by John Howard
I respected Andrew Peacock’s diplomatic and public relations skills, but I never thought that he had deeply held policy views on more important economic issues. That influenced my attitude towards him, especially after he became party leader.
There was fault on both sides. I don’t think Andrew ever understood the depth of feeling about his resignation in 1981 and the damage that many of his colleagues believe it inflicted on the Fraser Government. As for me, I don’t think I fully understood the extent to which my continuing ambition to be leader of the Liberal Party was so apparent to colleagues, and others, from the time that Peacock defeated me for the leadership after the 1983 election.
I suspect that the last thing Andrew Peacock wanted in early opposition days was an intense debate about the philosophical direction of the Liberal Party on economic policy, especially industrial relations. Yet that is what he got, because of my determination that the Coalition should take a more consistent pro-market approach. It was, even more importantly, an unavoidable debate because the Hawke Government threw off its old Labor garb and, on issues such as financial deregulation, surprised many by going further than would ever have been expected from a Labor Government.
I never lost my ambition to lead but decided to put it on hold, and resolved to do everything I could to argue the policy positions which I held. I would perform as well as I could as deputy leader and essentially through the prism of my strongly held economic opinions.
Having been frustrated by Fraser’s opposition to certain economic reforms in government, such as taxation, I was determined not to go quietly in opposition. When the opportunity presented itself, I took a strong market-centred economic position. Sometimes this was in advance of the party’s position and annoyed Andrew Peacock and others who, for a combination of political and other reasons, might have thought that a quieter approach was appropriate.
The quiet approach was not really an option. The dynamic had changed quite rapidly since the election of the Hawke Government. The Liberal Party was under a double pressure to have a clear position on economic issues. Not only did altered world economic circumstances require different responses, but the new ALP Government was not behaving like the Whitlam Government, or indeed consistent with the commitments it had made in opposition. It had assumed the mantle of economic responsibility. This put real heat on the opposition.
Many of the Coalition’s traditional supporters in the business community began to like what they saw of the new Government, particularly when it floated the dollar and decided to admit foreign banks. Comments such as ‘the best free enterprise government we’ve had’ began to be uttered at boardroom lunches attended by opposition spokesmen. The Liberal and National parties ran the risk of being left behind if the Coalition did not sharpen its thinking on some key economic issues.
In some cases this meant agreeing strongly with what the Hawke Government had announced. In other cases it involved adopting a new policy position likely to win business support, and which the ALP would be unable to match. This made my campaign to change our industrial relations policy so important. Here, I felt, was a policy change which would win wide, but by no means unanimous, business support and which Labor, with its trade union base, could never match.
The farmers, the miners and, crucially, small business would support a new industrial relations system. Many manufacturers, however, were still wedded to the old centralised system. They felt they could live with it. In any event I was told they could ‘talk to Hawke’ if things got out of hand. The corporate state, Australian-style, was already in full bloom.
My aggressive push for policy change aggravated some colleagues. They didn’t share my sense of urgency about the need for policy revision; they thought that some of my prescriptions were too edgy, and I thought they were altogether too complacent about the solidity of our political base. A party needs more votes than its base can deliver so as to win an election, but unless its base is energised, as distinct from just mildly supportive, it has no hope of victory. Big business had been partly mesmerised by Hawke, so I saw the preservation of our small-business base as absolutely critical to our longer-term hopes of revival. Internally difficult though it was, I believed that we had to confront hard policy choices early on.
I loudly supported the Hawke Government when the dollar was floated and exchange controls abolished in December 1983. This was overwhelmingly the right policy response for the future benefit of the Australian economy.
On the morning of the day the decision was taken, the Treasurer announced the closure of our foreign exchange markets, a clear signal that the Government intended to float the dollar. That morning, Liam Bathgate, Doug Anthony’s chief of staff, showed me a press statement Doug proposed issuing, strongly attacking the floating of the Australian dollar. Liam knew that Doug’s views and mine were different, and he did not want public disagreement between us. I immediately raised the matter with Doug and we had a heated debate, totally disagreeing on the desirability of the float. In the end he acceded to my view and did not issue the statement. Floating the dollar was the ‘big bang’ of financial deregulation. Our differences on the issue symbolised a deep divide in Coalition thinking on economic policy. Fraser later attacked the float.
The Coalition’s clear support for such a huge policy decision was critical to winning acceptance for the change in the general community. It meant that as time went by and fluctuations in the value of the dollar inevitably occurred, hurting some and rewarding others, a cheap fear campaign blaming the float could not have been credibly mounted. In sharp contrast, such unconditional bipartisan support on a big policy issue was never forthcoming from the ALP during the years of the Howard Government.
Floating the dollar had more influence than any other decision taken by either the Hawke or Keating governments. Although Paul Keating is often given the credit for floating the dollar, his timidity on the issue was overridden by the Prime Minister, with the strong support of the governor of the Reserve Bank, Bob Johnson.
