- 11 hours ago
Category
📺
TVTranscript
00:00my government has not agreed to any missile testing they are the focus of evil in the modern
00:17world they welcome you all to the nation's capital in this historic national taxation
00:23summit you've really induced a depression haven't you
00:27you know you're a banana republic the ban on uranium exports to france has failed
00:33has failed to serve its original purpose
00:36i simply want to say that the contribution that paul keating has made to lifting
00:55the level of community debate both before and at this summit has been without parallel and without
01:03equal and i want to say personally that in the process that we've gone through from the beginning
01:11of this exercise and up to and through the summit itself that no prime minister could have asked
01:19for better closer more effective cooperation than i have enjoyed with paul keating thank you paul
01:26by 1985 bob hawk and paul keating had forged an immensely powerful relationship but behind the
01:36scenes it was a different story hawk's prime ministership had been weakened by family tragedy
01:41and keating was scathing of his leadership from the end of 1984 through to really you know early 1988
01:49it was a period when when the government's the cabinet made the orders of the day made the pace
02:01and and and not bob and where the rest of us had to provide the leadership
02:08i was very peeved about the tax summit idea because i could think of nothing worse than making tax policy
02:24in public nothing worse it was the antithesis of political efficiency
02:29it was during the 1984 election campaign that bob hawk gave an off-the-cuff commitment to tax reform
02:44instead of putting a policy he announced a summit
02:47while in a sense it may have appeared to have uh uh the um a sort of knee-jerk reaction to something
02:55that happened on a particular program during election and there was a sense of that
02:58it still reflected my basic philosophy about uh how it made sense to go about uh making fundamental changes
03:11we were stuck with that uh because of the you know the lack of discipline which had been displayed
03:20by bob in that time during the campaign period that is it was suggested to him and he picked it up
03:25so we were stuck with it
03:27white
03:29sun
03:30evil
03:32evil
03:33evil
03:34evil
03:36evil
03:37evil
03:38evil
03:39evil
03:41evil
03:43evil
03:46for years australia's tax system had been a disgrace
03:47the main burden fell on ordinary workers while the rich sank their tax to the bottom of the harbour
03:54in canberra the ramshackle tax system had constantly frustrated treasury officials
03:59now their big chance for reform had come
04:02they worked night and day preparing options for keating to study over christmas 1984
04:09the reform treasury most wanted
04:11was dynamite, a huge new consumption tax.
04:15It was audacious in its breadth and depth,
04:20because you must remember, this wasn't simply
04:22a massive consumption tax reform exercise.
04:24It was also a massive income tax reform exercise.
04:28And as such, by far, the biggest single reform
04:31that we'd had in the history of the Federation.
04:33The bureaucracy was telling us that the Liberals
04:36had left the direct side tax system in a state of haemorrhage,
04:42that it was almost beyond repair,
04:45and that we would be better to try and collect income
04:47by expenditure, as the Europeans had done.
04:52And that's essentially where I think
04:54the consumption tax idea came from.
04:57Keating poured through the options
04:59and became committed to a tax the Labor Party had always opposed.
05:03Paul is a passionate proselytiser.
05:05And sometimes I think that passion has led him into self-delusion.
05:13His strength is that he is such a brilliant advocate.
05:16His weakness is that his powerful convictions
05:21can lead him into error.
05:23He profoundly believed, profoundly believed,
05:27in the goods and services tax, the consumption tax.
05:31He was almost obsessed by it,
05:33to an extent that worried a lot of people around him.
05:42We decided jointly to proceed with it in January of 1985.
05:47And his office and my office met at the lodge
05:51with the relevant officers from the Prime Minister's Department
05:54and the Treasury.
05:55They actually were a bureaucratic group.
05:57They produced a piece of paper between them.
05:59It was a joint effort.
06:01Cork was cautiously in favour.
06:05But that was an attitude which was to be repeated continually.
06:10There would be cautious support, followed by some backsliding,
06:17followed by support.
06:20But initially we came away from that meeting at the lodge,
06:26feeling that Hawke was going to support this package.
06:32What was worth doing was testing it.
06:35I mean, I was not prepared to take the view
06:38that some of my advisers and a whole lot of other people were saying,
06:40kill it.
06:41There was enough in the proposal
06:44to warrant detailed examination.
06:49Keating and Treasury officials bunkered down
06:53in a little-used training room on the ground floor of Treasury,
06:57refining the grand plan for tax reform.
07:00It was a race against time.
07:02The summit was set for early July 1985.
07:06People virtually lived there.
07:08People slept there.
07:10People worked through the night there.
07:12People brought their children in and put them under the desk there.
07:15It was, in my 20 years or so of a Treasury career,
07:21the most massive bureaucratic effort that I've ever seen.
07:25While Keating and Treasury were fully immersed in tax reform,
07:32Hawke pursued his own passion.
07:34He took off overseas.
07:36By early 1985, he had already visited 17 countries.
07:40It was a time when fears of nuclear holocaust
07:43and east-west bitterness dominated world politics.
07:46I've signed legislation that will outlaw Russia forever.
07:52We begin bombing in five minutes.
