Lazarus Rising

by John Howard

  2006 saw the most innovative policy from the Treasury area in our whole time in government, the superannuation reforms announced by Peter Costello in the 2006 budget. They included the removal of all tax on superannuation payments from taxed contributions, and a significant simplification of the entire superannuation structure. These reforms were widely welcomed. They were accompanied by a major liberalisation of the assets test for the aged pension. Given the way in which the global financial plunge of 2008 ravaged the retirement incomes of many Australians, these 2006 changes provided a valuable buffer for older Australians.

  For all of its famed intellectual resources, and they were formidable, the Treasury produced few really inspiring new policy ideas during our time in government, or certainly not ones of which I was made aware. Big changes such as the GST had been around for a long time and were finally brought to fruition when the requisite political will came into play. The independence of the Reserve Bank and the Charter of Budget Honesty were both pre-election promises, way back in 1996. I don’t diminish the fine technical work of the Treasury in the design features of big policy reform, such as taxation. It was impressive and indispensable to the final product. But the big ideas never seemed to come from there in the first place. Perhaps it was because new ideas often involved spending money, therefore Treasury’s attitude was no new ideas.

  The Commonwealth Treasury does not always oppose spending money. According to numerous reports which have never been disputed, Ken Henry, the current Treasury secretary, told the Rudd Government when the world financial plunge hit in September 2008, to ‘Go hard, go early and go households’, with lots of new spending. That advice led to the biggest discrete federal spending splurge in my lifetime. Presumably it was judged that the huge fiscal injection of late 2008 and early 2009 was justified by the circumstances.

  There were times between 1996 and 2007 when spending extra money in areas such as Health, Education and welfare reform were fully justified. Yet the Treasury usually saw its role as resisting the spending, rather than playing a leading role in designing the best way in which the extra resources should be used. Welfare to work reforms, work/family balance policy and the major health changes of 2003 and 2004 are leading examples of where the policy drive came from elsewhere than the Treasury.

  When I recorded my thoughts about the Government in my diary on 8 November 2006, I had no idea that Kim Beazley’s days as Labor leader were numbered. I was aware of the personal dislike of Kevin Rudd in ALP ranks, believed the opposition would not make the left-wing Julia Gillard leader, and assumed that the genuine affection for Beazley within Labor ranks as well as his vast experience would sustain him.

  He certainly needed sustenance. He had had a number of lapses, two of which were quite embarrassing, indicative of a man heavily affected by the pressure of the job. In August, he mistook comments of the Reserve Bank governor Ian Macfarlane for those of Ian McFarlane, the Industry and Resources Minister, and, in error, attacked the central bank boss. Worse still, in November, when Belinda Emmett, the popular wife of the TV host Rove McManus, died at the tragically early age of 32, Beazley, on the morning of her funeral, extended his condolences to ‘Karl Rove’ (George Bush’s principal political advisor). The name confusion was excruciating. It was impossible not to feel sorry for Beazley.

  I was in Kuala Lumpur on a visit to Malaysia when, on Friday, 1 December, speaking to my Canberra office by telephone, Ben Mitchell, one of my press secretaries, said, ‘Rudd has just been to see Beazley and told him he is mounting a challenge. Beazley has called a meeting next week. Rudd and Gillard are in it together.’ Speculation had been there, but this development surprised me. The night before, Brian Loughnane, the federal director, had given me the results of a further series of benchmark polls in marginal seats. Not every one of them was marvellous, but we were still in a winning position. That was all about to change.

  I sensed that Beazley’s fate was sealed when I saw Michael Forshaw, a right-wing ALP senator from New South Wales, say on TV, ‘I’m voting for Kevin Rudd, but with a heavy heart, because I think Kim Beazley deserves great tribute, great admiration from the party. I hope that he will understand the decision of many people who have supported him in the past, still respect him, but we have to move on.’1 He was a NSW Labor Party machine man, pure and simple. Beazley’s solid NSW support base had eroded. Rudd’s big spruikers in New South Wales were John Robertson, head of Unions NSW, and Mark Arbib, the general secretary of the ALP’s NSW branch, later a senator and junior government minister.

  These alliances, and the deal he had made with Julia Gillard for her to replace Jenny Macklin as Deputy Leader, were the decisive elements in Rudd’s 49 to 39 victory over Beazley on Monday, 4 December. It was an immensely sad day for Kim Beazley. Not only did he lose the leadership, but that day his brother died suddenly in Perth. I made sure that there was a VIP jet available to fly him home to his grieving parents.

  The day of the ballot, an A.C. Nielsen poll, published in the Sydney Morning Herald and the Age, showed Labor ahead of the Coalition by 56 to 44 on a two-party-preferred basis, with a 12 per cent primary vote for the Greens. Beazley was then still leader, although, when most of the interviews for the poll were conducted, there would have been full knowledge of the upcoming leadership vote. That was as big a lead as Labor had had all year. I was still miles ahead of Beazley on the preferred PM measure, and the Green vote remained high. These suggested that doubts about Beazley were suppressing the ALP vote. The Green vote eased somewhat once Rudd replaced Beazley, with Labor’s primary vote jumping to about 47 per cent, and staying in that region in every subsequent Newspoll and A.C. Nielsen survey until right on the eve of the election.