In its first budget the Hawke Government brought in an assets test for the payment of the aged pension. I thought this was good policy, although politically unpopular. I was absent on a brief holiday with my family in the snowfields when the shadow cabinet discussed the Coalition’s attitude to the proposal. The following day I read in the newspapers that the opposition would oppose the assets test.
If I had been present at the shadow cabinet meeting I would have argued that we support the Government. I wasn’t there and, by coincidence or not, a decision on this issue was taken. I had no alternative to going along with it, even though I felt uncomfortable.
Politically, it turned out that Peacock’s judgement on this issue was absolutely correct. His opposition to the assets test was a major reason why the opposition performed much better in the premature 1984 election than many expected. He developed a fine line of rhetoric, and it resonated with many older voters. It was a very good example of successfully applying the politics of consolidating one’s base of support, albeit in a different manner from what I was endeavouring to do with small business.
On 19 June 1984, Phillip Lynch died at the very early age of 50. Some time before, he had been diagnosed with stomach cancer. Lynch had been a hardworking servant of the Liberal Party, and had carried much of the grinding work of building the case of economic mismanagement against the Whitlam Government throughout 1975. We had been close as colleagues, and I felt for his wife, Leah, and their three sons. I called to see him at his home on the Mornington Peninsula only a few weeks before his death. He knew his fate, but was sustained by his strong Catholic beliefs. I admired his fortitude. He did not seek pity; rather he remained deeply engaged about the challenges then facing the Liberal Party.
The opposition languished in the opinion polls all through 1984. Six days before the election was called, the Morgan Poll in the Bulletin showed Hawke at 73 per cent against Peacock’s 15 per cent on the preferred prime minister rating. This probably encouraged
Bob Hawke to call an election for December that year, only 20 months after his win in March 1983. He was to get a rude shock. He entered the election campaign with supreme confidence, believing that the Labor Party would win seats from the Coalition, particularly in Victoria. As a measure of his hubris, he programmed a 55-day campaign, which was ridiculously long, especially as the election was being held so soon after the change of government.
Before the election there was speculation, both amongst some colleagues and in the press, that if the Coalition performed badly, and many expected this, then I would replace Peacock as Leader of the Opposition. My own stocks within the party had been bolstered unexpectedly by a very successful parliamentary speech on race issues in August 1984. I effectively attacked a speech by Hayden, the Foreign Minister, in which he had clumsily attempted to smear people in the opposition as racist. I drew attention to the Labor Party’s long historic support for the White Australia policy and managed to capture the moment. For immediate impact, it was probably as good a speech as any I delivered during my 33 years in parliament.
The campaign for the December 1984 election turned into something of a tour de force for Andrew Peacock. Undaunted by his poll deficit, he hammered away very effectively on two issues: the assets test on the aged pension, and altered taxation arrangements for lump-sum superannuation payments.
For the first time in Australian political history there was a televised debate between the Prime Minister and the Leader of the Opposition. Peacock won the debate quite convincingly. As Hawke and others were to learn, the expectations of these debates are such that, as there is an assumed ascendency for the incumbent, a reasonably good performance by the Leader of the Opposition exceeds expectations, and he often ends up ‘winning’ the debate. That is not to take anything away from Andrew Peacock’s extremely polished performance. He put in more than a reasonably good performance; he outclassed Hawke with an engaging, direct style of presentation. Such was the impact of this debate on Bob Hawke that at the next election, in 1987, he refused to debate me as Opposition leader. An overly compliant media allowed him to get away with this piece of dismissive arrogance. Leaders’ debates returned in 1990 when Peacock was again against Hawke and have been a permanent fixture ever since.
At the election the Labor Party was returned with a reduced majority of only 16 seats. Peacock and the Liberal Party had performed beyond all expectations. There was a wide feeling within the party, and elsewhere, that we would be back in government at the following election. This result put paid to any idea of a leadership change, and both Peacock and I were unanimously re-elected to our respective positions at the post-election party meeting.
At the news conference following the party meeting, I gave an answer to the question, ‘Will you rule out a leadership challenge to Mr Peacock during the term of this parliament?’, which was to be the source of intense irritation to Andrew Peacock and his close supporters. My response was, ‘I think somebody who has had the track record of loyalty that I’ve had for the cause of the Liberal Party is not really required to answer that question.’1 I took the position that no person could ever be expected to rule out a leadership challenge.
Peacock’s leadership had been consolidated by his election performance, and it was my expectation that he would lead the party to the next election. However, politics is always unpredictable, and I saw no reason why I should not, in an upfront fashion, keep my options open. I understood why my response irritated Peacock. In return, he should have accepted that it was a perfectly legitimate stance for me to take.