07:54Experts now believe that fully one-third of the Soviet Union's
08:05theater nuclear missiles are deployed in the Soviet Far East.
08:08Such a strong military capability has far-reaching implications.
08:15They are the focus of evil in the modern world.
08:26Hawke's trip blew up in his face over one of the most deadly missiles
08:30in the US arsenal, the MX.
08:33President Reagan has dubbed the MX missile the Peacemaker.
08:38It's the most fearsome nuclear missile yet produced,
08:41armed with ten nuclear warheads.
08:43It's a strong war.
08:44What is all that you can?
08:46It's a strong war.
08:47We begin with Mr. Hawke and a wave of opinion right across the country,
08:54which is opposed to his government's decision to involve Australia
08:58in America's MX nuclear missile program.
09:01It was put to me that it would be very difficult
09:05and very significantly more expensive
09:08to undertake the testing of the MX
09:13without the capacity for American aircraft
09:19to have access to our airfields
09:22for the purpose of monitoring splashdown.
09:27When the story broke in February 1985,
09:31Hawke had just touched down in Europe.
09:34The Prime Minister found himself swamped by a crisis at home.
09:37We got to Brussels and, of course, time there was taken up
09:45in very large measure by calls back to Australia
09:48and to Tokyo where Richardson was.
09:51Everyone was trying to get a hold of me to tell me that disasters were occurring.
09:56I can remember Beazley ringing me.
09:57There were all sorts of people very worried at the time.
10:00There was a general conveying that things were a bit unhappy,
10:04one might say tempestuous, in the caucus.
10:07From Tokyo, right-wing numbers man Graham Richardson delivered the message very clearly.
10:12Back off.
10:13I don't think it was a matter of debate.
10:18To try and win in the caucus on the MX would have been just about impossible.
10:23I mean, you might have done it, but I doubt it.
10:28And in any event, it's a hell of a risk over nothing.
10:32Also, if it wasn't worth the fight, why have it?
10:36So I just said, well, I think you're going on the wrong tram, you'd better get off it.
10:41Paul Keating took time out from tax reform to give the opposite advice.
10:46So I said to him, look, you haven't asked me for my view,
10:49but I'm ready to tell you he was in Belgium or somewhere.
10:53He'd spoken to everyone else but not me, because he knew what I'd say, I suppose.
10:58And I said to him, look, you know, for what it's worth,
11:01I think you should, you know, you should agree to go along and test this thing and get it out of the way.
11:07Of course, I took virtually no notice of this,
11:10because really, Paul Keating was not across foreign affairs.
11:22Hawke went on to Washington dreading international humiliation.
11:26He had to ask the Americans to release him from his undertaking.
11:30What Hawke had going for him was an extremely close relationship with the Americans.
11:35I guess I first got working with him when I was vice president,
11:40and he was not a protocol man.
11:42I think he didn't kind of make me feel, hey, you're not a chief of state,
11:46therefore you get less time.
11:48It was the other way around.
11:49He was very friendly.
11:51I remember he was coming to our house and actually singing,
11:54had a couple of beers with me and had a few other people around there,
11:58and we were all singing Waltzing Matilda and me off key,
12:01and his rendition was not much better.
12:04I liked him.
12:05I think he liked me.
12:07We had known each other back in the days when I was president of the Bechtel companies.
12:15We did engineering and construction work in Australia, still do.
12:19It was obviously for me a very significant advantage when I became prime minister to have as a personal
12:25friend the United States Secretary of State.
12:28Mr Hawke had his problems when he arrived for talks with Secretary of State George Shultz,
12:33cooperate with the testing of the MX missile and be damned by his own party,
12:38or refuse and face criticism for letting down a major ally.
12:42But during three hours of discussions, a compromise was reached.
12:45There are a variety of ways to monitor an MX test,
12:49and that the monitoring effort need not involve the provision of Australian support.
12:53The decision has been made by the US to conduct the MS tests without the use of Australian support arrangements.
13:03You had a situation where George Shultz was in a position where his friend Bob Hawke was in
13:11obvious political difficulty, embarrassment, and I was indebted to my friend George Shultz for the
13:17constructive and helpful way in which he, with me, handled that issue.
13:21It wasn't the easiest position that either of us have ever been in.
13:25What annoyed me a little bit in Washington was to be told there that in fact, with very little
13:34difficulty, the monitoring of the splashdown could be done by their ships.
13:41I don't know whether it was misleading.
13:44There has never, to my knowledge, been any thought of misleading Australia.
13:50That would not be an intelligent thing for the United States to do.
13:55Because you can't really get away with it.
14:00And it's not desirable between friends and allies, as we have been for so long.
14:07And in the end, as I say, I had to deal with the problem as it existed.
14:13And I had a total commitment to the alliance relationship, to the maintenance of the joint
14:18facilities, and I wasn't going to create additional difficulties by questioning whether there had been some
14:28deliberate misleading.
14:29And he pulled off what, in the circumstances, can only be described as a miracle, to actually,
14:36without doing any substantial damage to our standing in relationship with the United States,
14:42he got George Shultz, against all the advice that George Shultz was receiving, to let us off the hook.
