Lazarus Rising. John Howard

Чтение книги онлайн.

СКАЧАТЬ did not see elevation to the deputy leadership as necessarily indicating that I would become the leader after Fraser. The Prime Minister was then only about to turn 52, so issues of longer-term succession were not on the agenda. My total political focus was the re-election of the Fraser Government.

      Late in 1981, the Campbell Inquiry reported. It had met all of the expectations. Campbell recommended widespread deregulation of the financial system, including: floating the Australian dollar and the abolition of exchange controls; admitting foreign banks; and the removal of controls on interest rates. It went too far for the comfort of the Prime Minister and some of his senior colleagues.

      I had a difficult negotiating session with Fraser over the contents of my statement welcoming the publication of the report. I wanted to be as positive as possible. He did not want the Government locked in too much to supporting the main recommendations.

      Doug Anthony wasted no time in saying, publicly, that he was against removing interest-rate controls. Fraser and other senior members of the Government made clear their complete opposition to floating the dollar. As I mention later, Doug Anthony maintained this attitude in opposition, and Fraser, by then out of parliament, attacked the Hawke float.

      When the Campbell Report landed with a thud on the cabinet table, interest rates were still high, and there was acute concern in the Government about the cost and availability of finance for housing and small business. The controlled ceiling for housing interest rates was then 12.5 per cent, and there was little finance available at that rate because the banks were losing deposits to other financial institutions offering higher rates. A typical arrangement then was for a borrower to receive a relatively small portion of the required loan at 12.5 per cent and the rest from a finance company, often a trading bank affiliate, at a much higher rate. These ‘cocktail’ loans usually produced an average rate of 17 to 18 per cent for the whole loan. It was, therefore, easy to see that interest-rate controls were not delivering cheaper loans for homebuyers. That was Campbell’s conclusion, which I endorsed.

      I therefore recommended in a submission to the Monetary Policy Committee in February 1982 that we commence the process of deregulating interest rates on housing loans of less than $100,000 — average loans in high-priced Sydney were less than $50,000. My submission spelled out how controls were failing their intended objective, and I advocated lifting the controls through a process of negotiating with the banks for phased deregulation. I could not obtain authority to do this; rather, there began weeks of negotiations with banks to secure extra housing finance through a combination of a 1 per cent increase in the interest-rate ceiling and the removal of some restrictions on the banks, as recommended by Campbell. These changes were helpful and produced promises of increased lending, but fell well short of the change needed to break free of counterproductive regulation — and that was removing interest-rate controls altogether on future housing loans. In one stroke, that would have lifted permanently the flow of money into housing.

      There was also a time-consuming examination of other quite nonsensical proposals to boost the flow of money to housing, including the unsound idea of the RBA releasing some of the Statutory Reserve Deposits (SRDs) it held from the trading banks to augment the pool of money for housing. One of the reasons it was unsound was because the SRDs were subject to short-term variations, whereas housing finance was for long periods. Another equally flawed idea was to extend the old 30/20 rule whereby life offices and superannuation funds paid higher taxes if they did not invest a portion of their funds in government bonds to housing finance. The life offices and superannuation funds would pay higher taxes if they did not commit a specified level of funds to housing. Campbell had recommended abolition of the 30/20 rule, let alone its extension.

      Both proposals ultimately bit the dust, but it was only the combined opposition of me and the RBA governor which stopped the SRD proposal appearing in the 1982 budget speech. These proposals ignored the central reality that interest-rate controls aggravated, rather than ameliorated, the shortage of housing finance at a time of generally high interest rates. That was the view of Campbell. If that was the view of Malcolm Fraser in 1982 he did not act upon it.

      With Fraser’s support, early in 1983 I announced that the Government would allow in approximately ten foreign banks. They would provide much-needed competition for the existing domestic banks. This decision was applauded by the business community, but criticised by the shadow Treasurer, Paul Keating. In a statement on 26 January 1983, Keating said, ‘By allowing foreign bank entry in Australia the nation is being subjected again to ad hoc decision-making which in this case will effectively change by stealth the whole structure of the Australian financial sector.’¹

      Also the Fraser Government had taken the obscure-sounding decision to bring in a tender system for the sale of Treasury bonds. This change meant that demand would determine interest rates on government bonds; as a consequence, there would be less printing of money to finance deficits. In his 2006 Boyer Lecture, Ian Macfarlane, the former governor of the Reserve Bank, said that this had been a major reform not accorded the recognition it deserved — second only in importance to the floating of the dollar. It was a change that Fraser himself strongly advocated.

      I knew that putting together the 1982 budget would be a daunting task, even more difficult than my first in 1978. With the economy slowing rapidly and revenues falling away, there was a gruelling tussle between me and the Prime Minister about the direction of policy. He favoured an expansionary budget. By contrast, I argued that the inflationary pressures in the community were still so strong that any large increase in the budget deficit would add to those pressures and be damaging to the economy. Unemployment had begun to increase, and large parts of the country were still racked by drought. All of the options were bleak. I wanted our economic policy to remain consistent. For years we had preached the virtues of fighting inflation, reducing the budget deficit and avoiding the easy resort of spending our way out of difficulties. The way things started, it looked as if this budget would turn all of that on its head.

      The budget cabinet deliberations became acrimonious. The differences between me and the Prime Minister were out in the open. Our colleagues must have been dismayed as the Prime Minister and his Treasurer argued and sniped at each other about the shape of the budget as the country headed towards recession.

      I became alarmed that early spending decisions were so extravagant that there would be a huge increase in the budget deficit. To me, this was untenable, and I talked about resigning with my wife, John Hewson and Michael Baume, my parliamentary secretary and close friend, later a NSW senator. I put it aside as an option. It would be seen as disloyalty to the Government, only worsen its political difficulties and not necessarily result in a better economic outcome.

      Fortunately, Fraser responded to my concern, acknowledging that too many expenditure decisions had been taken which added to the budget deficit. We met in his office and he immediately suggested changes to decisions already taken, and some other measures which would help bring the prospective deficit back to more manageable limits. We would still end up with a very expansionary budget, but it would not be as bad as had seemed likely a short while before.

      I brought down the budget on 17 August 1982. It was attacked as too expansionary, and breaking with the economic doctrine the Government had been enunciating for many years. This was the central political dilemma we faced. For years we had preached the virtue of expenditure restraint and reduced deficits, yet all of a sudden we were saying that the solution to the nation’s economic problems lay in more government spending. It confused the public.

      So much for economic and political theory; the public was more interested in the human consequences of the worsening recession. On several occasions, over coming months, it became necessary to revise upwards, the unemployment predictions. This not only reflected the reality of a collapsing labour market, but unavoidably conveyed the impression that the Government was powerless to do anything about it.

      Due СКАЧАТЬ