  The Rudd–Gillard team transformed the political scene. New leadership teams always do, especially against a government which had by then been in power for almost 11 years. Rudd’s strategy was simple: he would run as a younger version of me and without what he argued were the rough edges of issues such as WorkChoices and our refusal to ratify Kyoto. There was widespread press interest in the duo, and they got off to a flying start. The first Newspoll after Rudd’s elevation had Labor leading the Coalition 55 to 45 on a two-party-preferred basis, and the opposition never looked back from there. By March, Rudd led me by 10 points on the preferred PM measurement; the last between Beazley and me had given me a margin of 30 points. In the middle of March 2007, Labor’s two-party-preferred lead was an astonishing 61–39, according to Newspoll.

  Rudd’s election surprised me. I had thought that his style would grate too much with ALP members who didn’t appreciate being lectured to on a regular basis. I obviously underestimated their sense of despair with Kim Beazley.

  It was obvious from the published polling and our own internal research that Rudd and Gillard presented a huge challenge. For the first time in more than a decade the Labor Party had momentum. Rudd was energetic, and presented well in a clear, cut-through fashion. This was not what I had expected, and I knew that I faced the fight of my life.

  As I pondered the year ahead over the Christmas/New Year break, first at Kirribilli and then briefly at Cable Beach, near Broome in Western Australia, I thought a lot about the composition of the cabinet. The reshuffle I decided on involved my seeking Amanda Vanstone’s resignation, not an easy conversation; she had been Australia’s longest-serving female cabinet minister and had been part of my ministerial team from the outset in 1996. Nonetheless, I felt that Immigration needed a new person at the helm. Amanda was impressive on broad policy and concepts, not so committed to detail and paper shifting — an essential part of that portfolio. A little while later she was appointed Australia’s ambassador to Italy.

  I promoted Malcolm Turnbull straight into cabinet as Minister for the Environment and Water Resources. It was a punt but a justified one. Turnbull had done well as a parliamentary secretary for Water. He had flair, and I thought that in a year in which the media would be obsessed with the environment and climate change, he
would do a better job than Ian Campbell, the Environment Minister. I shifted him to Human Services, still in the cabinet.

  I respected Kevin Andrews and I had no desire to demote him, so I made him Immigration Minister in place of Amanda Vanstone. He was disappointed but accepted the change and handled a tricky job well. The other cabinet change, and an important one, was to promote Joe Hockey into Workplace Relations and add him to cabinet. Hockey was a good media performer. He had gathered a lot of publicity from his joint appearances on the Sunrise program with Kevin Rudd. He came from Sydney, the nation’s major media outlet, and that would help give the post more exposure. It was a difficult, but necessary, reshuffle.

  This was the last significant ministerial reshuffle I would have. On the subject of reshuffles, it is worth noting that old habits amongst critics always die hard. Throughout the time I was Prime Minister, there was an express or implied criticism that the so-called moderates or ‘small l’ Liberals were unfairly treated by me when it came to ministerial preferment. It was a false charge. I only have to list the names of Hill, Ruddock, Nelson, Vanstone, Hockey, Turnbull, Patterson, Wooldridge, Fahey, Williams, Brandis and Brough to refute this allegation.

  All of them, in one way or another, identified with the progressive side of the party on the quite rare occasions when such labels were an issue. I honoured the broad church that our party was. That is one reason why we were so successful for so long.

  Although I knew how hard it had now become, I was by no means defeatist, nor were my colleagues. We had all been here before — or sort of. Mark Latham had started well, not as well as Rudd, but enough to unnerve us for a while. Then he had stumbled, and gradually we had worn him down, only to go on and win the 2004 election with an increased majority. In the early phase of Rudd’s leadership, it was believed that the same pattern would be repeated with him.

  We were all imbued with the belief that the public would not throw us out against the background of such a powerful economy. Colleagues continued to report that there was no general hostility towards the Government and that my personal stocks with voters remained high. Given the polls, we concluded that despite the people being happy with the Government, they were excited with the possibility of change.

  Our internal research highlighted an emerging problem. Australians thought that we had run the economy well and saw the Coalition as far superior economically to the Labor Party, but, ominously, had begun to take the strength of the economy for granted. There was an increasing tendency to attribute the healthy domestic economy to the strength of the global economy, especially China. Such an attitude, if it were to take hold, would reduce the risk of a switch to Labor. Unsurprisingly, we set out to highlight Labor’s past failures on the economy, especially high interest rates and as well the potential influence of trade union bosses on a future Labor Government.

  I was determined that the Government would continue to take major decisions and not be spooked into timidity by Labor’s new-found poll ascendency. If the Coalition became too defensive, the public would sense that it had lost its nerve and certainly vote it from office. We also had to work hard to solve issues which really aggravated sections of the electorate for no long-term policy gain and where no important principle was at stake. I called them ‘barnacles’.