14:49We didn't want to create a problem, and we didn't want to risk for that testing,
14:56which was important, but it shouldn't become the baby that went down with the dirty dishwater.
15:05And the joint facilities were far more important.
15:21The US bases, or joint facilities in Australia, were always the real issue for Washington and Canberra.
15:27The fear was the furor over MX would be used to force the closure of the bases,
15:33permanently damaging the Australia-US alliance.
15:36Resolving MX was crucial to saving the joint facilities.
15:40Now, I think it was very important, because what that did was to allow us time
15:48to work through the alliance issues with people in the Labor Party, and with a very important
15:55public out there that had been over the years disenchanted with features of the alliance,
16:01and that ultimately let us convince them that the joint facilities served absolutely critical,
16:07important international purposes, and that they should be sustained.
16:12Now, I don't think it would have been possible to do that,
16:15in the context of having to really bat and hatch us down on MX.
16:20After all the drama and the threats and so on, when I came back to Australia from the trip and
16:31went before the caucus and explained what had happened, we got something which was really quite
16:37remarkable, a unanimous resolution which contained support for the alliance and the joint facilities.
16:48And I regarded that as very significant.
16:51One of the things that did happen after 1983 was that the Hawke government moved
17:00both domestic policy and foreign policy to the right, if you like. It, in a sense,
17:08captured the middle ground domestically, but certainly, as I said, Mr. Hawke put great
17:17store by the relationship, by maintaining the alliance relationship with the United States.
17:22When you're dealing from common ground, uh, it's not too, it's not too hard. It's not too hard.
17:31It got complicated back in the Vietnam War days. But, um, I, uh, I, I,
17:39so I think there were some divisions that were a little tougher back then, but not anymore.
17:42Bob Hawke had pulled off the big prize of cementing the Australia-US alliance by calming anti-US
17:51sentiment inside the Labor Party. The Treasurer and the media, however, had decided that the
17:56MX crisis had undermined Hawke. I was filling in at that time, in terms of some authority in the place,
18:03the void which Bob had created during this down period. So I kept pressing on to make the,
18:09continue to make the government look like a government that had policies and was pushing
18:14the things through. And I thought doing him a favour because the government looked like it was
18:20really doing, in charge of things and doing things. And it was. What Paul Keating was doing
18:26was driving his tax cart, as he described his campaign for tax reform, into the middle of vast
18:32community opposition, particularly from the Labor Party. The consumption tax was not acceptable
18:45to the ordinary members of the party. For my part, I must say that I found the notion of a tax on bread,
18:56meat, fruit and vegetables, milk and so on, totally unacceptable. It was a complete anathema
19:07to everything that I understood that the Labor Party stood for.
19:16Keating was in desperate need of Hawke's support. He was forever upstairs,
19:20arm-twisting the Prime Minister about the merits of option C, as the consumption tax package was known.
19:26Hawke's staff were telling their boss to drop it.
19:28I was one of the chief villains in the piece, from Paul's perspective. There were meetings where
19:35I simply cautioned and said, look, for goodness sake, if you check this and that out.
19:38So there was this vacillation on again, off again. We'd have a meeting, it would be decided,
19:44and then two weeks later, it would be all off. And then we'd have another meeting, it'd be all on.
19:49Now the meeting would be all off. And this went on, it probably, it was like a tennis match. You know,
19:54you could watch the ball going back and forwards over the net, and it probably happens six or eight times.
20:00You'd go in there and you'd played the grand final, and you'd got him on board,
20:05only to find out, no, we've got to go back next Saturday and play the grand final again.
20:10Bob! Bob! Those documents have just arrived by courier!
20:14Ah, not now, Paul.
20:17It's the X-rays of your spine, Bob.
20:19Well, why didn't you say so? Shut the door!
20:24Ah, I knew it, Paul. Nothing wrong with my backbone, no matter what Senator Walsh says.
20:29Isn't the human body wonderful? Release it with the press, will ya?
20:34Take these back to the museum, and tell them their dinosaur ought to go into politics.
20:38At the time that option C was being discussed in 1985, the term, derogatory term, about Hawke,
20:48as old jellyback first appeared, it's been widely attributed to me.
20:53And I don't particularly mind it being attributed to me, but I didn't invent it.
20:58The term jellyback has been used to describe a view of Hawke, and indeed Keating wasn't averse to using
21:09that way before Peter Walsh ever came on the scene and used it.
21:12As near as I can be certain, it was Peter Walsh's phrase.
21:15But it was the mood, the important thing was it was the mood of that ERC group.
21:25It was their view, that Bob was shifting as the issues had come along.
21:33But it's not an expression which I had used ever in any other context.
21:38It was never my sort of expression. It was one of the others, but anyway, it didn't matter.
21:41I mean, Hawke's staff at the time fitted me up with it, the then Manchu court, as I call them.
21:52Yes, I got a lot of reports back of shit that was being spread.
22:01But I think people will tell you that throughout my life I've tended to be able to let that sort of thing go.
22:09Bob Hawke was very much preoccupied with non-party issues.
