Malcolm Fraser made great demands of the public service. He was entitled to. Any prime minister is. They must, however, be prioritised demands. It is the worst possible administrative style to treat every request made of the public service as urgent. It is not the case. Nothing saps the willingness of public servants more than having to work over a weekend preparing a paper for ministers, only to have ministerial consideration delayed or, at the best, consisting of a cursory glance and a scrawled ‘noted’ on the paper.
There were regular clashes between Treasury and the Department of Prime Minister and Cabinet over economic policy. Fraser’s department mistrusted the Treasury, and Treasury elite were resentful that their advice should in any way be questioned or qualified. Tension could reach absurd dimensions. For one premiers’ conference, two completely separate working documents were produced for the discussion between the Prime Minister, me, and our respective advisors. Clearly there should have been agreement on one set of figures.
Having wanted the financial system inquiry, Fraser seemed to go cold on the idea of financial deregulation as Campbell’s work proceeded. His own utterances increasingly ran counter to what I expected the inquiry would recommend. At monetary policy meetings he would frequently criticise banks, and talk of the desirability of greater, not less, control of financial institutions. On several occasions he asked that consideration be given to proclaiming part IV of the Financial Corporations Act. That would have further extended financial regulation.
I arranged for Keith Campbell to brief Fraser on the work of his committee to date. As I sat through the briefing, it became clear that Fraser was uncomfortable, even irritated, by the direction the briefing was taking. Campbell made no attempt to disguise his view that significant deregulation of the financial system was essential.
John Hewson and the financial community, especially in Sydney, were enthusiastic about Campbell’s work and eagerly anticipated wide-ranging plans to shake up the system. Treasury was unenthusiastic, with the Reserve Bank being more supportive of deregulation. I did not think that the Monetary Policy Committee would be champing at the bit to adopt Campbell’s recommendations.
None of this affected Malcolm Fraser and me working together closely on the immediate economic goals: to keep the budget under control; reduce the deficit; and hopefully make room for further taxation relief. The deficit had fallen significantly over a two-year period, and by the time the 1980 election arrived we had a good story to tell on the expenditure-restraint front.
Malcolm Fraser rightly saw me as a close political ally within the Liberal Party. I was conscious of an underlying tension between him and ‘the young man', as he called Andrew Peacock. In part it was a product of their former rivalry regarding John Gorton, and the understandable ambitions which Peacock himself entertained about the leadership of the Liberal Party. To some degree I probably filled a gap left by the fracturing of Fraser’s relationship with Phillip Lynch, and the complete termination of it with Reg Withers. These two had been very close to Fraser through the Constitutional crisis of 1975, and in the early months of the new Government. Whilst Lynch and he continued to work together, I do not believe that trust was ever fully restored to the relationship following the events on the eve of the 1977 election.
I remained ambitious about my future, but it would have been a grand delusion to have imagined that, by 1978, I had developed any hard core of people who saw me as having a future beyond continuing as Treasurer. The economic dries remained supportive of Lynch. Those unhappy with Fraser, or still, for one reason or another, carrying lingering resentments about earlier disputes, tended to coalesce around Reg Withers and Andrew Peacock. Overwhelmingly, however, Fraser commanded the loyalty and support of the parliamentary party. He had won two massive victories, and had a demeanour which transmitted commitment and toughness.
On the other side of politics Hayden had replaced Whitlam after the 1977 election. He was respected within the political class for having done a good job as Treasurer in quite impossible circumstances. Deciding to stay out of the leadership for the first two years had been a sensible move. He had a Herculean task to restore his party’s credibility on financial matters.
Bob Hawke was by this point strutting across the national political stage as president of the ACTU, openly ambitious about winning a seat in federal parliament. It now seems incredible that it should have taken the Labor Party so long to find an electorate for him. Once he did win the prime ministership, he would demonstrate a connection with the Australian electorate stronger than any Labor leader, before or since. That, of course, was still several years into the future.
The other Labor figure outside the federal parliament who continued to make an impact was Neville Wran, the Premier of New South Wales. In my view, Wran joins Bob Hawke as one of the two most significant Labor figures of that generation. Wran gave Labor victory, and also competence in government, at a time when national morale for the party had hit rock bottom. Remember that Whitlam was routed in December 1975, and having waited 23 years in opposition to see their dream of a viable Labor alternative in government destroyed so quickly, Labor people despaired of the future. Winning government in New South Wales in May 1976 gave Labor new heart. Wran was a polished media performer — as good as any I have seen on TV news bulletins — got on well with what he called ‘the big end of town', and provided something of a role model for future state Labor governments around the country.
* * *
The 1980 budget will chiefly be remembered as the one which was almost fully leaked by Laurie Oakes, then with Channel 10. Oakes got hold of one of the close-to-final drafts of my budget speech, and its leaking a few nights before the budget was a huge embarrassment for the Government. I later thought that the leak had come from a public service source.
The leak completely overshadowed the fact that for the first time in years Australia was projected to record a domestic budget surplus. After five years of grind, it was a significant achievement but its symbolism was completely lost in the bigger story of the budget’s premature disclosure.
The 1980 election and its immediate aftermath would markedly change my relationship with Malcolm Fraser on policy issues. I had retained my enthusiasm for taxation reform involving the introduction of a broad-based indirect tax accompanied by reductions in personal income tax. After the election had been called I reached an understanding with the Prime Minister, which he honoured in full, that neither of us, nor indeed the Deputy Prime Minister, Doug Anthony, would, during the course of the campaign, rule out future taxation reform. I wanted to keep open the option of moving on this issue if the Government were returned.
Hayden exceeded expectations in the campaign but Labor still fell short, with the Government winning with a reduced majority of 23 seats. Bob Hawke entered parliament via the safe Labor seat of Wills, in Victoria. There was a big swing against the Liberal Party in Victoria, although we held up better in New South Wales. Most people attributed this to the effective fear campaign waged by the Government on the capital gains tax issue during the dying days of the campaign. Peter Walsh, who became Finance Minister in the Hawke Government, had raised the possibility of a capital gains tax. Fraser grabbed hold of this with an impressive ferocity, reminding all of us what a formidable campaigner he could be. Walsh should have known that Fraser would hurt Labor with a claim it would tax the family home.
When the remarks were made by Walsh, the Government was struggling in the polls, and although Labor had a huge leeway to make up there was considerable nervousness in the Liberal camp. Property values in Sydney were higher than in any other part of the country, and the capital gains tax issue resonated in the nation’s biggest city more than anywhere else. Ten days out from the election, Fraser rang me at home and said that ‘our polling says that Labor is in a clear winning position'. I had spent most of my time in New South Wales, and told him that the mood in that state was still strong for the Government.
As a measure of Fraser’s nervousness, he rang me on the Tuesday before polling, when I was campaigning for Michael Baume at the Moss Vale Golf Club in his electorate of Macarthur. Fraser told me that he had a number of ministers, mainly Victorians, gathered in his office discussing the state of the campaign. They were canvassing the possibility of the Prime Minister announcing that the Government would boost family allowances if it were returned. I said I thought that