Holt’s elevation to the prime ministership saw the government turning in a new direction, with a new image. Fit, silver-haired, genial, and urbane, Holt’s media image was much more relaxed and extensive than Menzies’ had been, and the unexpected policy areas he began to stake out encouraged suggestions of a new era. Within weeks of taking over, Holt had disinterred a series of immigration reforms that had been buried by Menzies in 1964. Those measures relaxed entry and residency requirements for Asian migrants to Australia, and allowed eligible non-European migrants to become Australian citizens upon completion of a five-year residency. It was the beginning, Holt’s biographer later wrote, of the ‘formal deconstruction’ of the White Australia Policy.28 The reforms were widely welcomed in Asian countries that Holt toured during the early months of 1966, as he sought a closer diplomatic engagement with Asia — another of his shifts of policy.
The acclaim that greeted the Holt government matched McMahon’s happiness in his marriage. In Sydney, he and Sonia moved to a flat in Point Piper with glorious views of the harbour. It took a long while to set up the flat properly — ‘I think it will take forever to finish at this rate,’ Sonia was saying in March — but they were hardly deterred from buying property.29 Early in May, McMahon finally decided to eschew the Hotel Canberra, where he had held a permanent booking for years, in favour of a proper home in the nation’s capital. He and Sonia purchased a small modernist-styled unit in the leafy old-money suburb of Forrest. The unit, one of a set designed by the architect Roy Grounds, had ceilings made of compressed straw and a glass wall that allowed the northern sun to pour inside. It was beautiful, but decidedly different from the antique styling of McMahon’s Sydney home. ‘I think this one will be fairly contemporary,’ Sonia said.30
It was just as well they had settled down for, by month’s end, they had another reason: Sonia was pregnant. They found out in a manner that was, considering McMahon’s reputation, faintly ironic. While Sonia was in hospital for a curette, a journalist rang McMahon to confirm that he would soon be a father. Surprised, McMahon demurred from answering and called Sonia’s doctor. The doctor confirmed it. Someone in the hospital, he and Sonia deduced later, had leaked it. McMahon told Sonia, much to her surprise. ‘We had never even discussed having children,’ she said later.31 McMahon was delighted by the news, with the proviso that his new Sydney flat might not suffice for long: ‘I expect we will have to find a new and bigger home.’32
Despite the demands of his portfolio and his new home life, McMahon remained a regular dinner guest of Frank Packer’s. David McNicoll recalled that if there were famous guests at Packer’s table, the treasurer would be present. ‘And he was impressive,’ recalled McNicoll. McMahon would talk with dazzling detail and authority on all facets of international finance and economics. ‘His grip, his absolute positive assertions, impressed guests greatly,’ wrote McNicoll.33
McMahon spent the winter working on the budget. He immersed himself in the Treasury throughout its preparation, reportedly to the point of occupying an office in the department.34 Recognising that military commitments in Vietnam were taking up an outsized portion of expenditure, McMahon and his officials worked to reduce spending elsewhere. In mid-July, following three full days of cabinet meetings on the budget,35 McMahon, Roland Wilson, and Peter Howson shared a bottle of champagne to celebrate their success in guiding the deliberations. As minister assisting the treasurer, the English-born Howson was well placed to appraise McMahon. What he saw left him enamoured, and would make him an admirer and confidant of the treasurer — a point reiterated in the diary that he diligently maintained in the ensuing years. McMahon, he wrote, ‘had certainly done a magnificent job, with a complete mastery of each of the 107 Cabinet submissions’.36
Was it really so smooth? Later, McMahon claimed a completely different experience. While putting the final touches on the budget documents during a holiday at the Alexandria Headland, McMahon claimed that he came to believe that the budget was not economically or politically sensible. Sonia and Maurice O’Donnell, a deputy secretary in the Treasury, had agreed, with Sonia particularly pointed about the measures for families and children.37 McMahon managed to persuade Holt to his view, but then had to run the gauntlet and, supposedly, get agreement to his proposed changes from Alan Hulme, Paul Hasluck, and John McEwen, with the latter bitterly denouncing the move in private.38 Whatever the veracity of this claim, it points yet again to key characteristics of McMahon’s: a belief that his grasp of politics and economics was far ahead of his peers’.