22:15He'd had the difficulties with his daughter, particularly.
22:19That created a lot of tension between Keating and Hawke.
22:22I think at the time Keating didn't fully understand the pressures Hawke was under.
22:26I've acknowledged myself the fact that in the period, the latter part of 1984,
22:31in the period covering the question of what we would do about a consumption tax or not,
22:39that I had other pressures on my mind.
22:41But that didn't prevent me in regard to that issue of being able to make,
22:44I think, appropriate judgements.
22:55By May 1985, Canberra was bleak and dismal.
22:59Winter was looming and with it the tax summit.
23:02Hawke, Keating and their advisers had been locked away, grappling with tax reform.
23:07Now it was Cabinet's turn to confront Keating's option C.
23:12For two and a half days, ministers were held prisoner while Paul Keating hammered them.
23:16It was a meeting in which he charmed and cajoled and harassed and bullied his way through the assembled ranks.
23:24It was a classic example of Paul at his persuasive best.
23:28He used rationality, he used his intellect, he used his charm, he used his humour,
23:38he used his anger, he used his theatrics, he used his spleen, he used his withering language.
23:44All of them turn and turn about.
23:48And it was the most remarkable performance I've ever seen in my years inside a cabinet room.
24:01It was a gruelling meeting, not only because of the two and a half days that that meeting lasted,
24:06but because of the complexity of the material, the density of it.
24:10The requirement for intense concentration on figures and graphs and formulas and highly technical material
24:20that a number of the ministers would not deal with in a day-to-day sense and found extraordinarily difficult.
24:25I mean, you needed interpretation a lot of the time.
24:29I was across the detail of this as I've been across few other things.
24:32I was across all the theoretical basis of these tax changes and I was across all the technical aspects.
24:41Hawke's role was unclear, really.
24:46He chaired the meeting, but it was hard to get a feeling as to where Hawke wanted to end up.
24:54As far as tax reform went, it was clear where he wanted to end up politically,
24:58and that was with a consensus package. But the consensus package probably wasn't going to contain
25:04a lot of major tax reform in it. So I suppose Hawke's role really was the political management
25:13of it. Keating was the technical tax reform expert.
25:20You've got to blend all those considerations into your thinking and say, now, what is the right
25:26thing? What's the best thing in terms of the country? What's the best thing in terms of the
25:31interests of the government? And if you've locked yourself in early in the stage to saying,
25:36this is, you know, what it must be, then you're a bloody idiot. And that I ain't.
25:42For me, the breakthrough, I think, came about 1am on the Monday morning when Gareth Evans threw down
25:54his papers, took off his glasses and said, I've listened to this argument for two days and I've
26:01been waiting for the hole to be punched in it and none of you have been able to punch a hole in it.
26:06It was genuine euphoria. This was a huge national debate on a reform that had eluded governments,
26:24successive governments for decades. And now we seemed on the precipice of achieving it.
26:32We then spent a month literally on election campaign, much more intensely than we had been
26:39at the 1984 election campaign. Going around the country with a plane load of journalists,
26:45it was almost like Keating was the Prime Minister. I remember at the time Rod Cameron was taking
26:50research and he would come back with numbers saying about 10 per cent of people agreed and 90 per cent didn't.
26:55We would sort of sit around and have these sessions up in the cabinet room upstairs where Rod would come
27:00and report and he'd be thumbing through this research which was pretty disastrous.
27:05I think the results were fairly unequivocal and these were publicised to, or they were disseminated
27:13within the top echelons of the party fairly widely. I think if Labor needed any convincing
27:22that it should adopt a basically anti-consumption tax position, then it got that message pretty
27:29pretty forcefully in 1985. I mean in the end it was just an impossible task. You couldn't in one month
27:37convince people from complete scratch that a concept like this was worthwhile doing.
27:43Ladies and gentlemen, it is with sincere pleasure that I welcome you all to the nation's capital
27:52to take part in this historic National Taxation Summit conference.
27:56By the time of the summit, opposition was total.
28:00I'm deeply concerned by the proposal to extend the broad-based consumption tax to food.
28:06The Business Council does not support approaches A, B or C.
28:12We've heard a lot about recently about Mr Keating's so-called tax reform cart and I think that's a
28:19very appropriate phrase because he has put the cart before the horse.
28:23Farmers were here to fight fuel costs, capital gains tax, the consumption tax.
28:31We will do all those with our power to reduce the impact of the bus upon you and particularly in the fuel area.
28:50By day three of the summit, Bob Hawke was unnerved, jolted into action.
28:55The Prime Minister decided to dump option C and Keating with it.
29:01Simon and I were staying at the International Hotel along with the other members of the executive.
29:07Bob, on his way back from some place, I think it was the Sports Institute, stopped in and saw us.
29:15We said to Bob, where's Paul, what's happening?
29:20Bob said, he'll be talking to him later, but he just wanted to know what our position was.
29:26I said, well, you know what our position is, we can't accept option C.
