Australian Biography

Jim Cairns - full interview transcript

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So your view was that although you might need to borrow money from the Reserve Bank in the short term to deal with neglected social problems in the Australian scene, that after that initial expenditure to set things right, it would have slowly but surely been paid back.

Yes, the debt ... The money we would have borrowed in 1974 for example - when the deficit was 3000 million - that money - even leaving aside what might have happened in the next year about borrowing - we might have borrowed just as much - that would have been paid back in five years without any trouble at all. Whatever you borrow in one year that you reasonably need, will be paid back in no more than five years. Now the next question is who to borrow it from. I say: Commonwealth Bank, then the Reserve Bank after it was established. Menzies established the Reserve Bank, and I didn't like the idea of replacing the Commonwealth Bank, but the Commonwealth Bank has now been privatised and it would be impossible for them to privatise the Reserve Bank I should think. Now the pieces of paper that the bank issues ... the treasury issues, authorising the Reserve Bank to meet government cheques was always called treasury bills. They are now called treasury notes. That was done ... That change was taking place in 1974. When I was associated with the budget deficit of 3000 million I assumed that would be paid for, or substantially paid for, not all of it, two thirds of it, from the issue of treasury bills, but I found out in September, at the time it was happening, they were being issued on the authority of treasury notes. Now the difference between a note and a bill is that a note is issued at current bank rates of interest. Treasury bills at two or three per cent. In other words treasury notes it costs you two and a half, or three times as much, to borrow. So this anti-borrowing government prefers to borrow through treasury notes at two and a half to three times the cost of interest as it would have if it was borrowing through the Commonwealth Bank. Now most of those treasury notes are not issued to the Reserve Bank. Some are. They are issued equally much or more to private banks. In other words these days governments borrow critically from private banks, not from the Reserve Bank. This is all part of the market economy economics, all part of the economic rationalism, all part of this concern with debt. In other words they borrow where they can at the highest possible rates, fearful of debt as they are.

Could you tell me why the Whitlam government decided to try borrow from unconventional lenders overseas in two major loan matters?

Yes, the loans affair was initiated by Connor - Rex Connor, Lionel Murphy and Gough Whitlam. I was not Treasurer then, I was quite unaware of it. Frank Crean was hardly at all involved. I first became aware of it when I attended a meeting of the federal executive of the Labor Party - not the parliamentary one - at the Lodge and we were kept waiting out in the sitting room for a long time. And I asked the staff, 'Where's Whitlam?' and they said, 'He's in the dining room, having a meeting', so I opened the door and went in. And they were having a meeting over the loans affair. They decided to authorise Connor to borrow four billion dollars, and his representative in that borrowing was a man called Khemlani. I recalled Khemlani because Clyde Cameron had brought a man, and I've forgotten his name, to see me about a month before, asking me if I would see Khemlani about loans. And I said, 'No, I won't. We don't need to borrow that way. I don't ... I'm not going to do that'. So Clyde introduced, through this man, Khemlani to Connor and Connor took it up. Connor's purpose was to get that money to bore for gas on the north-west shelf between here and New Guinea, where there's a tremendous reserve of gas, still is. And then pipe it all the way down to eastern Australia. Geographically, economically: an excellent idea. All right, well the meeting was over in the dining room and Whitlam came out and said, 'We've just authorised our comrade to borrow four thousand or two thousand million, whatever it was, overseas'. I'd become treasurer three days before. He said, 'Are you going to sign it with us?' and I signed it with them. I wasn't part of the meeting. I said to Whitlam, 'You'll have to tell the premiers you're doing this. You can't do it secretly. You'll have to tell the premiers or they'll kick the roof down ... kick the roof in'. Connor was a man who never explained anything to anyone, so they didn't do that. Then it wasn't long before Sir Frederick Wheeler, secretary of the treasurer, the head of my department, and his staff, would come in one after the other, with stories about the awful character that Khemlani was, you see. So then Whitlam went away after Christmas, almost as though he didn't want to be here when the cyclone hit Darwin - and was overseas, I'd had enough of this talk, so I said, 'Let's get together at the Reserve Bank in Canberra and we'll make a decision about this, what we're going to do about the Khemlani affair'. So we had the meeting. There was Lionel Murphy. There was Rex Connor. There was Murphy's departmental secretary, the secretary of the Attorney-General's department, Sir Frederick Wheeler ...

