|Interviewer: Robin Hughes
Recorded: April 13, 1994
This is a transcript of the complete original interview conducted for the Australian Biography project. Each transcript page covers one videotape (approximately 35 minutes). There is also QuickTime video of the full interview available. To play the video, click on the icon in the right hand column. In addition, each question in the transcript is linked to the video. Clicking on a question will play the video from that point. (Help with this feature.) Optionally, you can download the video file for offline viewing (approx. 10MB).
The interview has been left it in its original state so that you can get a sense of how the conversation developed. The repetition of some questions, or a question followed by another question, is often due to the end of a particular tape or some other interruption, and has been indicated at the appropriate place in the text. There has been minimal tidying up of the text so that the flavour of the encounter has been kept.
At what stage did you discuss with Sir John Kerr the tactics that would have to be used to deal with this extraordinary situation that, in your view, had happened in the country?
Well there was a point where you did discuss it.
Just the way in which the whole thing would be handled on the day as it were.
No, tactics were never discussed. Going back a while, quite late - I knew Sir John fairly well, something Whitlam had forgotten. Because I had chosen him to - as my last act as Minister for Defence, but I put it into force about four hours before I resigned as Defence Minister, to do a study of armed services pay and conditions. And I - John Kerr spoke to me, even though I was just a backbencher, quite often because I knew the problems that he was - had been asked to overcome. And so I got to know him reasonably well. I knew he wouldn't act till the last minute. The last minute was when you could act and still have an election and get it all cleaned up before Christmas. And about a week before that I'd said to Sir John - I mean because he would ask me over occasionally to say what was the condition of the coalition, what was in my mind, did I have it in my mind to alter our position, or alter our tactics, was I going to let supply through? And I'd answer all of those things in the conventional way and say no, we weren't going to alter our minds. Yes, we were going to stay very solid, and there might have been some people's names mentioned in the press, but the press often doesn't get it right. And about the last time I said something else. I said, 'Your Excellency, you know that if there's not an election at the end of the day, I'm going to have to say something about what that means, and I regret it, but it will mean obviously saying something about this office. Because I believe that your duty requires you to provide an election and to make sure that there is an election. I think that's very clear from the Constitution and from the historic precedents of the office. In other words, you're the last protector of the democratic system in Australia'. And I would have said, 'I'm sure that you would want to go down in history as being that protector'. Which he will. But he would not have wanted to be condemned for failing the office, for failing that democratic responsibility, and I knew that very well, but I just wanted - it was important at some point in the battle of wits and pressures that he understood that the Whitlam view of the office was not the only view of the office and the Whitlam view of the office was that the Governor-General must at all times do exactly what the prime minister determined. Which is no more true of the Governor-General, or of the Queen for that matter. And the occasions when you are required to do something contrary to the wishes of the prime minister might be very rare but if it occurs, it occurs.
But wouldn't ...
On the, on the morning at about 10 or 11 o'clock I was reporting to my senior colleagues about a meeting that Doug Anthony and, I think, Philip Lynch - might have been Withers, I'm not sure - had with Whitlam and, I think, Jim McClelland, maybe Frank Crean, I'm not sure, there were three or four of them, and I'd made, in a sense, a last offer of a compromise, that if Gough Whitlam would guarantee a double dissolution before June of the following year, we'd let the budget through. But he wasn't prepared to do that. He'd allow a - I think he was prepared to allow a half-Senate election or something, but certainly not a - that can be checked.
Yes, it was a half-Senate.
Half-Senate election, which wasn't and he knew it wasn't answering the circumstances. So you know I said, in that case, our position stands and I said to Gough, 'The Governor-General does not in all circumstances have to do exactly what you demand'. But that was not a view that he was prepared to entertain, believe or consider at all. Although it is a view I'm quite sure that the current Governor-General had advised him of and warned him about. But Gough wasn't listening. So, and it was very near to D-Day, because if an election was going to be organised it had to be, it had to be called that week - not that day - it had to be done that week. About 11 o'clock that day I did get a call from the Governor-General and he said that I clearly knew that one of the options in front of him and which he had to consider, with others, was the possibility of dismissing the government and commissioning somebody else to form a government. But if that were to happen, he wanted to know what my actions as a government would be, and it was something that he would have to take into consideration, and there were four issues which are I think in Philip Ayre's book. But they were - if I were commissioned, would it be as a caretaker government to issue no new policies, not to sack anyone, not to pursue any legal whatever against any member of the previous government, not to - well to call a double dissolution forthwith. Oh, could I get the budget through? Would I call an election forthwith? And then those other two things, caretaker thing and not to pursue any - they were the four issues, and they were all things that would have been in my mind anyway. But it was reasonable, appropriate, proper, for the Governor-General to ask me those questions before making a final decision one way or another. Because clearly, if he was going to commission a different government he'd want to know what the actions were in relation to that government in a - you know, was the government going to take some actions in relation to the constitutional crisis that would resolve it, or wasn't it? And anyway, then there was a censure motion again in the House of Representatives I think, and I was involved and Whitlam was involved, and I got the message to go to Government House and his office was I think a little late giving the message to him, and so there was a mix-up in the order, which had nothing evil attached to it, it was just one of those political things that can happen.