29:30I was home probably about 10 o'clock, sitting down to a meal, when I got a call from
29:38a journalist from the Sydney Morning Herald, John Short, who said Geoff Walsh, the Prime Minister's
29:47Press Secretary, is briefing the gallery that a deal has been done, that the broad-based consumption
29:53tax has been jettisoned, and he's done a deal for a modest extension of the existing indirect tax base.
30:02I told Shorty he had to be misinformed, that if there was any such deal, the Treasurer would have
30:12been sure to have heard of it, and I left him just 45 minutes earlier, and I simply couldn't believe it.
30:21But it was true. By the next morning, option C was dead.
30:28I want to allay any suspicions that the Treasurer has resigned, he's just running late.
30:32Paul, I just told them I wanted to allay any suspicions that you'd resign, you were just running late.
30:52Ladies and gentlemen, it is not possible to say that there is broad community support
31:00for what was put as the preferred government option. We acknowledge that.
31:04It's a bit like Ben Hur's, we've crossed the line with one wheel off.
31:12At a press conference afterwards, Keating was gracious in defeat, concealing intense bitterness.
31:18No Treasurer, the best intentions in the world, can get a reform proposal like this through a cabinet
31:25in this country without the support of the Prime Minister. I'm pleased to say in the time I've been
31:30Treasurer, that support has been unqualified and I appreciate it very much and like to take this
31:36public opportunity in front of you people who've written so much about our relations and this issue,
31:41just to say that support's always been there and I've always appreciated it.
31:44I did say things which were kind to Bob at that time, even though he had abandoned me, because
31:50there was no point in me trying to beat up on him in the state he was in and the mood he was in.
31:55So I had to make the best of it. I mean, my job then was to keep the government together,
32:03to keep the show on the road, to look for the next practical opportunity to get changes through.
32:08When I exercised the judgment that not only I had the right to, but the responsibility to exercise
32:17as Prime Minister, he was terribly upset about it and he said some harsh things. I mean,
32:24he's given to invective and lashing out. On the following week, I had to go in and interrupt
32:34a meeting that was in the Prime Minister's office, which I didn't know what it was about. I wasn't
32:37part of it. And Paul turned on me and turned around and hawked and said, if you had any
32:42fucking guts, you'd sack this bastard. And you're gutless and it was that sort of stuff.
32:48Keating got on with the job, nevertheless. On September 19, he unveiled a series of massive
32:54changes to the tax system, representing one of the biggest reforms in a decade of labour.
33:00They included the fringe benefits tax, cutting business entertainment rorts,
33:04a capital gains tax, dividend imputation, and a cut in the top income tax rate from 60 to 49%.
33:12Keating was triumphant and angry, believing Hawke had put obstacles in his way,
33:17especially on the weekend the Ministry met to endorse the final tax changes.
33:23Bob started the day by some gratuitous attacks upon the proposals.
33:31I then left to fly to Papua New Guinea for some celebration, some national celebration there.
33:38And I had to get the package through without his support over the ensuing two days.
33:43The Keating analysis is a pathetic rewriting of history. The fact is, of course, that after the summit,
33:51I encouraged the Treasurer to go ahead with the alternative approaches and not only gave him my personal
34:04encouragement, but ensured that all the resources of my department and my economists were available and involved.
34:14That was the first time that Bob and I, that was the first one I put back in the memory.
34:21The first one I really didn't forgive him for.
34:26And I am proud indeed to be the leader of a team.
34:29Keating by now was contemptuous of Hawke's leadership, believing his consensus style concealed a fear of reform.
34:37I always thought a leader's job was to, was to, was to, was to nourish the forces,
34:43make the big judgments, strike out with the big directions and follow them through.
34:48Bob is a far more discursive, till the soil, find out what's growing, see who wants to do this, this sort of thing.
34:57What I understand is about the, the whole approach to running a government that I, that I've had.
35:06I mean, I've, with all my ministers, and particularly as I see them develop in their capacity and
35:14a sense of authority, and that's, that's what I want to see. I mean, I say, go for your life.
35:22Now, obviously, Keating grew in, in knowledge and confidence, uh, in the job, and it was appropriate
35:32that, that he'd be allowed to go ahead and do it, just as I did with other ministers.
35:37He, uh, was surrounded, uh, fortunately, by, I think, an extremely, uh, dedicated and pretty
35:44talented group of ministers who all had, I think, uh, pretty clear ideas about what they wanted to do.
35:52And he was able to manage that, uh, process, uh, I think very well and, uh, to pretty good effect
35:58in terms of both policy outcomes and in terms of the standing of the government in the community.
36:06In early 1986, Australians thought the good life would go on forever. The lucky country was a national
36:18catchphrase that epitomised how we saw ourselves. But an economic crisis was coming that would destroy
36:24national complacency and force a new view of Australia. Australia had to face up to being
36:30poorer. No longer would the old Hawke style of popular consensus be enough. A new, tougher style
36:37of government would be needed.
36:39Fortitude, uh, consistent, uh, Cecilian spirit is not one of, uh, Hawke's strong attributes. He's got many
36:46attributes, uh, but that's not one of them, uh, taking a consistent, uh, unpopular position.
