The early weeks in opposition were very hard for me because I had to beat off claims that I had misled the public about the true state of the deficit. It was right on the eve of the election that I was given a figure of $9.6 billion as the likely deficit for the following year, which was much higher than the stab-in-the-dark figure I had casually mentioned to some journalists. Moreover, the $9.6 billion was only a starting point, and would be reduced in the normal budget process. This did not stop Bob Hawke and Paul Keating, his new Treasurer, making a huge issue of it. This was their honeymoon; the press swallowed their lines and I took quite a shellacking.
Andrew Peacock and I were rivals for the leadership of the Liberal Party for some years, but this did not, as many have argued, completely paralyse the Liberal Party in opposition. Rivalry between key figures in political parties is commonplace. From 1986 onwards, the rivalry between Keating and Hawke within the governing Labor Party was barely disguised, periodically spilling into the public arena. Nonetheless, Andrew’s and my rivalry was real, both as personalities and on policy issues.
In the culture of the Liberal Party, Andrew and I were almost born to be rivals. We were only a few months apart in age. When it seemed, to many people, to matter a lot more, he came from Melbourne and I came from Sydney. He had taken over the seat of Kooyong from Sir Robert Menzies, the great hero of our party. We were of different personalities and styles. Andrew’s urbanity and very considerable personal charm had won him early notice as a future leader of the Liberal Party. He had been a very effective minister in the McMahon Government, and had won a lot of deserved praise for the relationships he established with key figures in the newly independent Papua New Guinea. It was so easy, given our contrasting styles and personalities, for commentators to paint him as emblematic of the progressive side of the Liberal Party, and me as a dull, dogged conservative.
I respected Andrew Peacock’s diplomatic and public relations skills, but I never thought that he had deeply held policy views on more important economic issues. That influenced my attitude towards him, especially after he became party leader.
There was fault on both sides. I don’t think Andrew ever understood the depth of feeling about his resignation in 1981 and the damage that many of his colleagues believe it inflicted on the Fraser Government. As for me, I don’t think I fully understood the extent to which my continuing ambition to be leader of the Liberal Party was so apparent to colleagues, and others, from the time that Peacock defeated me for the leadership after the 1983 election.
I suspect that the last thing Andrew Peacock wanted in early opposition days was an intense debate about the philosophical direction of the Liberal Party on economic policy, especially industrial relations. Yet that is what he got, because of my determination that the Coalition should take a more consistent pro-market approach. It was, even more importantly, an unavoidable debate because the Hawke Government threw off its old Labor garb and, on issues such as financial deregulation, surprised many by going further than would ever have been expected from a Labor Government.
I never lost my ambition to lead but decided to put it on hold, and resolved to do everything I could to argue the policy positions which I held. I would perform as well as I could as deputy leader and essentially through the prism of my strongly held economic opinions.
Having been frustrated by Fraser’s opposition to certain economic reforms in government, such as taxation, I was determined not to go quietly in opposition. When the opportunity presented itself, I took a strong market-centred economic position. Sometimes this was in advance of the party’s position and annoyed Andrew Peacock and others who, for a combination of political and other reasons, might have thought that a quieter approach was appropriate.
The quiet approach was not really an option. The dynamic had changed quite rapidly since the election of the Hawke Government. The Liberal Party was under a double pressure to have a clear position on economic issues. Not only did altered world economic circumstances require different responses, but the new ALP Government was not behaving like the Whitlam Government, or indeed consistent with the commitments it had made in opposition. It had assumed the mantle of economic responsibility. This put real heat on the opposition.
Many of the Coalition’s traditional supporters in the business community began to like what they saw of the new Government, particularly when it floated the dollar and decided to admit foreign banks. Comments such as ‘the best free enterprise government we’ve had’ began to be uttered at boardroom lunches attended by opposition spokesmen. The Liberal and National parties ran the risk of being left behind if the Coalition did not sharpen its thinking on some key economic issues.
In some cases this meant agreeing strongly with what the Hawke Government had announced. In other cases it involved adopting a new policy position likely to win business support, and which the ALP would be unable to match. This made my campaign to change our industrial relations policy so important. Here, I felt, was a policy change which would win wide, but by no means unanimous, business support and which Labor, with its trade union base, could never match.
The farmers, the miners and, crucially, small business would support a new industrial relations system. Many manufacturers, however, were still wedded to the old centralised system. They felt they could live with it. In any event I was told they could ‘talk to Hawke’ if things got out of hand. The corporate state, Australian-style, was already in full bloom.
My aggressive push for policy change aggravated some colleagues. They didn’t share my sense of urgency about the need for policy revision; they thought that some of my prescriptions were too edgy, and I thought they were altogether too complacent about the solidity of our political base. A party needs more votes than its base can deliver so as to win an election, but unless its base is energised, as distinct from just mildly supportive, it has no hope of victory. Big business had been partly mesmerised by Hawke, so I saw the preservation of our small-business base as absolutely critical to our longer-term hopes of revival. Internally difficult though it was, I believed that we had to confront hard policy choices early on.
I loudly supported the Hawke Government when the dollar was floated and exchange controls abolished in December 1983. This was overwhelmingly the right policy response for the future benefit of the Australian economy.
On the morning of the day the decision was taken, the Treasurer announced the closure of our foreign exchange markets, a clear signal that the Government intended to float the dollar. That morning, Liam Bathgate, Doug Anthony’s chief of staff, showed me a press statement Doug proposed issuing, strongly attacking the floating of the Australian dollar. Liam knew that Doug’s views and mine were different, and he did not want public disagreement between us. I immediately raised the matter with Doug and we had a heated debate, totally disagreeing on the desirability of the float. In the end he acceded to my view and did not issue the statement. Floating the dollar was the ‘big bang’ of financial deregulation. Our differences on the issue symbolised a deep divide in Coalition thinking on economic policy. Fraser later attacked the float.
The Coalition’s clear support for such a huge policy decision was critical to winning acceptance for the change in the general community. It meant that as time went by and fluctuations in the value of the dollar inevitably occurred, hurting some and rewarding others, a cheap fear campaign blaming the float could not have been credibly mounted. In sharp contrast, such unconditional bipartisan support on a big policy issue was never forthcoming from the ALP during the years of the Howard Government.
Floating the dollar had more influence than any other decision taken by either the Hawke or Keating governments. Although Paul Keating is often given the credit for floating the dollar, his timidity on the issue was overridden by the Prime Minister, with the strong support of the governor of the Reserve Bank, Bob Johnson.
In its first budget the Hawke Government brought in an assets test for the payment of the aged pension. I thought this was good policy, although politically unpopular. I was absent on a brief holiday with my family in the snowfields when the shadow cabinet discussed the Coalition’s attitude to the proposal. The following