Did you feel slightly undignified that you had to get out of the way?
Well I felt slightly awkward and I thought it was a pity, but I didn't think it was any more serious than that. And it was not a very pleasant time, just waiting there - I think I was waiting there probably 20 minutes, half and hour or something.
Where did you have to wait?
Oh, just in one of the small, it was one of the sitting rooms, it wasn't out the back or wasn't in the kitchen or whatever but ...
Knowing what was going on ...
One of the aides came in and tried to make polite, light conversation, which I wasn't very much in favour of responding to at the time. And anyway, you know, Whitlam even then had a last chance to go to an election as prime minister, if he'd wanted to recommend an election. But he wasn't, so he was handed the letter and then he reached for a telephone, but it was to late to make a phone call and when I got back I called my senior colleagues together and I said to Withers, 'How soon can you get the budget through?' He said, 'By about 6 o'clock', and I said, 'well that's ...' I looked at my watch and it was probably about 2 o'clock, I said, 'Well you've got five minutes to get it through, Reg'. So he ambled off and got it through in about six. And then there was an election, and then Labor was defeated by the largest majority in the history of Australia.
Sitting in that room, waiting for Whitlam to be sacked, did it cross your mind at all that it might have been constitutionally the wrong way to go, as some have argued that it was?
What other constitutional way is there to go?
Well there was a view put and an alternative view would be that the Governor-General needed to accept the advice of his senior minister, that was the prime minister, on the way he should proceed and instead you had offered him an alternative view of his role and he had taken that view.
A lot of other people had offered him an alternative view too, and he had his own legal knowledge and all the rest. Nobody now disputes, in political circles, the Governor-General's power, the right of the Governor-General to do what he did. And it wasn't really disputed at the time. It was fought on political grounds, but nobody tried to suggest that the Governor-General does not have the power. He clearly does have the power, and it's got nothing to do with reserve powers of the Crown. It is words written into the Australian Constitution, because if anyone bothers to read some of the background documents to the constitutional conventions, which my grandfather took part in, they'll find that those founding fathers were aware of the possibility that a prime minister can go bananas. He could lose his marbles. He could have a stroke. Is the government to endure while a prime minister is ill, can't take action, loses half his mind through a stroke or whatever, or all his mind? How is he to be got rid of? He might live for a long while. He can never recommend an election.
But you weren't suggesting at the time that Gough Whitlam had lost his mind.
No, but they were aware that there were circumstances in which a Governor-General may have to have power to act.
Well clearly Gough Whitlam must have thought he did or he wouldn't have accepted the sacking. So I mean obviously he accepted that and went. But at the time I suppose ...
But that says it all doesn't it. Gough's public view really was that the Governor-General does not have that power and yet he accepted the letter and its consequences, and vacated his office and the Lodge. So he knew the Governor-General had the power, but he kept up a subterfuge to try and maintain Labor's rage and to try and hide the fact that Gough had embarked on the greatest gamble of his life, gambling with the total structure of the political stability of Australia, and he had failed.
Were you surprised at the strength of the public feeling?
No, not at all. Gough was the left's hero, I knew that. He was the press's hero. I only had to go to my first press conference as prime minister to know that 90% of them thought I was some pariah out of hell.
How did you, how did you experience that?
Well I was used to the press you see. The press, after I resigned from John Gorton, I wasn't surprised.
Do you feel that you had a bad time from the press in the time that you were prime minister?
I don't think it's really relevant.
You don't think the press is relevant?
No, they write what they're going to write, and I'm not sure that it influences all that much.
You don't think it influences public opinion?
Not all that much.
Didn't you feel that it was important and an important part of your job and an important part of being a politician according to the sorts of principles that you describe from Machiavelli, to handle that press? Isn't that part of the job?
Oh you try and get a message across in a variety of ways and luckily there's television and the print media and all the rest. So you get part of what your message is, but the condition of the country, the condition of people's lives, and what they feel about circumstances, is often going to have more import about the way they vote than what the press say in an editorial. Editorials are written for politicians. They're not written for the general public. I mean a large part of the public now will go to the business pages, not even look at the political pages. You take ...
