Lazarus Rising

by John Howard

  In mid-2006 Turnbull gave Arthur Sinodinos a detailed account of a long discussion he had had with Costello at Turnbull’s home in Sydney about the future of the Government, Costello’s impatience with my not having retired and how he had carried the Government. Turnbull wanted it to be made known to me that on the basis of this encounter and other considerations, he was adamantly against Costello becoming leader, and that he hoped I stayed on as PM. Not long after, in a personal discussion, Turnbull confirmed to me the substance of what he had told Arthur.

  My reading of the mood of the party was that colleagues really hoped I would stay, and I felt I could leave a final decision on my future until the end of the year. There would be pressure as year’s end approached, as it was commonly accepted if I did retire, my successor should be given at least 12 months to cut his own mustard.

  The leadership was not constantly on my mind. There were several pieces of unfinished business before me: the High Court adjudication on WorkChoices — the states had challenged the validity of our reliance on the Corporations power — and finally resolving Telstra — two very significant matters which went to the heart of reform causes I had championed since becoming PM. However, the working assumption that I would retire before the next election had not changed.

  That is, it had not changed until the Glenn Milne story in News Limited papers on Sunday, 9 July 2006. Under a Sunday Telegraph headline, ‘PM Broke His Secret Deal’, the story said that at the December 1994 meeting involving Ian McLachlan, I had said that I would hand over the prime ministership to Costello after two terms. Although the headline carried the word ‘deal’, the story itself did not say that Costello had agreed to support my replacing Downer, an essential element if there had been a deal. McLachlan had made a note of his recollection of the meeting and kept it in his wallet. As recounted in an earlier chapter, I had told Peter Costello that I would only serve one to two terms as Prime Minister. He did not offer me anything in return. We reached no understanding; at no stage during the discussion did Peter say that in return he would help me to become leader unopposed. I left that meeting with no clear indication from Peter Costello as to where he stood on the leadership.

  This was not a chance story. In February 2008, after the Government’s defeat, Peter Costello acknowledged on the ABC’s Four Corners that McLachlan had telephoned asking if he, Costello, had any objection to McLachlan confirming to Milne the substance of the story, which would guarantee that it would appear. Costello had no such objection, nor did he give advance warning of the story to me or my office. That came from Milne himself to David Luff, my press secretary, after it had been put to bed.

  Peter was happy for the story to appear — at the time — despite the fact that almost 12 years had elapsed since the meeting, and that he had never over that period raised the meeting with me or alleged that I had broken my word. Revealingly, in a comment piece Milne said, ‘The leak is designed to force Howard’s hand.’5 It did, but not in the way Peter must have wanted.

  When asked about the story the next day I simply said that there had been no deal about the leadership. In retrospect, it was probably a mistake not to have spoken to Costello about the issue before either of us said anything to the media. Though, given my instinctive belief that Costello had wanted the story to run, I doubt that anything I might have said to him would have made any difference. He had cast his bread upon the waters. He hoped that the drama surrounding the 12-year-old story would shake things up about the leadership, and to his advantage.

  That calculation proved disastrously wrong. The reaction of Liberal MPs, apart from a few Costello activists, was one of both astonishment and irritation. The near-universal comment was, ‘For goodness’ sake, that was 12 years ago. We’ve won four elections since then. Why bring it up?’ If the story had been the spontaneous product of investigative journalism, then it had been within Costello’s gift to kill it off. All he had to do was give his version of what had happened in December 1994 but say it was a long time ago, the Coalition had won four elections since then and what transpired at that meeting in 1994 had no relevance for the current situation of the Government. He could have reiterated his desire to lead the party, but said that the time of my departure was entirely up to me. That response, with honour, would have ended the story. The fact that Peter did not handle it that way suggested that he hoped the story would shift the dynamic of the leadership issue in his favour. It certainly had an impact, and a decisive one, on the leadership, and in a way that destroyed Peter Costello’s hopes of my retiring before the 2007 election.

  Even those who completely accepted his version of events and wanted me gone and Costello in the Lodge as soon as possible realised that his handling of the issue had hurt him. Christopher Pyne, a close Costello activist, telephoned me, acknowledged Costello had mishandled the issue and said that Peter wished to continue working with me in his role as Treasurer. He had no need of such advocacy. It was my wish that Peter stay in his job. Other colleagues, strong Costello people, spoke to Tony Nutt, telling him that although they wanted Costello as PM one day, he had bungled things, and I had to stay on and fight the next election.

  The incident brought urgency back to the leadership issue. Discussion quickly shifted from who said what 12 years earlier to who do we want as leader? This was the last thing that Peter Costello should have desired. It meant that suddenly the pressure was on me to make it known, quickly, whether or not I would lead the party to another election. Before this, my future was something which could wait until a time close to Christmas. Now, courtesy of the Milne story, and the way in which it had been handled by Peter Costello, both of us would be forced to declare our hands almost immediately. Within only four days, an Australian editorial called on me to declare my leadership intentions.

