and the Treasurer, especially on monetary policy issues. I liked John a lot. He gave good advice on most economic issues and was taken by the political atmosphere. In the changeover from Lynch to me, he had glided almost effortlessly from one office to the other.

      Tension would develop between the senior people in the department and John early on. The top officials in the Treasury resented the degree to which both Fraser and I listened to private office advisors.

      At this time the relationship between the minister, his private office advisors and his department was undergoing significant change. Ten years earlier, somebody like John Hewson would not have existed in the Australian political system. All of the principal policy advisors in a minister’s office came from the relevant department. If non-departmental advice were taken, it was overtly taken from someone who was not on the minister’s staff.

      My five years as federal Treasurer were to change profoundly my opinions on many aspects of managing the Australian economy. When I became Treasurer I was unaware of the extent to which the Australian financial system was in need of deregulation, and although generally aware of the negative impact of across-the-board wage rises granted by the Conciliation and Arbitration Commission, I did not see the issue as one requiring freeing of the labour market. Rather I adhered to the conventional view at the time that the commission should be encouraged to deliver different wage judgements. I did not then realise that fundamental change to the system was required.

      I believed that the Whitlam Government had spent far too much and that a big part of my responsibility as Treasurer was to reduce the rate of growth in government spending. I also thought the Australian taxation system needed to be reformed. However, I underestimated the enormity of the task involved in bringing about change in that area.

      I was to have successes and failures. In 1978 the idea I floated of introducing a retail turnover tax collapsed, as a policy initiative, fairly quickly after an onslaught from Australian retailers and some very unhelpful comments from one of my colleagues, Bob Ellicott. He used the platform of a Sunday evening address at the Wayside Chapel in Sydney to say that the Government should abandon the whole idea because it was causing disquiet in sections of the business community. Although I had been right, in a pure policy sense, to raise the issue, I had been extremely naïve in the way in which I had gone about it. As I learned from that, you need time to build the case for change by explaining, in detail, the shortcomings of the existing system.

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