36:52The politics of optimism was very much a strong hand and he ran with that from 83 through 85. In 1986,
37:01with the terms of trade crisis, we hit the rocks and that called for a very different style of government.
37:07It came to a head on May 13th, 1986, in a strange little ritual performed on the dot of 1130.
37:14At the third stroke, it will be 1130 precisely.
37:25The Bureau of Statistics figures on trade for the month before would slash through national complacency.
37:32When I saw the April, uh, balance of payments, uh, figure, uh, my reaction was we're stuffed.
37:39The April current account figures caught everybody by surprise, not least the government. Just when
37:47it thought the balance was about to improve, it took a nosedive. The deficit for April reached $1476
37:53million, a rise of $434 million in a month. The terms of trade problem that we became so aware of in,
38:02in the earlier part of 86, uh, had in fact, uh, begun in 1985. Uh, now with the benefit of hindsight,
38:10if, uh, we'd been able to avoid a tax summit and get tax reform off the agenda earlier, then possibly,
38:17uh, we would have picked up, uh, that development earlier and taken remedial action earlier.
38:25First, the economy and the dollar. No matter how you interpret yesterday's figures on Australia's
38:30balance of trade, it's bad news for the federal government. Something had to be done and quickly.
38:35The day after the figure was released, Paul Keating had a breakfast commitment in the electorate of
38:41Labor backbencher, Neil O'Keefe. If Australians had been shocked the day before, they had experienced
38:48nothing yet. When the car pulled up, I went out to meet him on the steps and, uh, there were,
38:55there was some local press there taking photos. And as we were coming up the steps, Paul said to me,
39:02look, I'm going to have to change the, uh, the script for the day a bit. I know there are some
39:06things you want me to talk about and explain. I'll do that, but I'm going to have to broaden the
39:11context a bit. And I said, oh, that's okay. They're, they're keen to learn, keen to hear. She'll be fine.
39:17And, uh, little did I know what, what was going to unfold.
39:21This place, I'm sure it's quite a nice function centre, but, you know, it had all the dark stained
39:27timber. It had the, you know, the, uh, had the dark maroon velvet curtains. It had the maroon flock
39:34wallpaper. It had the very, very heavy sort of, you know, somberness of, uh, those sort of mock
39:40furnishings you're supposed to imply. And in amongst this is all these business people hoeing into their
39:45breakfast, um, while, you know, Paul was making the speech. A phone was found for Keating to speak
39:52to Sydney radio personality John Laws about the crisis Australia was facing. There was only one
39:58phone he could use. People in power prefer John Laws. We must let Australians know truthfully, honestly,
40:08earnestly, just what sort of an international hole Australia is in. There's Paul having a conversation
40:16with Laws of immense national significance, um, while there's trays of, trays of sort of croissants
40:23and coffee and orange juice and whatever else they were serving, wafting a couple of feet, uh,
40:28to the right of us. Incredibly distracting. There was this flapping kitchen door. There were these smells
40:33coming up from the kitchen. There were people yelling in the kitchen. There was just a general sense
40:37of noise and chaos around. So I'm standing in this kitchen, and there was a woman there. It was quite
40:42amusing, really. She was irate. She had all the dishes to wash, and she was bundling them up and
40:47looking at me daggers while I'm on the telephone, standing doing this interview with Laws.
40:53But I did it. And, and, um, and I felt I sort of had to complete it because she was so,
41:03obviously so put out about the fact I was in a way. Once you slow the growth under three percent,
41:08unemployment starts to rise again. And then, of course,
41:11you've really induced a depression, haven't you? Then you're gone. You know, you're a banana republic.
41:20I, of course, was in Canberra. Paul was in Melbourne. The interview on Laws was broadcast
41:26in Sydney. So, you know, I didn't hear it. And, uh, but very shortly thereafter, journalists
41:32began to ring me and say that the Treasurer had said that Australia might become a banana and bummer.
41:37And I said, oh, no, I don't think that the Treasurer would have said that.
41:44The Prime Minister travelling in Asia was also shocked by Keating's candour. Hawke's staff,
41:49always aware of Keating's ambition to run the country, thought he was taking too much control.
41:55Our advice was essentially, you know, to get onto Paul and to get him to pull his head in.
42:00He didn't act on that. He acted to find out what was happening, but he didn't do anything definitive.
42:05Well, from the point of view of an ambassador, it was a nightmare.
42:10The press was buzzing only with concerns about events at home.
42:18There were impromptu press conferences, messages coming from all over the place.
42:24Uh, the Prime Minister having to respond to questions and comments, uh, at the same time,
42:31as, as he had a tightly structured, busy program of, uh, deep discussions with, uh, the main leaders
42:41of the most populous country in the world.
42:43Back home, Keating, ignoring Hawke, pushed the issue harder. He took it upon himself to change
42:51government policy. Striking out for a deal that would keep wages down, he unilaterally announced a meeting.
42:57Well, thanks for, uh,
42:58Effectively, a mini-summit to be attended by all governments, employers and unions,
43:03it will take place within the next couple of weeks.