McMahon handed down the 1966–67 budget at eight o’clock on Tuesday 16 August 1966. Nervous, speaking flatly, and sipping repeatedly from a glass of water, the fifteen minutes that it took him to arrive at the budget’s ‘central problem’ provoked a guffaw from Fred Daly that it was ‘about time’.39 Observing that military commitments required a 34 per cent increase in defence spending from the 1965–66 budget, McMahon argued it had required that ‘difficult choices’ be made in all other areas of expenditure.40 Thus the absence of reductions in taxation, the small increase in spending on pensions — ‘Not enough,’ Arthur Calwell called, after McMahon announced the $1 increase — and the careful caveat that only ‘within limits’ did the government want the budget to be ‘expansionary’.41
Its reception was decidedly mixed. Outside of the ‘quite impressed’ coalition party room,42 New South Wales Liberal Party premier Bob Askin suggested that state taxes would rise as a result of the token assistance given to his state. Manufacturing and employers’ bodies made their disappointment clear.43 Even the ever-reliable Daily Telegraph argued that while McMahon had ‘done a good job’ amid ‘difficult circumstances’, the pension increase was simply ‘niggardly’.44 The Australian suggested the budget was timid, and called it ‘a half-speed-ahead budget’; The Age called it ‘practical’.45 Both papers gave faint praise for the government’s resistance to election-year largesse.
McMahon might well have hoped for inclusion of another measure: the removal of the marriage bar. In April, aware that the inter-departmental committee was soon to report on the consequences of its removal, he had written to Holt to remind him that ‘the submission is on the march again’. Assuming the committee reported in time, McMahon suggested keeping it for the budget, so that he could announce it. ‘It is one I initiated personally,’ he added, pointedly.46 But the report had arrived too late for the occasion, and the minister for labour and national service, Leslie Bury, was only able to report to cabinet on the issue on 24 August. This time, with the support of Holt, McMahon, and Bury, the recommendation that the marriage bar be removed was accepted.47 Legislation was prepared for October. The Bill was passed, and when it came into effect on 18 November it finally removed the outdated barrier to equal employment in Australia.
Almost immediately after the budget, tensions with McEwen flared again. At first, it was a request for a loan to assist the sugar industry. In cabinet, McMahon pointed out that the Commonwealth had provided assistance earlier in the year: ‘[I] don’t believe we should go further.’ The principle and precedent was at the top of McMahon’s argument to refuse: ‘If we agree and give $19m to bring them up to 1965 income, where do we stop and why not other commodities too?’ The extended debate was fierce. Calling sugar ‘a great national industry’, McEwen argued it was a ‘victim of US foreign policy’. To McMahon’s ‘query’ about precedent, McEwen was forthright: if the same request were made the next year, his answer would be yes, again. ‘We can’t allow a great industry to die,’ he said.48 Liberals in the cabinet echoed McMahon’s arguments, but this time Holt sided with the Country Party, accepting that sugar was ‘an industry of such value that it has to be sustained’. McMahon and his officials were aghast, and in a subsequent cabinet meeting his submission sought to change Holt’s mind. McEwen would have none of it: ‘What I give you is my best and I consider well-informed judgment,’ he said. ‘Don’t brush it aside — it’s not a Country Party judgme
nt, it’s a best judgment on [a] wider canvas.’49
Then there were problems over tariffs. In October, the Tariff Board’s proposal to introduce a system of bounties and a support price on industrial chemicals was submitted to cabinet, and McMahon and McEwen butted heads again. ‘Our industry can be pushed out of [the] ring by giant competitors,’ McEwen told cabinet. ‘We decided by the terms of our reference [for the report to the Tariff Board] that we want the industry … we must assist.’50 McMahon disagreed with the main thrust of the report, believing that acceptance would result in inefficiency and that it should therefore be examined further. To this, McEwen was cutting: ‘What that means is that we put T[ariff] B[oard] aside and set up an independent committee in its place — we can’t do it.’51
McEwen’s resulting victory in cabinet caused criticism from Newton, who echoed McMahon’s line and assailed cabinet’s timidity in accepting McEwen’s policy. In Incentive, the journalist argued that ‘there is virtually no possibility of competition from imports’, and that Australia was going to be ‘wasting increasing quantities of scarce national capital in an area of production where we are perhaps worse off, in an internationally competitive sense, than in almost any other area of national economic activity’.52
According to McMahon, this fight poisoned McEwen against him. ‘When John McEwen went mad on tariffs,’ he said, ‘I opposed him bitterly. It was one of the reasons he became a bitter enemy of mine.’53
Fortunately for the government, attention to these divisions was diverted when United States president Lyndon Johnson visited Australia late in October. The relationship with the US had been on show throughout the year. Johnson’s vice-president, Hubert Humphrey, had visited Australia in February and Holt had travelled to the United States in July, where he declared that Australia was ‘an admiring friend’ and ‘staunch ally’ that would be ‘all the way with LBJ’.54 The government’s commitment to the US alliance and Holt’s warm relationship with Johnson had also been evident in the February decision to support the US bombing campaign in North Vietnam, the March decision to treble Australia’s military presence in Vietnam to 4,500 men, and Holt’s tour of South Vietnam and South-East Asia in April. Johnson’s visit, replete with a ticker tape parade and declarations of support, also helped the government overcome the increasingly vociferous criticism of conscription.