  Don Argus, chairman of BHP-Billiton and doyen of the Melbourne business community, telephoned me and said, ‘I hope that you’re not thinking of going. Nobody down here thinks you should be leaving the reservation any time soon.’ A few days later Ron Walker, the party’s veteran fund-raiser and Victorian activist, called. My diary entry records Walker having told me of a lunch he had had the previous day with four leading members of the Melbourne business community (Hugh Morgan; John McFarlane, CEO of the ANZ Bank; Robert de Crespigny, a leading mining industry figure; and Laurie Cox, a former chairman of the Australian Stock Exchange) at which, according to Walker, there was scathing criticism of Costello’s behaviour.

  Nobody, however, cut to the core of the issue quite like the respected Melbourne journalist Neil Mitchell. Writing in his weekly column in the Herald Sun, he described Costello’s performance as ‘petulant, arrogant and indulgent’. He said that Costello had ‘wounded a government that was not in serious trouble and significantly damaged any hope he has of realising what he seems to believe is his God-given right to ascension’. Mitchell went on to say, ‘Howard is one of the most successful conservative leaders in history. He has been elected four times by the people as Prime Minister. His popularity remains high. His government is not a shambles, at least not until now.’ He continued, ‘But here we have his deputy and some of his backbenchers telling him to get out, not because of public clamour or scandal but because of this immature whining that “it is my turn”.’6

  The party and the public had turned against Costello over this issue. Even the Canberra press gallery, never my greatest cheer squad, judged him harshly. The published polls had me way ahead of him as preferred Liberal leader, and as well continued to give me a big lead over Beazley, whereas Costello was behind the Labor leader in a head-to-head contest, according to a Newspoll conducted a week after the December 1994 story broke. This was consistent with the results of that popularity measurement over the preceding few years, except for a poll in April 2006 which had Costello ahead of Beazley. The irony for my deputy could well have been that he badly misread public sentiment on an issue just as the public was beginning to warm towards him.

  Pressure mounted on me to
declare my position. Parliament was due to meet after the winter recess on 8 August. I knew that if I had not said anything about my future by then, the leadership would be the only game in town, and that would damage the Government.

  I had to make a decision there and then. There was little doubt that the decision had to be that I would stay and fight another election. Contrary to so much of what has been written about my decision to stay, I had genuinely mixed feelings about it. The Government had been in power for a long time; seeking a fifth term was tempting fate; only Menzies had done it, and he had profited from the momentous and bitter split in the ALP. There was nothing like that on the horizon for me.

  If I stayed and won again, I would be a hero. If I lost, many would brand me the stubborn old bloke who stayed too long, denying Costello his rightful inheritance by preventing generational change. These were thoughts that I committed to my diary at the time. It was a hard decision. It was the wrong time and the wrong set of circumstances in which to make it. Yet I had no alternative. Putting it off was not an option. The Government would bleed profusely if I remained silent.

  It was a tragedy for the Government that it had reached this sorry state of affairs. The fact that I had to make the decision then meant, inevitably, that the decision had to be that I would stay. To have gone in the wake of the Milne story about the December 1994 meeting would have had history recording that I had been forced out by the revelation of a broken deal, no matter how untrue that might have been. I was never going to allow that to happen. Compounding this powerful constraint on my retiring at that time was overwhelming evidence that my colleagues and the voting public both wanted me to stay. That attitude had only been reinforced by what the publication of the December 1994 story had set in train.

  If this drama had not occurred or had been effectively cauterised, there would have been little pressure on me to say anything about my future until the approach to Christmas. In those circumstances I would have gone then, allowing Peter Costello a full year within which to make his own mark as PM; that, however, was not to be.

  At the end of July I decided to announce, by way of a letter to my Liberal colleagues followed by public confirmation, that I had decided to stay and lead the Coalition to another election. I had consulted widely within the party and it was obvious that the overwhelming majority wanted me to stay as leader. They also wanted Peter Costello to remain where he was. I rang Peter on Sunday, 30 July to tell him of my decision, and how I intended to announce it. I recorded a diary entry of this conversation and some of my other thoughts on the issue. Peter told me that my decision was the wrong one for the Liberal Party, that the letter I proposed sending to our colleagues could easily have been written by Menzies when he was contemplating his future, and that MPs, particularly senior ones, never tell the leader their true feelings. He said that I might not end up facing Beazley at the next election.

  I reminded him that in 1991, six of Bob Hawke’s most senior colleagues had gone to him and said it was in the ALP’s best interests that he stand down. That was not the mood of the Liberal Party in July 2006. I made the point several times that there was wide support for me staying.

  Although he reserved his position regarding a response to my commitment to stay, I did not believe that he would either challenge for the leadership or resign and go to the backbench. There was no serious support for a challenge. He must have known that. To simply resign and retire to the backbench would be seen as purely self-serving. Peter said that he would inform me of his response after thinking of it overnight. His observation to me that it would be difficult to go through the next election campaign with the current leadership arrangement did not suggest to me that he was about to jump ship.