One other incident concerning the leadership of the party in those months is worth recounting. Andrew Peacock, Malcolm Fraser and I, with our wives, attended a function staged by the Victorian division of the Liberal Party in October 1984, just before the election, to mark the 40th anniversary of the party’s foundation. After the function, Malcolm, his wife, Tamie, Janette and I, together with Tom Austin, deputy leader of the Victorian Liberals, and his wife, Judith, adjourned to Austin’s hotel room for a drink. In the course of discussion Malcolm lambasted Peacock’s leadership, asserting that he had no policies, and said that the party was headed for ruin at the next election and that I had an obligation ‘to put my hand up’. Both Janette and I were rather taken aback at this outburst, and afterwards confided to each other that maybe Malcolm had in mind two leaders being knocked off for the price of one election. There had, for some time, been low-level chatter that perhaps Fraser might be recalled to lead the Liberal Party. It should be remembered that he had left the prime ministership at a very young age, 52. Hawke, in fact, was six months older than Fraser when he defeated him for the top job.
Whatever may have been the former Prime Minister’s motives, he left me with the unmistakable impression that I should seek the leadership, and quickly do so. I had no intention of doing this and made that clear to him. The very next morning Janette and I ran into him at the airport. Robin Gray, the Premier of Tasmania, was also there and we chatted inconsequentially. As Malcolm left to get his plane, he raised his arm and repeated the words ‘Put your arm up.’ According to the media, when asked about the whole incident, Fraser denied that it had taken place.
Some months later, after the election, Malcolm Fraser rang me and said that in light of changed circumstances, I should ignore the advice he had given me back in October 1984.
The changed circumstances to which Fraser referred were not only the unexpectedly good election outcome, but also the extraordinary way in which Bob Hawke had handled a national security issue involving the US Alliance. There had been an understanding between the Australian and US governments, concluded under the Fraser Government, whereby Australian facilities would be available to help monitor splash-down trials of the MX missile, then under production in the United States. As the time of the trials approached, this became a sensitive issue within the Labor Party because the missile would be capable of carrying a nuclear warhead.
The 1984 election had seen a surge in support for the Nuclear Disarmament Party (NDP), and Palm Sunday peace rallies had attracted large crowds. Hawke’s natural instincts were to honour the agreement with the Americans but, remarkably, he caved in to the left wing. Keating, to his credit, had commented before Hawke’s capitulation that the Government should not take any notice of ‘fifth-graders’. If he is to be believed, Graham Richardson is the person who finally persuaded Hawke to give in to the left. By chance I ran into Richardson in the lobby of the Imperial Hotel in Tokyo just after the decision had been announced. He was quite happy to confide in me that, having canvassed opinion within the parliamentary party, he had offered Hawke the advice to compromise with those who were nervous about being too close to the Americans. There were never any flies on that fixer.
Hawke’s back-flip caused something of a run on the Australian dollar, and coming on top of the worse-than-expected election result, this helped create the impression that the Government had begun to lose its way.
After the 1984 election, which saw the return of Peter Shack to federal parliament as member for Tangney, Peacock made Shack spokesman on industrial relations. This created an interesting position. Shack was very close to Andrew Peacock, having worked on his staff between the 1983 election, when Shack lost his seat, and his return to parliament. On the other hand, he was a strong supporter of a freer labour market. His views on industrial relations were much closer to mine than had been those of Ian Macphee, the previous spokesman, who, prior to entering parliament, had been director of the Victorian Chamber of Manufacturers, which was quite a supporter of the traditional industrial relations order.
1985 gave me an opportunity to give vent to my long-suppressed interest in defence and foreign policy issues. I had some very strong things to say about the Labor Party’s capitulation to the left on the MX missile issue. The strategic defence initiative, which involved the creation of a missile shield against a possible nuclear attack, then in its embryonic phase and receiving active support from the Reagan Adm
inistration, was something which I openly supported.
At this stage Paul Keating and I enjoyed an easy personal relationship. He had even sought my advice about moving his young family to Canberra. Our links attracted some media interest because the Canberra gallery appreciated the support I extended when the Hawke Government adopted good policy.
For months the Treasurer had been working on an elaborate plan for taxation reform, to be presented to a taxation summit promised by Hawke in the 1984 campaign and due to take place in July 1985. The centrepiece of Keating’s plan was the introduction of a broad-based consumption tax, at a rate of 12.5 per cent, accompanied by reductions in personal income tax, the introduction of a capital gains tax and a fringe benefits tax. It was a huge and ambitious proposal that mirrored changes for which I had argued when Treasurer, most particularly the proposal to broaden the indirect tax base and reduce personal income tax.
On the day his tax blueprint was released, he asked me round to his office and gave me a copy of the document, saying how important certain reforms were to the future of the country. Mindful of my past support for taxation reform, he was appealing to me for bipartisan help.
Keating’s taxation proposals led to a renewal of tension within the Coalition between those who wanted to oppose it outright for popular political reasons, and those like me, who believed that the national interest required a completely different taxation system. Its foundation was a new broad-based indirect tax in exchange for much lower income tax, something I had advocated for years. How could I oppose it? I made it clear that I backed these parts of the Keating plan.