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

Fraser had long been excitable about national development in the resources sector and he was eager to embrace government intervention to encourage this. He was on a unity ticket with the Liberal premier of Western Australia, Sir Charles Court, who had long seen the potential of an expansion of minerals capacity. Indeed, Fraser’s commitment to grand schemes was deep and ingrained. In his maiden speech in 1956, he had praised the Snowy Mountains Hydro-Electric Scheme, and had called for the damming of the Ord and Fitzroy Rivers in a massive irrigation scheme to develop Australia’s north, as well as a national communications plan, all engineered by the Commonwealth Government.

In their respective interpretations of the 1979 oil price shock, Howard was right and Fraser was wrong. The shock did not lead to a massive increase in demand for Australian minerals, but the increase in oil prices did lead to significant economic dislocation around the world, which heightened, rather than reduced, the need for prudent policymaking in Australia.

The fiscal strategy outlined by Howard in the 1978 Budget did not last the financial year. By 1979, revenue was deteriorating so rapidly that a mini-Budget was needed. The ‘temporary’ tax surcharge incorporated in the 1978 Budget was made permanent, which led to probably the most famous post-Budget headline of all, and undoubtedly the most famous Illawarra Mercury headline ever. For years afterwards, Labor politicians would wave the edition with the ‘Lies, Lies, Lies’ headline to taunt Howard in parliament.

The 1980, 1981 and 1982 budgets were all brought down in challenging economic environments and against the background of a weakening electoral environment for the government. And it was not only the government’s electoral fortunes that were declining. Fraser’s personal political capital was eroding as well. The 1982 Budget in particular was brought down in the context of a prime minister being challenged for the party leadership.

The 1980 Budget was a historic one for all the wrong reasons. It is the only Budget in Australian history to have been leaked in its entirety, without authorisation. The weekend before it was to be delivered, journalist Laurie Oakes opened his front door to find the entire Budget sitting on his front porch, and he duly reported it. It was later established that the leak had come from Treasury.

This was an election Budget, and there was little disagreement between Fraser and Howard about the budget settings. Outlays grew by almost 14 per cent (3 per cent real growth). With an election to be held that October, there were to be no cuts or tax increases like those that had been included in Howard’s previous budgets. This, however, put more and more pressure on monetary policy. In the days before financial deregulation and reserve bank independence, monetary policy settings got plenty of attention in the budget papers. In 1980 the budget papers were explicit: ‘macro-economic policy, and particularly monetary policy, will need to play an even more important role in maintaining an economic environment which asserts an adequate degree of discipline upon the parties involved’.9

The political strategy in the Budget was apparent to all, with a headline in The Australian a day after its release shouting ‘Hi Ho. It’s off to vote we go’, while the article itself complained that the Budget’s lack of spending cuts made it ‘bland to the point of insipidity’.10

That year also saw Fraser act on his long-held dream of heavy government investment to facilitate a resources boom. Dismissing Howard’s reluctance, he asked the Loans Council, consisting of the Commonwealth and the premiers, for approval of $4.7 billion in borrowings for resources-related infrastructure over ten years. This was more than the amount the Whitlam government had sought to borrow in the Loans Affair, which Fraser had used as the trigger to bring the government down, and it was for a very similar purpose. In the end, the boom didn’t eventuate and the Loans Council’s approval had to be rescinded. Fraser was right to identify the potential of a massive resources boom for the Australian economy. But he was twenty-five years too early, and he was wrong to conclude that massive government investment would be required to make it happen. It was the world market that would spur an investment boom in mining, not a government spending spree.

Fraser was re-elected with a much-reduced but still comfortable majority in October 1980. John Howard told me in 2014, however, that ‘Fraser was shocked by the loss of seats in 1980’, and that afterwards ‘there was no appetite for big reforms’.11 It was this, the Fraser government’s last term, that would see the schism between Fraser and Howard at its greatest. Howard was spending time reflecting and learning, moving towards a bolder, more confident free-market approach. Fraser was becoming more timid and risk-averse.

Following the election, Fraser agreed that there needed to be a holistic and rigorous examination of government expenditure, and he instituted a review of spending, building on the ERC of the Whitlam government. It became known colloquially as ‘the Razor Gang’, a term that sometimes gets exhumed to describe modern-day expenditure review processes. Extraordinarily, Fraser appointed as committee chair not the treasurer but the Liberal deputy leader (and former treasurer) Phillip Lynch. While Howard and Lynch maintained cordial relations, this was more reflective of the fact that Howard had yet to develop the sort of authority that is the hallmark of a successful treasurership.

It is unlikely, however, that the committee would have been any more successful if Howard had been chairing it. It would not be an exaggeration to call the committee, which was announced with much fanfare and amid plenty of publicity, an abject failure. Howard himself referred to it many years later as ‘one of the great damp squibs of the Fraser Government’.12 The committee toyed with major privatisations such as selling Qantas, Trans Australia Airlines (TAA, the government-owned domestic carrier) and Telecom, but shied away from recommending any of these to Cabinet. Many of the savings