The Killing Season Uncut

by Sarah Ferguson

  Swan’s deputy chief of staff, Jim Chalmers, could see that the effects of the crisis were starting to hit home.

  People easily forget now just how scared the Australian population was during the global financial crisis. There was a lot of anger. People had been to the ATM and discovered for the first time that they could only take out a maximum of a thousand dollars cash in a twenty-four hour period.

  Less than a week after the first significant discussion about introducing a fiscal stimulus package, a run on the banks seemed like a real possibility.

  On Friday 10 October, after major losses on the Australian share market, the Prime Minister convened an urgent weekend meeting in Canberra. Rudd allowed cameras into the Cabinet room to film part of the proceedings.

  We knew we had to communicate to the country at large that we had a substantial problem which was going to require drastic action, and you’ve got to actually bring the public with you.

  Julia Gillard and Finance Minister Lindsay Tanner attended the meeting; Swan joined in by phone from Washington. It was the first public outing of that small group of ministers that came to be known as the Gang of Four.

  Henry explained why they made the policy decisions that shaped the government’s response to the GFC.

  It simply would’ve been impossible to get everybody in the right place at the right time, and it would’ve proved an overwhelming distraction.

  That weekend, there were people in the room who understood the harsh reality of unemployment. Henry had been an adviser to the Hawke and Keating governments.

  Anybody who is an adviser, who lived through the recession of the early 1990s, could not help but have this seared on their brains and their hearts. Hundreds of thousands of people out of work, families destroyed as a consequence, a very large proportion of those aged over fifty-five who lost their jobs never worked again a day in their lives. It has a tragic human impact. It’s really the worst economic catastrophe that can affect a country.

  The Rudd government had inherited a Budget surplus of almost $20 billion. Now he and his senior ministers were considering a stimulus package that could push the Budget into deficit. Henry said it required political courage.

  When you design a fiscal stimulus package you have to accept that there will be, in the jargon, leakage. There’ll be money spent on imports, all of that kind of stuff will happen. You’ve got to have the courage for it. You’re going to be pilloried—and by the way, this was very much discussed before this decision was taken on that weekend—you’re going to get all of that negative publicity. Be aware of it. If you don’t have the stomach for that, then we can always have a good recession.

  Julia Gillard remembered the discussions.

  The environment was so much focused on the economics that I don’t really recall sitting around canvassing the politics. I think we all sort of inherently knew that there was this potential liability for Labor.

  Rudd had sold himself as an economic conservative, but the unravelling of the international financial markets set him and his government on a course radically different to the one they’d plotted on reaching office. They settled on a $10.4 billion package, with cash payments for families and pensioners, and an increase to the First Home Owner Grant.

  We knew, and I knew, that the Budget was going to go into deficit anyway, so my argument was simply this: it’s better we, the Australian Government, based on the advice of the Treasury, do everything possible to rescue this economy and at best, maybe, just maybe, avoiding a recession, which no-one at that stage thought was possible.

  The other equally pressing question to be resolved was whether to provide bank guarantees. On Sunday morning, Henry’s advice to Kevin Rudd was not to wait.

  Before the meeting started, I took him aside and I just said to him, ‘You need to be aware of this and I don’t think you’ve got the luxury of waiting. I think you have to make an announcement this afternoon, before the banks open on Monday morning. Monday morning could be too late’.

  Swan’s chief of staff, Chris Barrett, said the decisions the group made in early October were crucial to restoring confidence in the short term.

  If you want to look at the thing that really made the difference, that first bit of stimulus made probably about 60 per cent of it … We were out with the announcements barely four weeks later [after Lehman], and you can see how quickly the consumer and business confidence jumped back up. I give a great deal of credit to the PM and to the Treasurer then. They really understood the need to get into people’s heads, and in particular, get into people’s heads before the Christmas shopping season.