43:05It was coming out loud and clear. At least three, uh, gallery chiefs were in the process of
43:14rescheduling their activities and getting on the first plane out of China back to Australia.
43:19On the basis, that's where it was all happening. And that's where the, you know, political issues
43:24were. And that's where, uh, it was happening. That's where the leadership struggle was. And
43:29that Hawke was almost irrelevant, and was behaving in a way that was almost irrelevant.
43:39So, essentially, I put it to him in the harshest terms possible, that, uh, Paul had been sitting
43:46underneath him for the last year, pointing upwards and saying, that silly, so-and-so thinks he runs
43:51the fucking country when it's run from this office. And I said, you've done nothing about it,
43:57and now it's got to this. And you've got at least three gallery heads in the process of booking to
44:03go back. And if that happens, you can forget it, you're stuffed. And you've just got to do something
44:08about it. Finally, Hawke was stung into action. He briefed journalists, unprecedented for him,
44:15and ordered acting Prime Minister Lionel Bowen to take control.
44:18And Lionel had not been involved that much with economic policy, but he was in,
44:23put in charge of the processes. And I was to be sort of put back in my place,
44:28until his return, where he could take the processes up. Because his staff had insisted that
44:35he was the Prime Minister, unless he looked like he was the Prime Minister, and behaved like the
44:39Prime Minister, he wouldn't remain the Prime Minister.
44:41Hawke could live with the Banana Republic outburst, but not what followed.
44:48I didn't think that the statement was an attempt to hijack policy. Although in the week that followed,
44:55with the statements and suggestions about a mini summit that was going to be held,
45:04I wasn't too happy about the way that was done without consultation. And I made it clear at the
45:13time that I wasn't too pleased about that, and took steps quite quickly from overseas to bring that back
45:22under Prime Ministerial control. It wasn't designed to be, I mean, I was prepared to say what I
45:30thought about all this, but it wasn't designed to be shattering to the government. As it turned out,
45:37it was. But it was to just sort of say broadly where, I mean, it was not to be a secret, I'd said it in
45:45Parliament, that Australia's terms of trade had fallen, that the price the world, the world was now
45:49giving us for our commodities was much less than before, and that we couldn't pay our way without
45:54substantial remedial change.
45:57The particular political lesson I think Paul drew from all this, not that he hadn't necessarily
46:05learned it earlier, but was that it was he who was driving the government to the tough but necessary
46:12economic outcomes and having to bring the Prime Minister with him.
46:23The financial markets were despairing. Month after month of bad trade figures sapped their
46:29confidence in the country's future. On July 28 1986, in a frenzy of disapproval, they drove the dollar
46:37through the floor. It started that particular day at, I think, about 63 cents. And there had been
46:44a widely shared perception for some time that if it fell below 60, there would be a psychological
46:49barrier from which it could be gone to a freefall. Paul Keating was sitting opposite me with his
46:55little portable Reuters screen, which every minute or so, if you press the right button, would be the
47:00most recent US-Australian dollar exchange rate from Sydney. He announced that it had gone below 62,
47:06below 61, below the psychological barrier of 60, and it kept on going. It bottomed at 57 that day,
47:15and only then because of pretty heavy intervention by the Reserve Bank. I was closer to despair than
47:20I'd ever been in politics, because I thought we had been a good government, certainly by Australian
47:25standards we'd been a good government, and yet we'd been hit with this and we didn't really deserve it.
47:30And how the hell were we ever going to get out of it?
47:34This was one of those cataclysmic type situations which governments don't normally get
47:39faced with, where the Governor of the Central Bank is on the phone to the Treasurer,
47:45and I think the Prime Minister on that occasion too, because I think they were called out of
47:51ERC to take this call. And the Governor said, I don't know what to do.
48:00But how to tell those bronze dockers with their beach houses and barbies and cold tinnies and yachts
48:08that the good life is over? Australia was living beyond its means. The government had to slash its
48:14spending. The 1986 budget had already been closed off for the year. We therefore took the unprecedented
48:23step of stopping the printing presses on the budget and going into the Prime Minister's office,
48:32the Treasurer, the Prime Minister, and a few advisers, and without the benefit of any papers or cabinet
48:39submissions or cabinet memorandum, sitting round, knowing that we had to turn the presses on again,
48:46get these changes and turn them on again if we were going to have the budget on the normal cycle,
48:51and carve an extra couple of billion out of that budget deficit.
48:58The Cabinet group charged with the task, the Expenditure Review Committee,
49:02was about to cut the budget with a severity rarely seen before in Australia.
49:07In two weeks, they took $1.5 billion off the deficit.
49:11The decision was radical. It was also tough for the party. I mean, we had a party which had been
49:16brought up on the basis of government doing things by way of public expenditure in the areas of social
49:27welfare, education, and so on. And to be faced with the reality that we were not going to be having
49:36overall real increases caused a lot of heart burning for the party.
49:41I used to feel, particularly at the Expenditure Review Committee,
49:47almost physical blows as these episodes went on. I've never been in such an aggressive environment
50:01to this day. Never.
50:05The sense of crisis meant nothing was sacred. Flying in the face of labour policy,
50:12the government lifted a ban on uranium sales to France for a paltry saving of $70 million.
