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

a much more significant amount. If the loan had been successful, it would have represented 8 per cent of Australia’s gross domestic product and tripled the existing external debt.33 Herein lies the essential folly: that the government was proposing a big increase in our national debt to fund a nebulous and nationalist adventure with no analysis of the costs and benefits to the Australian people.

To Cairns’ credit, when he was acting prime minister, he did try to revoke Connor’s authority to seek such loans. This followed extremely strong advice from the Treasury that the venture was ill-advised. But Connor’s authority was reinstituted on Whitlam’s return to the prime ministership, though with regard to the lesser amount of US$2 billion. Again, having now been appraised of Treasury’s deep concerns, it is extraordinary that Cairns did not insist to Whitlam that the venture cease or at least be paused for proper Cabinet consideration.

It was not Cairns’ failure to stop Connor’s quixotic crusade that would directly cost him his job, however. Rather, it was the relationship between this socialist, unorthodox champion of social change and one of the doyens of the Melbourne establishment. Cairns had been introduced to George Harris, the president of the Carlton Football Club, by no less a figure than Sir Robert Menzies some years before. Harris now wrote to Cairns to ask him if Treasury would facilitate the necessary arrangements if he and business partners were able to source loans for state governments. Cairns appropriately referred the letter to Treasury, which noted that the treasurer had expressed caution about approaches such as this.34 However, when Harris again made contact with Cairns some months later, saying that he had made progress, Cairns did not refer the inquiry to Treasury but entered into direct discussions with Harris. There is some irony in this: Cairns had no confidence in Khemlani and thought him to be highly questionable, whereas he thought Harris had the potential to be a more respectable and reliable conduit of funds.35

On 7 March 1975, Harris left Cairns’ office with a letter from the treasurer that indicated that the government would be prepared to pay him a commission of 2.5 per cent if he secured the stipulated loan. Why Cairns signed this letter remains a mystery. He said for the rest of his life that he had no recollection of signing it, and indeed had declined previous requests from Harris to sign similar letters. He only recalled instructing that a more general letter be drafted, which was not as explicit as the final product. In any event, this is a lesson for all ministers of the dangers of a dysfunctional office and unsatisfactory record keeping. If Cairns had kept to his original and proper instruction that all discussions with Harris should occur through the Treasury, he would not have been in the situation he found himself in.

On 15 April, Harris informed Cairns that he needed yet another letter. Cairns provided him with two, one addressed ‘To whom it may concern’, confirming that Harris was a legitimate representative of the Government of Australia, and another addressed to Harris confirming he would be paid a commission. Cairns never denied signing these letters.

Harris obviously put the letters to good use, as the Treasury’s representative in London soon informed his departmental secretary, Sir Frederick Wheeler, of their existence. Wheeler approached his treasurer, who told him they simply authorised Harris to make inquiries and he did not expect anything to come of it. Perplexed by this answer, Wheeler took the highly unusual, but on balance justified, decision to seek legal advice on the letters’ status from the secretary of the Attorney-General’s Department. He also informed the prime minister of the letters’ existence, and advised him that a formal agency between the government and Harris had been created by their existence.

The End

Cairns was in Europe for a meeting of the OECD when Whitlam was updated by Wheeler. Whitlam instructed him to return urgently. Connor rang Cairns when he was transiting through Perth on the way to Canberra to let him know that Whitlam wanted to ‘get rid of him’ as treasurer.36 On meeting Cairns, Whitlam asked him if had signed the letters of 15 April. Cairns confirmed he had, at which point Whitlam informed him his position as treasurer was untenable. Cairns could not see the problem. He pointed out that he had the authority as treasurer to authorise such an undertaking. However, Whitlam’s view was justified. As much as Connor’s venture was foolish, it had been undertaken with the full knowledge and approval of his prime minister and with the advice and cooperation of his department. Cairns’ dealings with Harris were marked by neither of those things.

Whitlam intended to move Cairns out of the Treasury in a reshuffle sparked by Lance Barnard’s intended resignation from parliament. In a final, desperate act, the deputy prime minister of Australia issued a press release saying he opposed moves ‘to appoint Mr Barnard to a diplomatic post and make several changes to the Ministry’.37 As Strangio notes, the already slim chance Cairns had of surviving as treasurer was now taken away by his own hand. The challenge to the authority of the prime minister by his deputy could only be dealt with by his removal.38 Cairns was forced into a reluctant backdown and accepted the position of minister for the environment in the reshuffle.

But this was just a precursor to the final misstep by Cairns. On 4 June, he categorically denied in parliament that he had signed a letter offering a 2.5 per cent commission—this was, of course, a reference to the letter of 7 March. Cairns’ denial is made all the more extraordinary by the fact that he had received intelligence from journalists that the letter was in the possession of the Liberal Party. Inevitably, the existence of the letter became known, both through the media and through Treasury (now helmed by the new treasurer Bill Hayden), which provided a copy that had come into its possession.

Misleading