  Fortunately, the filming schedule for The Killing Season coincided with Christmas. Louie Eroglu filmed every Christmas scene he could find: shoppers, department store trees, illuminated cathedrals, inflatable Santas waving wildly outside car dealerships on Sydney’s Parramatta Road. This became a scene to describe Christmas stimulus spending.

  Ken Henry paid tribute to Rudd’s decision-making over the stimulus.

  Ken Henry (KH): At the end of the day somebody has to make the judgement, and in the political system that we have, that person has to be the Prime Minister. It can’t be anybody else.

  SF: And he made that decision?

  KH: He made that decision. I said to him subsequently that I thought his instincts were better than mine, and I still think that.

  CHAPTER 4

  A HARD INTERVIEW

  I have no particular taste for the personal brutalisation of politics, none whatsoever.

  Kevin Rudd

  THE INTERVIEW WITH Kevin Rudd in Boston in October 2014 didn’t go smoothly. Rudd is a hard interview. His timing can be brilliant, with moments of pure vaudeville, part pastor, part PT Barnum, but he can also be turgid, using too many words to demonstrate knowledge rather than share it. (When I asked Rudd about the criticism that he didn’t understand the union movement, he gave me a lecture on the Tolpuddle Martyrs.) It’s never clear which version of Rudd you are going to encounter.

  New South Wales Senator Sam Dastyari suggested there are a number of different Kevins.

  The key with Kevin is you’ve got to know which Kevin you’re dealing with before you walk into the room. Are you dealing with workaholic Kevin? Are you dealing with charming Kevin? Are you dealing with angry Kevin? Are you dealing with cunning Kevin?

  Rudd’s performance on the second day was different to the first. He had recorded the first day’s interview on a mobile phone and, I guessed, listened to it overnight. When we resumed, his delivery was different, answering as if in a press conference, creating unnatural sound bites. I tried to lead him back into a conversation but it didn’t work. By the end of the day I thought we had little good material and we’d used up a lot of time.

  After dinner Deb Masters and I walked back to our hotel through the gas-lit cobbled streets of Boston’s Beacon Hill. Like Washington, where I used to live, the residents keep their shutters open, allowing passers-by a glimpse into the heart of the house. As we crossed Louisburg Square, Secretary of State John Kerry emerged from his front door and stepped into a black SUV. A convoy of black cars pulled in behind him, the flashing lights and sirens momentarily distracting me.

  Back in my drab hotel room, I watched the interview on my computer. I paused it after ten minutes, leaving Rudd’s face frozen in close-up, and sat on my bed staring at his image. We were supposed to be telling a drama and this dialogue felt like a civics class. Deb Masters came in and said, ‘It’s not as bad as you think’.

  ‘Don’t cheer me up’, I half-shouted, unreasonably. ‘It’s awful.’

  Later, I rang my husband Tony Jones back in Australia: ‘I’m not getting anywhere. What am I doing wrong?’ He laughed and said it was like a scene from Frost/Nixon, the 2008 movie about the interviews British journalist David Frost conducted with Richard Nixon three years after the US President had left the White House. Part way through the interviews, an anxious Frost calls his producer because they are going badly:
Nixon is easily getting the better of him.

  ‘Just go for it’, Tony said. ‘You don’t need to be so cautious. He’s not going to walk out now.’ I’m no Frost and Rudd is no Nixon, but the simple suggestion made sense. Having come this far and knowing that Gillard had agreed to an interview, the risk of Rudd pulling out was very low.

  In the morning I pulled on my tight purple jacket for the third time. It’s not easy to find clothes that can hold continuity over three days without washing, the days ended too late for dry-cleaning, and I couldn’t wash heavy winter clothes in a hotel sink. Perhaps a better-prepared interviewer would have packed three identical jackets. An international rowing regatta was taking place in Cambridge that weekend and the banks of the Charles River were busy with trailers unloading boats. Driving to the studio, I watched the crews on the water, gliding under the bridges, and hoped for a better encounter with Rudd.