50:18The idea came from John Dawkins.
50:22Well, we were sitting here in this room with the economy falling to bits around us,
50:29so it meant that a lot of issues which we, under normal circumstances, may not have contemplated,
50:35we just had to consider anything. And in the dying days of that budget, when we believed that we hadn't
50:43quite gone far enough, some of some previously unthinkable things became thinkable.
50:51The Honourable Treasurer.
50:57Madam Speaker, I present the Appropriation Bill No. 1, 1986-87.
51:02Madam Speaker, over the past year, the factors which determine Australia's national prosperity
51:09have changed dramatically. The strong economic growth
51:12and the huge employment growth of the last three years have been slow due to the sudden collapse of
51:19our export earnings. The ban on uranium exports to France has failed, has failed to serve its original
51:26purpose. Order. The Honourable Member will resume his order. Order.
51:32The Honourable Member behind Mars will resume his seat.
51:40Sit down. Sit down.
51:45Well, the Federal Government didn't have to wait long for reaction to its decision to lift a three-year ban on
51:50uranium sales to France. As the Treasurer, as you heard, was outlining the decision in Parliament,
51:55three Labor backbenchers stormed out of the House. I think that was probably one of the worst decisions
52:01the Government took. And I suppose at the end of whatever period we have in Government,
52:07that might go down as one of the silliest. It was just really dumb. What the Government did was crazy
52:13stuff. And, I mean, you couldn't have them rolled. You couldn't have... Because it's the Prime Minister
52:20that gets rolled when you roll the Cabinet. It's not whatever Minister might have suggested at an ERC
52:26meeting, that Minister's not getting rolled, it's the Prime Minister, and you can't do that.
52:30But it was just so stupid that I didn't take great pride in my work, as they say. But one does what one has to do.
52:37The strong men of Labor had to put down a caucus revolt, which could have led to the defeat of part
52:45of the Budget. It became very clear to a lot of people that I certainly wasn't going to support
52:50the sale of uranium to France. And there was a lot of discussion around the corridors,
52:57in people's offices and generally. And, as it turned out, I received a summons to attend the Minister's
53:04office. Friendly summons, I might add. And it was there put to me in no uncertain terms that
53:12my vote was expected to support the Government's position on the sale. And if that wasn't to be the
53:19case, then perhaps my preselection mightn't be as safe as it would otherwise have been.
53:24So it was put to me in short, four-letter words, fairly tight language,
53:32that my straying from the fold was just not on.
53:38The base Labor vote was starting to decline in the mid-'80s. It wasn't helped by decisions like
53:46selling uranium to France. But looking at it from a wider perspective,
53:54the real reason for the decline in the base Labor vote was simply longevity of Government.
54:03And the economically correct, or so the Government saw,
54:11decision to keep a peg on real wage growth. I mean, ordinary wage and salary earners were not
54:20benefiting out of a Labor Government.
54:23It was the workers who were to bear the brunt of the 1986 collapse of the dollar.
54:28Instead of wages automatically rising with inflation,
54:31the Government put pressure on the unions to accept real wage cuts.
54:36A full wage indexation had been basically an article of faith amongst a lot of Labor Party
54:40people, and certainly amongst the unions in the late 70s and the 80s. And some or other,
54:45this was no longer consistent with making the economy work. There had to be real wage cuts.
54:51Kelty was very, very important in that.
54:53Kelty was a difficult task, because people had said that once you move away from indexation,
55:03then inexorably it will lead to a reduction in living standards.
55:08Kelty was a difficult task, because the government and unions were forced towards the conservative
55:13ideal of a decentralised wages system. Workers' pay would be tied partly to productivity.
55:19It was an historic step, which didn't bring cheers from the factory floor.
55:23In my view, the decision is a bastard of a decision.
55:27I've said umpteen times, and clearly recently, that that's not an act you can pull twice. And if we
55:33have a big collapse in the dollar right now, God help us in terms of pulling another little trick
55:37leg like that.
55:39Tom Hawks is scabbed. That was the message I gave him. He's scabbed on the Labor Party.
55:45The government was at a dangerously low ebb by the end of 1986. The electorate had become angry,
55:51and an election was due the following year. The Labor Party was face to face with its nightmare
55:57of short-term government.
55:59We're not used to winning. We weren't. That's one thing Hawke changed for the Labor Party,
56:05I hope forever. We always thought we were going to lose, so we were turning around thinking,
56:10gee, this might be another occasion where that happens.
56:15Every caucus meeting, Hawke would stand up and ease address to them, affirm the fact that we're going
56:20to win the next election. At first, this was greeted with a degree of silence, then a degree of sarcasm.
56:27So there tended to be this relapse into the, here we go, we've had our time, we've done good things,
56:37but now inevitably we go into opposition again.
56:40Hawke maintained his faith in his ability to win elections. Out of the wilderness,
56:45he found a new source of votes. The environment would save Hawke and his government, but it would provoke
56:53the government's biggest and longest running feud.
57:06Hawke used to win elections by the
Comments