Well most of them go to television of course ...
Well they might, and the news you see in the newspapers is stale by the time you read it. So only those who are most avidly interested were going to read detailed reports of Bosnia or the state of the previous day's statistical reports or whatever. I'm not sure how much the newspapers are read today, I mean some are and some aren't. But there are a lot of things that go into framing the public mind and the press is not as important as it likes to think it might be.
Was some of the satisfaction of finally being prime minister taken away by the circumstances in which you slid in first as a caretaker prime minister, or was it a sense of responsibility and excitement to be Prime Minister of Australia?
Ah, it wasn't a question of sliding in, it was really a question of becoming prime minister with a bang, in an old-fashioned sense, because it was all very public, it was all very sudden and it was a one-off, it hadn't happened before. There was a great sense of responsibility, of excitement, yes, now you're going to be able to do something. But there's an election to be won and all the rest and perhaps in part, belying what I've just said about the media in Victoria, the polls were very bad because while we'd been ahead for so long through most of the year, the Melbourne Age had conducted an absolute bombardment for weeks, all the through the supply crisis about the immorality of Fraser and his henchmen and all the rest. But I have always believed that once people started to focus on the issues before them, in electing a government, that there'd be no doubt about how Victorians or anyone else would vote, and there wasn't. So you know, a large part of it is having an instinctive view about how Australians are going to react in a given set of circumstances.
And you felt in touch with the man on the street?
I think the vote showed that I was, and I also believed and still believe that if we had not acted then, in spite of the trauma and the difficulty, by the time a normal election came round about 18 months later, we would have been held in total contempt. 'These are the people who could have given Australia relief and they refused to lift a finger.' And I think that condemnation would have been justified.
What did you feel was the most important thing that you had to do as prime minister?
Oh, re-establish a sense of stability to the government in Australia. Re-establish financial stability and the circumstances in which investment would start moving forward again. Explain to countries overseas that the Whitlam government had been nothing more than an aberration. I can remember my first visit to Germany, Helmut Schmidt said to me, 'Malcolm you have a job to do with German businessmen'. He said, 'They were just getting interested in investing in Australia and two of your colleagues came here to speak with them and the decided to stay at home'. I said, 'Well who were they?' and he said, 'Well one of them was your former prime minister, Mr Whitlam and the other was Sir Lennox Hewitt', and he said, 'Mr Whitlam spoke to them and that decided that half of them would not bother about investing in Australia and by the time Sir Lennox had finished, they had made up their minds to persuade Germany as a whole not to invest in Australia'. But, so, you know, that all got turned round. But also to reestablish some view that whatever governments can do, and however wealthy a country is, there are limits to what governments can do, to what governments can provide. You can't ... you know, money is not like water rising up in a well, the more you take out the more flows in at the bottom. And we were operating in that environment before Mrs Thatcher, before Mr Reagan. We were the first government to preach financial restraint in the middle 1970s. And this, you see, I would have regarded those actions to restrain government expenditure in those times as good, true Keynesian actions, because it's what Keynes would have been advocating in those circumstances.
Well, there was also something specific though, wasn't there, about what you did. I mean you did decide that where money was spent in government ...
... it should be spent to support the productive areas, the business area, the farm area, and that the restraint had to come in those areas which you saw as not productive, that is the areas of welfare and some of the other aspects of the country where you felt it was necessary to put a ceiling ...
Well it's too broad to put it in those terms, because we put staff ceilings onto government departments. We hauled back on government expenditure. We hauled back in a whole variety of areas, a lot of capital expenditure, where government departments and whatever had been, you know, contributing to the irresponsibility. But we provided much better tax breaks for business to encourage investment. We modified taxation for mining. We introduced some new measures for farming. I did not believe, my government did not believe, and I do not believe that you have totally uniform tax rules for all of industry. It is ludicrous to suggest that the service industry, rather, or taxation that's suited to elements of the service industry, is going to establish the regime that will encourage mining and development, that will encourage farming, or manufacturing. And if you need different rules for different - not for different companies - obviously you don't do that, but for different basic industries in the country, all those rules are up front, they're on top of the table. People could argue about it, they can agree with it or disagree with it, but then you can make sure that you will get a tax regime that will maximise investment in the different areas of economic activity, which is what we did. Which is what - well one of the things that has not happened since and one of the reasons over the last ten years the volume of new investment has been lower than I think any ten years comparatively in Australia's history, apart from the 1930s.
But you were seen as something of an architect of the notion of small government, of ...