The government’s view was that Australia’s contribution to Vietnam was the premium to be paid for the ANZUS alliance, and was crucial to maintaining American presence in the Asia-Pacific. This won public support. Yet Peter Kelly, in the run-up to the election, asked McMahon if he thought the Americans would truly ever come to Australia’s aid in the event of an attack. McMahon sat back and thought. Kelly, who had expected an immediate answer, was amazed — a feeling that was increased when McMahon eventually responded: ‘No, I don’t.’55
Australia’s involvement in Vietnam became the principal issue of the 1966 election, called for 26 November. With the ALP still wholeheartedly opposed to the war, the campaign posed a sharp policy-based choice for voters. Moreover, Harold Holt’s fresh and relaxed media presence gave the Liberals an advantage over the ageing, raspy-voiced Arthur Calwell, fighting his third election as the ALP’s leader.
McMahon’s stature as deputy party leader and treasurer meant that his voice was loud. He echoed the domino theory, and argued that conscription was the only way to fortify Australia’s security.56 He also provided his own justification for Australia’s intervention in Vietnam. Alongside Australia’s treaty obligations under SEATO, its alliance with the US, and the threat posed by communism to world peace, McMahon again voiced the liberal sentiments that had animated him back in 1954. ‘Nations should have the right to freedom and independence,’ he said. ‘The individual should be free to determine his own form of Government. We believe all people should join in the benefits of modern scientific discoveries and technological developments. We do not believe that nations should resort to war to settle their political problems. These are the fundamental reasons why we are fighting with our allies in South Vietnam.’57
On the domestic front, he called the ALP out for its ‘inaccurate, inept, irresponsible and deceptive’ economic policies. ‘He must think he is Father Christmas,’ McMahon said of Calwell.58
But the campaign revealed divisions within the non-Labor party memberships. In New South Wales, a splinter group of supposedly disaffected Liberal members attacked the government over its support for the Vietnam War. Funded by Gordon Barton — owner of IPEC (the Interstate Parcel Express Company), McMahon’s old university friend, and a critic of the government’s ‘two airlines’ policy — the so-called Liberal Reform Group, organised only a few weeks before the poll, carried an anti-war message aimed at voters stranded in the policy divide between the Coalition and Labor.59 McMahon denounced them immediately.60
Meanwhile, in Queensland, the graziers who had been criticising McEwen’s policies on tariffs announced that they would encourage people to vote for Liberal Party candidates in five electorates where the Country Party was running against Liberal and Labor candidates. Funded by Charles Russell, a disaffected former Country Party MP, the Basic Industries Group (BIG) attacked McEwen for what it argued were the higher costs his tariff policies were imposing on primary producers. McEwen was not backward in taking them on: he called them ‘faceless’ and a ‘distraction’ from the message of the election.61
In spite of these divisions, the government was re-elected in stunning fashion. The Coalition’s numbers in the House swelled from seventy-two to eighty-two, and the Coalition vote, expressed as a percentage, was its highest since 1951. The efforts of BIG came to naught. It barely affected the electorates in which it had campaigned. In Lowe, McMahon’s majority went up by nearly 3 per cent. Francis James, the candidate for the Liberal Reform Group, garnered only 4 per cent of the vote — not that it would dissuade Gordon Barton from further involvement in politics.62
Triumph was supplemented when, two days later, at King George V Hospital, McMahon became a father. Born at seven-and-a-half pounds, Melinda Rachel McMahon had ‘long slender fingers, beautiful blue eyes like her mother’s, quite a lot of auburn hair and her mother’s lips,’ McMahon said to reporters. He was delighted enough to joke around: ‘The only thing about her that resembles me is her voice — it’s good and loud.’63 When Melinda was baptised, Holt and George Halliday were present as her godfathers.64
For McMahon, 1966 was a triumph, strewn with highlights and achievements. Val Kentish emphasised this same point. ‘You had just been married,’ she told him, years later. ‘You had just become treasurer. You were elected deputy leader of the Liberal Party. You had moved into a new home. You became a Privy Counsellor [on 14 June]. And at the end of the year you became a father. And everyone who ever knew you sent a congratulatory message. I know — because I answered them all!’65
THE year that followed revealed that the triumph had come laced with danger. Chief among them was the elevation of a new opponent.