  Rudd arrived late to the studio with non-matching suit trousers. He had fallen over and torn his suit pants, so no shots below the waist. He seemed more relaxed.

  The first topic on that last day was a sensitive one for Rudd: the second stimulus package announced by the government in February 2009. When they announced the details of the first stimulus, the government was already contemplating the next instalment.

  In January, Rudd delivered a series of speeches in cities around the country to mark Australia Day. Ministers and officials followed him. Finance Minister Lindsay Tanner was part of the travelling caravan.

  We had to put together the stimulus package while this was happening … I can remember grizzling to myself, ‘God, if this is January, imagine what the rest of the year’s going to look like!’ I had days when I was on four flights and I’m sure there are some of my colleagues who probably could have topped that.

  Treasury secretary Ken Henry understood the Prime Minister’s caution about the implications for the Budget.

  At some point it became clear to him that the actions he was going to take were going to push the Budget into deficit … I know this was a big issue for the Prime Minister and the Treasurer. This was going to be a legacy issue, no question about it.

  On Tuesday 3 February 2009, the government announced its $42 billion Nation Building and Jobs Plan, a mixture of longer-term investment in infrastructure and short-term payments to keep cash circulating through the economy. Ken Henry remembered learning the final figure.

  I wasn’t in the room for the final decisions but I was being kept informed. When one of my deputies phoned me to tell me how big it was, I did express some surprise at the size of it. But having said that, whilst I was surprised, I didn’t consider it inappropriate. Nobody will ever know whether it was the right amount or whether a larger amount would have given Australia an even better unemployment outcome. Or whether we could have achieved satisfactory economic outcomes with a smaller package.

  The day after the government unveiled the measures, Malcolm Turnbull told Parliament the opposition would vote against the package. The opposition didn’t reject the idea of a stimulus, he said, but $42 billion was ‘more than is appropriate right now’.

  US Treasury secretary Hank Paulson discussed stimulus measures with Rudd. Paulson was diplomatic about whether the Australian stimulus was justified.

  Well, of course, of course. Now you can never prove a contrafactual, okay? You can never say if we hadn’t of done this the economy would have turned down. But let me tell you, I think one thing that we all learnt in the financial crisis is you don’t want to play with financial fire. You don’t want to take a risk. I think knowing what I know of the financial system in Australia, he [Rudd] made the right decision, and no-one will ever know with certainty but I don’t think anyone in Australia would have liked to have lived with the consequences if he had said, ‘Well, I think maybe we won’t need it’, and then he’d been wrong.

  In June 2009, Australia’s quarterly economic figures were released. In a small archive miracle, Ken Henry was being filmed, seated next to Communications Minister Stephen Conroy in a Senate Estimates hearing, when a note was passed to him containing the figures. Henry showed the note to Conroy, who looked incredulous and then began to smile. In the March quarter, in the midst of the worst global economic downturn since the Great Depression, the Australian economy grew by 0.4 per cent. The nation had avoided recession.

  Staffers told us there was shouting, whooping, high-fiving and general pandemonium in the offices and corridors of Parliament House. Rudd described the moment.

  We got the growth numbers and it was a genuine whacko moment, which is, ‘We’ve managed to do it’. And I’ve got to say, most of our Treasury team did not think we could, but we just got across the line.

  Ken Henry reminded us that while Australia hadn’t technically fallen into recession, there were consequences across the economy. More than 200 000 people lost their jobs, despite the government’s efforts.

  The arrival of winter in 2009 was a turning point for Episode 1, marked by new Opposition Leader Malcolm Turnbull walking across the icy forecourt of Parliament House, crows silhouetted above him against a grey sky. Crows became The Killing Season’s totem: jet black and sinister, their cries punctuate the series’ soundtrack.