But that was ...
... government moving out of things, and then in fact I understand that you even offered some advice to Margaret Thatcher when she came ...
Oh I did.
... about that because you'd already begun this process. Did it start to alarm you, the direction in which this went later with both Margaret Thatcher and Reagan? And of course here it was the Labor Party who took it up, taking that to the extreme of letting the market determine things and keeping government so small as to be non-existent.
Well you've got to look at rhetoric and reality. Both Margaret Thatcher and Ronald Reagan adopted a rhetoric over a range of issues that I didn't. I mean I was arguing for small government and I was also certainly prepared to argue for a rigid examination of government regulations to see which was necessary and which was not. And in many cases they are [not] necessary, but in other cases they are entirely necessary for health and a well-functioning economy, and regulation so that you know what's happening across the exchanges, so that the Reserve Bank knows what's happening to your currency, I would have regarded as totally essential. They don't exist any longer. The Reserve Bank has no idea what's happening. A decision in New York can increase the credit available to the private sector in Australia by two billion dollars, just because you've sent a telex, or - it wouldn't be a telex, it would be a fax or a money order or something, and so control, even knowledge, in a capacity to supervise and know what was happening just disappeared in the 1980s. Now Britain probably went nearly as far as we did. They've got a central bank that operated in much the same way. But Mr Reagan's rhetoric and his actions were two entirely different things. He never reduced the size of American government, he increased it. He never reduced America's protection, he increased it. At the beginning of Mr Reagan's reign, 8% of America's imports were under quota. At the end of his reign, eight years later, 24% of America's imports were under quota; 34% of our exports to the United States are today under quota, and a lot of those quotas are going to [be put] in place by tariffs that are so high that we'll sell even less than we sell now. And that will be the GATT result on agriculture. In terms of corporate regulation, Mr Reagan deregulated some things. He deregulated the interest rates that savings and loans would have to pay for money, but he wasn't going to deregulate the rate at which they could lend out their money. He wasn't going to - he totally forgot that they had billions out on long term at fixed rates of interest. So they had borrowed short, lent long, and we had the savings and loan disaster that's costing the American taxpayers hundreds of billions of dollars. Mr Reagan did not deregulate the supervisory powers of the Securities & Exchange Commission, he increased them. He did not take away the powers of the Reserve Bank and say that the Federal Reserve must only use interest rates to influence the economy. It still adjusts capital ratios, it gives them power, it gives directions to banks that it thinks are being irresponsible. All sorts of things that our bank used to do, but no longer does. So the trouble is here, that the bureaucrats and the Federal Treasury in the Reserve Bank and the Labor Party and the Liberal Party believed all this rhetoric about government having no role. Mr Reagan didn't believe it. He just thought it was good politics to talk it. And the same goes very much for Mrs Thatcher. But you know, I was operating before either of them operated and it was necessary after a period of dramatically increasing expenditures - imagine - 46% up one year, 26% up the next year, to haul that back and to haul back the excesses of Canberra.
But in the period between when you took office and hauled it back and the end of your period in government ...
... had you reduced the overall size of government? You'd redistributed ...
In terms of numbers?
In terms of numbers and in terms of - you've got to look at it in cycles to some extent. In 1983 Australia had just gone through or was just emerging - well no it wasn't, the drought broke after the election - a drought that took six billion dollars, at least, out of the economy and affected every state of the Commonwealth. And the Treasury models have always underestimated the impact of rural recession or rural prosperity on the rest of Australia. We just had the second oil shock which damaged growth in every OECD country very considerably. And we also had Bob Hawke's wages explosion - I say Bob Hawke's wages explosion because he was President of the ACTU in 1979 when they adopted the '79 wages policy, which the unions applied quite ruthlessly in 1981, with total disregard for its consequences on employment. The design politically, as I believe now, to damage the government, which of course it did. But they added 25% to unit labour costs over a matter of months. The Arbitration Commission said, 'Well the unions are taking no notice of my determinations, nor are management, because they're giving in to union demands. I'm not going to make any more determinations'. End of sentence. End of statement. And we had to institute a wages pause, but you couldn't do that until after the damage done by that particular wages policy was known and evident. And I really think that the Labor Party or Bob Hawke put that policy in place for the unions, knowing the damage that it would do, knowing his own plans to move into the political arena, and knowing the damage it would do to the government, and that would help therefore in achieving a change of government.
Do you feel that you were perhaps a little too trusting in that situation?
Well then Albert Monk would never have used his position as President of the ACTU in that regard. Albert Monk had an intense feeling for the well being of unionists.
And you don't think Hawke did?