Gough Whitlam’s accession to the ALP leadership on 8 February 1967 was the most foreseeable outcome of the 1966 election result. Tall, erudite, eloquent, and quick-witted, with a compelling self-belief that could infuriate colleagues, Whitlam seemed nothing like ALP leaders of the past. He had a decidedly middle-class background: the son of a senior public servant, he had attended Canberra Grammar School; like McMahon, he had studied arts, then law at Sydney University while boarding at St Paul’s College. When World War II broke out, Whitlam had interrupted his studies and joined the RAAF, serving as a navigator aboard Ventura bombers in northern Australia, attacking Japanese targets in the Timor Sea. When he arrived in the House of Representatives in 1952 as member for the Sydney electorate of Werriwa, Whitlam began setting out unexpectedly new directions for the ALP. He took an interest in housing and urban development, constitutional law, and Commonwealth–state relations. Serving as Calwell’s deputy since 1960, in in
creasingly bitter circumstances, Whitlam survived fierce party infighting to consolidate a position as a party leader-in-waiting. He had evident appeal to the media and middle classes, represented (even more than Holt) a generational change in Australia’s leadership, and possessed a formidable parliamentary presence.66
McMahon and Whitlam had clashed in the past, most notably in September 1957, while McMahon was minister for primary industry. A minor kerfuffle about the provision of a report on poultry saw the two exchange insults in the House. McMahon declared that his decision to withhold the report stemmed from his observation that Whitlam was unable to ‘interpret facts correctly or to draw proper conclusions’. Menzies intervened to stop the matter continuing, but when McMahon tried to frustrate Whitlam’s objection, the Member for Werriwa lashed out: ‘You dingo! You stink and crawl away!’ Whitlam withdrew the remark, but later in the day, when the matter came up in the adjournment debate, McMahon provoked him again. ‘This is one more contribution by the honourable member to what can be regarded as a tissue of falsehoods and misrepresentation relating to this particular matter,’ he said.
Whitlam’s interjection was immediate and it was cutting: ‘I would resent that from anybody but a quean like this.’67
The insult ‘was too personal, too cruel and too precise,’ wrote Whitlam’s biographer, and Whitlam apologised when the House resumed on 1 October.68 Whitlam had hardly calmed his temper in the years since this outburst, but he had certainly outgrown its juvenility, and over the year would establish a clear ascendancy over Holt in the House, exacerbating government difficulties elsewhere.
One of those was in the Senate. Special elections to fill six vacancies in the Senate had been held alongside the election in November. While the government won four of the six vacancies, one of those won by the Labor Party, in Western Australia, had previously been a government-held seat, and it thus emerged from the election one seat weaker in the Senate than it had been. In February 1967, its strength declined further when South Australian Liberal senator Clive Hannaford resigned his party membership and moved to the crossbenches to protest Australia’s involvement in the Vietnam War. Hannaford’s resignation meant that the government could only count on twenty-eight votes in the sixty-strong Senate, notwithstanding that he remained generally sympathetic. It was a weakness compounded by another problem: a sizeable and restless government backbench in the House of Representatives.
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