  Although I was relieved a decision had been made, I felt no joy about it. As I sat in my Kirribilli House study, signing my letter to each of more than 100 Liberal colleagues, I felt quite reflective. This was not what I had either expected or hoped for. This was not an unpressured decision about my future. I had that nagging feeling that the decision was being taken in the wrong circumstances, although in those circumstances I had no doubt that the decision I was about to announce was not only the right one but also the one that Liberal MPs and the public wanted. All my instincts told me that the next election would be extremely hard to win.

  I flew to Innisfail in far north Queensland the next day to talk to local people about how they were handling recovery from the cyclone which had hit earlier in the year. The Commonwealth had provided massive aid, which totalled in the end about $230 million. It was there in tropical dress, no jacket and no tie, that I made my announcement. It was in Bob Katter’s electorate. Peter had rung me earlier to say that he would stay on as Deputy Leader and Treasurer. That did not surprise, and I thanked him for his decision. I spoke warmly of him in my own comments. I told the assembled journalists that it was the emphatic wish of the parliamentary party that the current leadership team of me as leader and Peter as deputy should stay in place and lead it to the next election.

  In the space of three weeks, the whole leadership issue had been disposed of in a way that I had never expected. Instead of an unhurried decision at the end of the year, with all pointers being that I would go, Peter’s inept handling of the December 1994 story incident had created a situation where I had no alternative but to announce when I did that I would stay.

  Since then I have occasionally tried to play devil’s advocate with my decision. If I had said nothing about the leadership before parliament resumed, both Peter and I would have been relentlessly pursued about it every question time. Would I give a promise to stay and fight the next election? Costello would have been asked repeatedly about a challenge. MPs would have been constantly drilled by the press. The less disciplined ones would have given plenty of quotable quotes. It would have been the dominant political story for weeks. Before long there would have been calls for me to make my future intentions plain in the interests of the Liberal Party. Pressure for that from some media had started early. The Government’s political position would have eroded rapidly. That course of action was simply not a viable option.

  The early December putsch which replaced Kim Beazley with Kevin Rudd and immediately lifted Labor’s stocks presented, some months later, another exit option for me. Under Rudd the ALP shot ahead in the polls, and as this trend consolidated, my departure then would not have been linked to the December 1994 story, but simply seen as a pragmatic recognition of the fact that a new leader from Labor required a different one from the Liberals.

  The main problem with this option was that Rudd’s arrival had further intensified sentiment in the party for me to continue as leader. Colleagues thought that only I had the experience to handle this new, unexpected challenge. The other drawback was that it would have dramatically enhanced the perception of Rudd as a world-beater. After only several months into the job he would have scared Australia’s second-longest-serving PM into retirement, after that PM had declared only months earlier that he would lead his party to the next election. I thought about it, but concluded that it was not a viable option, either. The reality was that, as I knew when I reluctantly made my announcement the previous July, I was committed to fight the next election as PM, irrespective of the circumstances. It was long past the time when I could decide that I would retire in advance of the next poll. In any event the view was held early in Rudd’s time as leader that the tide would eventually turn, and the more so if I stayed at the helm.

  The polls, both public and private, provided unrelieved gloom for the Coalition for the first seven months of 2007. What small rays of hope that did appear occasionally, extinguished themselves quickly. Separate polls in my Bennelong electorate showed that, consistent with the general swing against the Coalition in the generic polls, I would lose my seat. Labor’s Bennelong candidate was the well-known former ABC presenter Maxine McKew. When late in 2006 she had announced on the Lateline program that she was leaving the broadcaster, I speculated to my wife, ‘S
he’s going to run in Bennelong.’ By the end of July I had concluded that if the polls were to turn around, that would not happen until the election had been called, and voters were faced with making a real choice. I drew a small amount of comfort only from the experience of 2004, when the polls did move more firmly our way once the campaign had started.

  Throughout this period there had been, to my knowledge, no serious debate within the party about the leadership. It was regarded as having been firmly settled the previous year. There was virtually no press speculation either.

  Then, in successive months, Peter Costello was involved in incidents that produced the impression of a government which was unravelling. He must have known that the biography of me written by Wayne Errington and Peter Van Onselen would be published prior to the 2007 election. This did not prevent him making severe criticisms of my record as Treasurer to the authors of the book. Not stopping there, he called into question my commitment to economic rationalism, and even industrial relations reform. The book was published late in July 2007. The timing could not have been worse. When I raised the comments with Costello, he reacted with embarrassment. He mumbled something to the effect that he had only been trying to help. I felt it unnecessary to make the point that his remarks could hardly qualify as helpful. This was appalling conduct on his part. The fact that we were so close to the election and our moment of political truth meant that I suppressed the deep anger I felt.