And you were Acting Prime Minister?

Yes. So we outlined all this, and so I said, 'Well, what are you going to do about it, Rex?' Now Connor was easy. Connor said, 'Cancel it'. Murphy put up a defence for it, but we decided to cancel the Connor authority to borrow in the loans affair. That was to be the end of the loans affair. Whitlam came back on the 19 January and on the 27 January they had restored Connor's authority. I was Treasurer and they didn't tell me. Now how can you trust people like that really? So that was that: Connor's got his authority ...

Why do you think Whitlam did that?

I can't understand why. Whitlam in a sense said, 'No', when he shouted, 'No', but he never meant, 'No', when he said, 'No'. He didn't seem to be able to stand up to Connor. Connor and I always got on easily, and what he wanted I was able to do. What he wanted me to do, he was able to do. Never found any trouble with Connor and even to this day I'm not quite sure why Whitlam did what he did. Anyway, I'm Treasurer and Whitlam is back, and then the Treasury tells me they've got this authority and it was signed by Moss Cass, by Whitlam, by somebody else, and they said to me, 'You've got to go to America soon. They'll talk about nothing else when you go there except this loan. You've got to do something about it', in effect. So one day we were in parliament soon after that. Whitlam and I were sitting at the front bench, and I said that to Whitlam, 'They tell me I'm going to have a lot of difficulty over the new lot of the Khemlani loans when I go to America. I really don't think we'll get anywhere with that. They'll never get any money out of it. They're always telling ... everybody tells me that. Won't get any money out of that'. So Whitlam says, 'All right, you be the bastard and tell him'. So I just went back to where Connor was sitting on the front bench, [and] briefly said to him what I've said to you. 'Right', he said, 'We'll stop it'. So we did. It was cancelled. Later Whitlam sacked Whitlam ... sacked Connor for keeping in touch with Khemlani - sending him cables and so forth.

You yourself had sought the possibility at least of borrowing money overseas through an agent. Could you describe what that was about?

I never wanted to borrow money overseas at all, and never through an agent. My second trade activity was to do trade with the Middle East. After I became Treasurer I kept arrangements with the Middle East that I'd made as Minister for Overseas Trade to go to see about trade with Iran and with Saudi Arabia. In Saudi Arabia, when we were there, I was informed that King Faisal wanted to see me. So Ken Wriedt from Tasmania, the Minister for ... I don't remember what he was minister for ... Ken Wriedt.

Yes, I'm trying to remember too.

... and I went to see Faisal. Faisal said he had asked to see us because he was very pleased to be able to talk to Australians. 'I want to do ... I want our country to do business with you'. And I said, 'Well, I'm here at the moment ...' (Agriculture was Ken Wriedt) ... 'We're selling sheep and cattle and so forth to you but we can cope much further than that, and I hope to sign a comprehensive trade agreement with you in the next few months'. And he said, 'Then there's funds, borrowings. We're very happy to lend money to you'. He said, 'I've made an appointment for you to see the Saudi Arabian Monetary Authority'. It wasn't any private lender or agent - it was the Saudi Arabian Monetary Authority who was rolling in millions. So I went the following day to see them and the governor offered me 500 million at New York rates of interest. If we'd gone into money lending we could have made fortunes out of that. So he was to write a letter and have it signed by the King. Two days later the King was assassinated. We didn't get the letter until after I had been sacked as Treasurer, so I gave a copy of the letter to Whitlam and one to Hayden, but they never even replied to it.

But you were sacked by Whitlam as Treasurer because of what were perceived to be your own money raising activities.

Yes, I was sacked by Whitlam for informing the House that I had not given a letter about loans to George Harris, the father of the Patrick's overseas wharfies training scheme. Now ...

George Harris was a well-known and well-respected Melbourne business man, wasn't he, at that time?