  With the government heading towards the long winter break, Thursday 4 June was a busy day in Parliament: debate continued on the first tranche of the Carbon Pollution Reduction Scheme legislation; in Question Time, Parliament acknowledged the twentieth anniversary of the Tiananmen Square uprising; the Prime Minister informed the chamber that Joel Fitzgibbon had tendered his resignation as Defence Minister; and the Leader of the Opposition asked the Prime Minister and the Treasurer whether they, or anyone in their offices, had tried to help a car dealer named John Grant.

  Earlier that day, before a Senate committee, a Treasury official who managed OzCar—a special-purpose fund set up during the financial crisis to help struggling car dealers—was answering questions from Liberal Senator Eric Abetz. The official, Godwin Grech, said he had received ‘representations’ about car dealerships from the Prime Minister and Treasurer’s offices. Pushed for detail, Grech confirmed the approaches from the PM’s office were about one dealership, and they came ‘mostly’ by email.

  Ken Henry had mentored Godwin Grech.

  This guy was so well known in the department. A quirky character. A fun person to have around, believe it or not.

  The car dealer Grech referred to, John Grant, was an acquaintance of Kevin Rudd’s who had once given Rudd a second-hand ute which he used in his electorate. The donation had been declared. When Turnbull first raised the issue in Question Time, Rudd was puzzled.

  I just scratched my head and turned around to Treasurer Swan and said, ‘What the hell’s all that about? I have no idea’.

  Andrew Charlton was sitting in the adviser’s box in the chamber.

  Suddenly I noticed that a number of the Coalition frontbenchers were staring at me quite intently, and then Malcolm Turnbull asked the Prime Minister whether he had corruptly acted to give a favour to his friend, John Grant. I sent down a piece of paper to the Prime Minister at the dispatch box that said, ‘I’ve checked with the office. No-one has provided any special favours to Mr Grant’. And the Prime Minister said that in Parliament.

  The ‘Utegate’ saga unfolded over the next two weeks. Press secretary Lachlan Harris watched Turnbull’s fevered pursuit of Rudd and Swan.

  I can remember watching Turnbull go after [Rudd and Swan]. Really, he obviously thought he smelt blood. There’s a great expression in rugby league, white line fever, and there was a man that had white line fever. He saw the tryline but he didn’t see the defending tacklers coming his way and he paid a very high price for that.

  Unknown to members of the government, Grech was a Liberal Party mole who’d convinced Turnbull and Abetz that he had evidence that Rudd’s office had sought special assistance for Grant. He claimed the proof was an email from Andrew Charlton.

  Grech put in a second appeara
nce before the Senate committee. Urged on by Abetz, the best that he could offer was his recollection of a ‘short email’ from the Prime Minister’s office, alerting him to Grant’s case.

  As Grech gave his testimony, government staffers, including Charlton, were watching in their parliamentary offices.

  I think I was having some morning tea and he said ‘Andrew Charlton’ and I think I might have spat that morning tea on the ground. It was a shock.

  Turnbull called a press conference and said Grech’s evidence was ‘extraordinary’. He demanded Rudd and Swan justify their actions or resign.

  Ken Henry was in a tax conference when Grech was giving evidence. He saw it on the evening news.

  At the end of it I turned the television off and my wife said to me, ‘Do you trust Godwin?’ The next morning I called the head of Treasury’s corporate area and I said, ‘I want our IT security people to go through every email of Godwin’s and whatever else’ … By Sunday morning I felt I had to call the commissioner of the Australian Federal Police.

  The email from Andrew Charlton was quickly exposed as a fake; so too was Grech.

  When I referred to the Grech affair as a small thing in my interview with Ken Henry, he shot back a reply.

  KH: This was not a small thing. No. Learning that one of my staff had behaved inappropriately in providing information to the Leader of the Opposition, over an extended period of time and in some detail, this was not a small thing for the Treasury. I was gutted by it. And this was an official that from time to time I had mentored. So this had real personal impact. I did feel personally betrayed.