I think he had an intense feeling for the well being of Bob Hawke.
Did you find it ...
I mean, let me make another point. His popularity began and only began when, as president of the Labor Party, he started distancing himself and publicly criticising Gough Whitlam, who was then prime minister. So people in the public domain said, 'Well at least here's one Labor man who's prepared to criticise somebody who's doing the country a lot of damage'. So coupled with Bob's own character and out-goingness and all the rest, he became an easy person to love, if you like. But his advance in popularity coincided and step-by-step went up with the extent to which he criticised Gough Whitlam.
Well that was in some ways parallel to your criticism of Gorton. That that was the beginning of your rise.
My criticism was - no, not at all. Totally different circumstances because my criticism of John Gorton was sharp, to the point and it was over. Bob Hawke's criticism of Whitlam was long, drawn out, repetitive, and therefore planned. And once I'd had my say about Gorton no matter what he or any of his henchmen said behind their hands and in briefings, whatever, to the press, I never said another word to anyone. And while Hawke's briefings put his popularity up, mine certainly put me right down. So the two circumstances have absolutely no parallel at all.
I suppose I'm making the point that in politics often, in order to rise, you rise over somebody else's failure.
Well hopefully, if somebody's going to fail, somebody else will rise, otherwise we're going to have truly wretched government, aren't we?
What did you think then? Did you find - you talked earlier how important you find it to respect people. Did you find it particularly difficult to lose the election to Bob Hawke, given that you didn't feel a great deal of respect for him?
Well I was concerned because I knew the policies he went to the election on would be an absolute disaster, that the Australian economy couldn't stand the sort of policies that he put in place or that he said he was going to put in place. He, in effect, tore a lot of them up immediately after the election and he took the Labor Party into the middle ground. Not in all respects but in some essential respects. So that meant the condition of the country was not going to be damaged in the way that it might have been, and that was really what was going to happen. If it had gone through another Whitlam phase well then really, God help us. It went through a longer drawn out phase, but one that was supported by the Treasury, the Reserve Bank, financial journalists, with two or three notable and praiseworthy exceptions, which has done enormous harm and built in structural weaknesses into this economy which even if policies were put in place to redress now, would take us ten years or fifteen years to redress. Like incapacity to pay our own ways. In this recent period our manufacturing trade deficit has gone from four billion a year - no, around two billion a year - to 34 billion a year. And there is no way exports of other things can make up for that deficit. One car in five used to be imported, now one car in one is imported, without, at any point increasing commensurately our capacity to export. So the, and all the service industries, where most of the population has gone ...
Some of ...
... tend to be great consumers of imports and not producers of exports. I mean the cameras you use, they're all imported, the computers people use, if they're not imported totally the components are mostly imported. And so there is now a structural imbalance in the Australian economy, which is hidden by worldwide high interest rates still and by lack of examination in the public arena of public economic policy.
Some of the problems of our balance of trade had begun to show themselves though while you were still in power, hadn't they?
No they hadn't.
There was none ... no problems in that period?
Look, Australia's always been a country where our demand for imports had the capacity to outweigh our ability to export, but you've got to look at the circumstances of the time. It wasn't - in 1983 we had no international debt of consequence. It might have been $20 billion, it's now about $200 billion dollars. And then look at the circumstances of '81, '82, '83. We'd had the worst drought in Australia, every state, every acre was under drought. That reduced our rural exports by billions. So that was out of the export equation. There was a worldwide recession, caused as much as anything by the second oil shock and even a continuation of the first oil shock, and one coming in on top of the other. So the demand for other products, for metals, minerals, was less than it would otherwise have been. But we had no basic structural problem. We needed rain in Australia to get rural industries moving again and rural exports therefore flowing, and recovery in the world economies and then the demands for metals, minerals and all the rest would also grow. And so ...
... to the general public, who often hear explanations like this of situations which, they say, they blame the government for and some could say that it was those circumstances, the drought and the international problems and so on, that lost you that election.
Well I think it was, because it was the - the three things that caused the recession - I think we could have survived any two of them, but we had the second oil shock, which is so easily forgotten, we had a Treasury paper which was published in the budget papers saying that the government has been remarkably successful; in eight months inflation will be below 5%, which was so far below the rest of the OECD average at that time that it was miraculous. The oil shock put that totally out of court. We then had the wages explosion which did much further damage to it. We knew what the results were going to be, but we had to - and we knew the Metal Trades Industry Association were going to come calling to us and ask for help. But we said, 'There's not going to be any help. You've agreed to all these wage demands. You said you had the profits, you could pay the wages. We know you can't and you, in effect, know you can't'.
[end of tape]