As far as I know. I ... I hate really going into this because it sounds like excusing things and all that. I was sacked and that's sacked and I don't complain about it. It's over and done with it. I don't give a damn. I was born in Carlton. I've seen Carlton play twice. Menzies was a patron of Carlton and George Harris was the president. In 1974, for some reasons or other, it was through somebody I can't remember who, I went to Carlton for lunch one Saturday. Menzies was there and Harris, so when I walked in they took me to the table to sit with Menzies and Harris, and I had lunch with Menzies and Harris. Menzies introduced me to Harris and that was George Harris. Some short time later George Harris turned up at the Treasurer's Office in the city here, Melbourne, saying he was going overseas, and he'd like to make enquiries about what's been going on in these loans dealings with Khemlani. And I said, 'Yes all right. I don't mind if you make enquiries, and let me know. I'd like to know from another source what's happening'. So he said, 'Will you give me a letter of introduction?' and I said, 'Yes, I'll give you a letter of introduction'. There's about three lines in it. That very day the ACTU had come to my office and I was telling him about their wage policy. I spent most of the afternoon doing that. I came back upstairs and there were about fifty letters on the table. I signed them fairly quickly, and I signed one to George Harris, completely unaware that I had, so when I was asked in parliament had I ever signed a letter to George Harris I said, 'No'. That belief was strengthened because some weeks after I was supposed to have signed that, George Harris and a mate of his turned up in Sydney, asking me for a letter, and I gave them one.

But it wasn't the same letter that you were accused of signing?

No. It was much the same, but it wasn't the one that was an issue you see. So, you know, if you look in Carlton the day I was sacked you'll see Fraser ... Fraser and all the rest: two or three ministers, saying, 'Anyone does this every day. There's nothing ... We often sign letters we forget about, [that] we don't remember we've signed'. They were criticising Whitlam's sacking of me. But as I say, I get sick and tired of defending this. I signed the bloody letter and I was sacked. Well so what.

Well I suppose the 'so what' was that at that time you were working hard to develop an economic strategy that might have worked and you were curtailed in that.

That was why I was curtailed in that. I was sacked for reasons which had nothing to do with that letter.

And what were they?

Whitlam wanted to stop my uneconomic-rationalist economic influence in the formation of policy, and he always saw me as a rival for leadership. They were the two reasons.

If he had that attitude to your economic theories, why had he pressed you to be Treasurer, because he had, hadn't he?

Yes. He pressed me very much to be Treasurer. He ... Whitlam never thought about economic theory, never thought about it. Whitlam thought Frank Crean was negative and had no energy, no purpose in being Treasurer. Whitlam had four or five ministers who wanted to be able to spend much more government money: Connor, Hayden, Jones, Beazley. And Whitlam wanted to get them that money or whatever was safe.

He wanted to get them that money but not by the means that you were thinking of through the Reserve Bank, but through overseas borrowing.

Yes. Yes. No, no. He wanted to get that money through normal kinds of ways that I had always stood for. I had never mentioned overseas borrowing in my life. I was against it. He wanted to get it, that money, through taxation adjustments, through economies in other ways, and through the Reserve Bank. And he really thought I could do something about that. Right up to November 1974 ... We had an inflation crisis as it were in 1974, and fearing inflation, Whitlam came to fear that kind of policy and me as a Treasurer. So soon after November 1974 - I was appointed Treasurer on the 4th December, on papers that were signed a couple of weeks before, and I'm satisfied, had the inflation figures been as prominent, he wouldn't have signed those papers. He wouldn't have agreed to me to be Treasurer. He'd have replaced Frank Crean by Bill Hayden, as eventually he replaced me by Bill Hayden.

While you were Acting Prime Minister Cyclone Tracey hit Darwin. What effect did that have on you and what did you do?

