The Money Men by Chris Bowen (superbooks4u .txt) 📕

close to the nirvana of economic profiles, one that would have been impossible without the economic reforms of the 1980s and early 1990s.

Credit for this achievement can be claimed by many people: successive prime ministers and treasurers, sensible trade union leaders, world-class financial regulators, prudent bankers, visionary mining executives, hardworking employees and, to some degree, Lady Luck. But no individual can claim more credit than Paul Keating. The micro-economic reforms of the years 1983–96 were the single most important element in creating an environment conducive to growth. The non-partisan think tank the Grattan Institute has identified the ten economic reforms that have most contributed to Australia’s sustained period of economic growth: eight of them occurred while Keating was treasurer or prime minister. Some were implemented in coordination with Liberal states and territories, some were continued or formalised by the Howard government, but nonetheless, Keating was their original owner.

Keating, of course, could not have done this without a supportive prime minister. The Hawke–Keating partnership ranks alongside those of Bruce–Page and Curtin–Chifley as Australia’s most productive. While the two men eventually, and almost inevitably, parted over leadership tensions, and have since waged an on-again, off-again war over their respective legacies, the years 1983–90 in particular were rich in reform due to their constructive relationship.

Keating was also supported by an unusually talented and forward-thinking Cabinet. Ministers such as Hayden, Button, Beazley, Dawkins, Evans and Ryan could usually be counted on to support his controversial reforms. Certainly Keating had the benefit of working with a much higher calibre of Cabinet than many of his predecessors.

And given Keating was operating in the days of still reasonably high union membership and centralised wage bargaining, a sensible and constructive ACTU was also important to the success of his reform agenda. Under Bill Kelty in particular, the ACTU became an advocate for such reform. A more recalcitrant peak union body would have been a significant handbrake on change.

So Keating had a considerable degree of assistance in developing and implementing his reform program. But without him, it would not have been conceived of or implemented. As talented as many of his Cabinet colleagues were, it is difficult to imagine any of them conceiving similarly sweeping reforms and being able to implement them by sheer force of will and a peerless ability to communicate the rationale for radical change.

Keating’s tenure had its share of problems. He believed passionately that he could avoid a debilitating recession as he attempted to take the steam out of an overheating economy, and he was proven wrong about that. The 1991 recession was deeper than that which saw the defeat of the Fraser government in 1983. However, an objective analysis shows that Keating wanted interest rates raised earlier, and cut earlier, than they were. If his stance had been adopted by the RBA and the rest of the official economic family, it is likely that the recession would have been briefer and less severe than it was. In any event, the recession was severely compounded by financial collapses in Victoria and South Australia for which Keating was in no way responsible. And the RBA would argue that keeping interest rates higher for longer helped to break the back of inflation.

The economic reforms of the Keating treasurership were difficult. They went against the grain of what many saw as the Labor way, and were more radical than the measures contemplated by any previous Liberal government. They were controversial, and often unpopular. But Australia is unquestionably better off for them having been implemented. Paul Keating is therefore clearly entitled to be considered in the very top rank of Australia’s treasurers.

11

PETER HOWARD COSTELLO

A Treasurer in Surplus

Born: August 1957, Melbourne

Treasurer: 11 March 1996 – 3 December 2007

PETER COSTELLO IS the longest-serving treasurer in Australia’s history. His time in the role coincided with an Australian economy that had become very strong five years prior to the election of the Howard government, and that maintained that strength throughout the government’s term, despite international headwinds like the Asian financial crisis. By the end of Costello’s tenure, this growth had led to a historically low unemployment rate of under 5 per cent, a level that had not been reached since the 1970s.

The most important characteristic that Costello brought to the Treasury portfolio was a determination to deliver budget surpluses as an end in themselves, rather than as a means of manipulating economic activity. In this regard, Costello was the first post-Keynesian treasurer, leaving the task of economic stimulus or contraction to monetary policy and insisting that budgetary policy be confined to the drive to surplus. Costello equated a budget surplus with economic strength for the nation, and turned its delivery into a powerful political weapon. He used his rhetorical skills to make the case that surpluses were economically beneficial, and that Liberal governments were inherently superior at delivering them. This is a questionable economic achievement, but it was a lasting political one.

Costello’s other achievements include his handling of the Asian financial crisis of 1997/98, which caused havoc in many regional economies, most notably Indonesia’s. The treasurer, advised by the RBA, had a better understanding of what had caused the problems than did the IMF, and his suggested prescription for Indonesia was superior to that insisted on by the IMF and the Clinton administration in the United States. His actions contributed to improved IMF responses to subsequent financial crises.

Costello’s reforms to prudential regulation were also substantial. Based on recommendations made by the Wallis Inquiry into the financial system in 1997 and then the HIH Royal Commission in 2000, prudential regulation was improved, and this boosted the stability of the financial system. Formalised independence for the RBA was an early Costello initiative, and a positive one. It was an evolution of the substantial independence that the RBA had developed during the Keating period.

Howard and Costello had a complex and competitive relationship. Since the end of their government, their relationship has been marked by squabbling about their personal levels of