  The prime example of a barnacle was the time it had taken for the Americans to bring David Hicks to trial. Most Australians suspected that Hicks was at least guilty of the things to which he ultimately pleaded guilty. They had little sympathy for him, but he should have his day in court. The fact that a lot of the delay was due to major constitutional challenges against the military commissions which were intended to try detainees such as Hicks went through to the keeper with most Australians. The longer the wait dragged on, the harder it became to stop supporters of Hicks building him into some kind of martyr.

  At every level we had pressured the Americans to bring Hicks to trial. I spoke to George Bush about it at the APEC meeting in Hanoi the previous November, and again in February 2007, stressing the domestic political problems for my Government. Just a few days later the Vice-president, Richard Cheney, arrived in Australia. I pressed him hard on Hicks. He told me that Hicks was ‘at the head of the queue’. They had got the message.

  On 30 March the US Defense Department announced that Hicks had been convicted of giving material support to terrorism. Hicks admitted to 35 facts that supported the charge. These included training at multiple al Qaeda camps in Afghanistan and joining fighters at Kandahar Airport and frontline forces in Konduz after the terrorist attacks of 11 September.

  We then turned our attention to the 2007 budget, with both Peter Costello and me realising that this could be the last Coalition budget for some years. The nation’s fiscal position was enviable, so a popular budget would be fully consistent with sound economic policy. There needed to be a heavy emphasis on tertiary education, because a highly educated workforce was critical to our future. There was a $5 billion tertiary education fund as well as further taxation relief, for the fifth year in a row. There were also vouchers for parents of children who had not met the national literacy and numeracy benchmarks, as well as generous measures to aid the professional development of teachers. There were one-off payments to retired Australians and, yet again, special bonus payments to carers.

  The budget received a rapturous reception. It touched as many bases as one could possibly hope for. Ross Gittins of the Sydney Morning Herald, often a harsh critic of the Government, said, ‘… as pre-election budgets go this one’s not bad. As you would expect, there are a lot of giveaways, but their total cost is not sufficient to put pressure on interest rates.’2 He said that the budget was about investing in the future. Terry McCrann said that the budget posed no threat to interest rates. Polling found that it was the best-received budget ever. Yet, incredibly, it had not lifted our support. The Government was completely flattened by the finding of the first voting-intention Newspoll after the budget that Labor led the Coalition on a two-party-preferred basis by 60 per cent to 40 per cent. Our political fortunes remained in the doldrums.

  The Liberal and National parties faced a perplexing situation. For close to five months the Labor Party had held a commanding poll lead, enough to give it a really big win if replicated at the polling booths. Nothing we had done in response seemed to work. We had delivered a popular and widely applauded budget. The public and the boffins both liked it. There was good long-term policy in the document. The fairness test had been introduced to remove the perception of harshness from our workplace changes. The Hicks issue had been resolved. We had launched a huge water initiative, although some of the states were playing games on this. We had bitten the bullet on emissions trading, with the Shergold Report released on 1 June rapidly being turned into clear policy. This was the agenda of an active government, still policy-confident and by no means spent and exhausted after 11 years of power.

  My colleagues remained remarkably sanguine about it all. I am sure that most of them thought that I would pull a rabbit out of the hat. Sensing this air of unreality I deliberately dramatised the serious political challenge we faced by telling a joint party meeting on 22 May that we faced ‘annihilation’ if the opinion polls were fulfilled at the election. I knew that would receive a big press run. It sure did. It was a rudimentary approach, but I was anxious to shake any remaining complacency out of my colleagues. We had been in power for so long that the majority of them had never known opposition. Of the Coalition MPs and senators of the 41st parliament, only 46 had been elected before we came to power in 1996, compared with 81 elected since 1996.

  It was to Alexander Downer that I spoke most candidly about our political position. His theory was that the prolonged drought had depressed people, and that once it rained again our electoral fortunes would turn around. It was an interesting take but I didn’t believe it.

  Early in 2007 I had formed a small political tactics group, to meet over dinner at the Lodge, which would regularly assess o
ur political position. As well as me it comprised Mark Vaile, Peter Costello, Alexander Downer, Nick Minchin and Mal Brough. I added Brough both because I saw him as good potential talent and because he was from Queensland, a state which would loom large as the year wore on. I did not have a monopoly on wisdom when it came to solving our problems, and I thought that a small group such as this would encourage the frankest of discussions including, where necessary, an analysis of my own performance.

  There was very little disagreement within this group; there was no push, for example, to ratify Kyoto; no pressure to change policy on Iraq; and endorsement of our embracing the framework of an emissions trading system. Knowing just how tough the political climate had become, I wanted to create maximum opportunities for senior colleagues to question the direction in which we were heading, if that was their wont. The group of five added another, more intimate forum in which that might happen.

  When the election neared, this group debated the major options to be put in the 2007 campaign. We opted for the big tax reduction package announced by Costello and me right at the commencement of campaigning. At one stage, I had canvassed extensive tax breaks for savings as the centrepiece of the campaign pitch. In the end I decided that across-the-board tax relief should be supported because of its simplicity and consistency with previous Liberal and National Party policy.