Well, you know, there was no question about what should be done. We were living in Hawthorn and the phone rang about ... early in the morning. I was told that Darwin had been devastated, and they wanted authority for things to be done, and I, right from the start, said, 'Whatever needs to be done do it. I'll sign whatever paper is necessary and I'm going there myself very soon'. So I rang to get an aircraft and already the only VIP aircraft that was available had been booked by the Governor General, Sir John Kerr, to go to Darwin, so Gwen and I went up TAA to Darwin. We got there before he did. Well, we went all over Darwin, Gwen and I. We talked to people, looked at the wreckage and all that. At ... We didn't have any lunch. We were too busy. Dinner came and they suggested we go on board HMAS Melbourne and have dinner there and sleep on the battleship. We did. We found that Kerr was there too. So before dinner, I think this is the most distinguished moment in my life ... Before dinner, the Governor General, the Admiral of the Fleet and me, were marching up and down on deck on HMAS Melbourne. I talked to Kerr quite a bit - the first time I had really spoken to him you see, and Kerr and I got on fairly well, actually. So we had dinner and then Gwen and I ... Gwen slept under a couple of guns somewhere on a rubber mattress, and me on a rubber mattress on the floor. I don't know where the Governor General slept. Anyway the following day we ... Was it the following day? Just another incident. I think I was back in Melbourne by the time I got a phone call from Reg Ansett. And I never met Reg Ansett and I didn't think much of Reg. But Reg said, 'I've got to get your authority'. He said, 'There are ... it could have been 40,000 people, [that] we've got to get out of Darwin. I can fly them out in five days', he said. 'But they won't permit me to take a full aircraft [but] I want to fill my aircraft to take them out quick.' So I said, 'Is it safe Reg?' 'Yes', he said, 'I'll prove it's safe'. So I said, 'Okay get them out'. So he moved about thirty or forty thousand people out in two or three days. The work on the reconstruction of Darwin began within a week. There was no hold up because of bureaucracy or anything like that, and Darwin had a very good opinion of me for quite a long time.

People were very impressed with you as Acting Prime Minister, weren't they, during that period on all sorts of fronts?

Yes, but I only did normal things, like that. Like the Hobart Bridge. Somebody runs into the Hobart Bridge and pushes it over, well what do you do? You put it up again. You start work straight away. You don't go through bureaucratic procedures. You get tenders and pick the best one and get it going. You don't have to be a brilliant Prime Minister to do those things, surely?

When Whitlam decided that you were to go, as Treasurer, you had such strong support in caucus. You'd always had the highest vote among your colleagues. Why do you think that they didn't stand up and defend you at that time? It was left to the other side of the House to defend you.

Yes it was. Well, they didn't defend me because they thought I was a bad political risk now. Junie Morosi: they didn't do much about it. When the vote came about Whitlam's decision, I spoke against it. I didn't say very much. And when the vote came I think it was carried by about no more than about ten votes. I still got over fifty votes, over forty, over forty out of a 110, 109, 110 - something like that. Carried by ten or a few more votes. But that was more just for their own self-esteem than because they were supporting me I think.

And did you think they were right, that you were a political risk at that stage?

The public opinion polls didn't say so. I think in many of these cases if we had stuck together and fought well, we'd change whatever was in many cases a political risk into something that wasn't. But given that you're running away from it: yes, I was a political risk.

Tell me about Junie Morosi and how you came to work with her and the influence that that had on you at that time.

Well, as I told you before, my attitude to society and to the economy and to social reform and to policy and to principle and to ideals, and what should be done, was essentially economic and economic history. It was significantly Marxist. I believe that power in capitalism was exercised by the owners of the means of production, and there was no way of changing that much. It needed a revolution. But in capitalism a revolution was next to impossible, and you just had to nibble away at it and try to improve things. That was my theoretical view almost to the word.

You needed a quiet revolution, as your book says.

Yes, that's right. Now, what I learned in 1975 from her and from her alone, was psychology. She'd been a student of Reich and she understood the nature and significance of repression, and how repression diminishes, eliminates self-esteem, how it distorts it into a reaction against the forces that diminish it, and you become aggressive. The processes is a cultural process of human relations in which the first ten or fifteen years of life are vital. Unless you understand the theory of the formation of human character and behaviour you can understand nothing. She was the only one who brought that to me. I studied it much more than she did and I went a long way past her.

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