Tiberius with a Telephone

by Patrick Mullins

  More fractious, less disciplined than those of the past, the government’s backbench members and senators were keen to make their presence felt. As the Labor speechwriter Graham Freudenberg later observed, the new backbench knew nothing of opposition or defeat. The near-loss of 1961 meant little to them. ‘They knew little about Holt and he knew little about them,’ wrote Freudenberg.69 In the Senate, the government’s weakness was exacerbated by backbenchers willing to cross the floor, sometimes impervious to the consequences.

  All of these factors would come into play over 1967 — and turn it into a year that McMahon would come to rue.

  CHAPTER TWENTY-ONE

  Protection (II)

  1967

  The rivalry and antagonism between McMahon and McEwen reached into the public service. Their departments were in constant competition to stay ahead of one another. ‘Again there is a battle with Trade, but at least we are trying to hurry Treasury to get their job done quickly so that we will be ready to deal with it in cabinet before Trade are ready to deal with theirs,’ wrote Peter Howson, after a February meeting with McMahon.1

  Throughout the early months of 1967, at the urging of their respective ministers, both departments were formulating proposals to strengthen — and, in McEwen’s case, protect — investment opportunities in Australia. McEwen wished to create a government-funded corporation to raise money internationally and invest in new, large-scale Australian companies and projects. In his vision, the Australian Industry Development Corporation (AIDC) would allow Australian businesses to avoid trading away control of the assets that they built up in exchange for the investment necessary for success. He talked about it in terms of not ‘selling off the farm’. The purpose of McEwen’s proposal was not to eradicate foreign investment, but to narrow the open-door policy that he believed the Treasury was allowing.

  McMahon’s proposal was similar in purpose, but wholly domestic in nature. Arising from a document he found in his in-tray upon becoming treasurer, as he said later,2 his Bankers’ Development Refinance Corporation would draw from the trading banks and, with support from the Reserve Bank, allow Australian investors to access larger amounts of domestic capital than was then available. As McMahon later argued, the benefit of the Treasury’s proposal was that it would not be competing with the Australian government — as McEwen’s proposal would — when it sought to borrow from overseas lenders.3 His corporation would give ‘large new capabilities to the Australian capital market,’ McMahon said. ‘It will enable Australian enterprise to venture more boldly in the development of Australian resources on a massive scale and will advance us, as a people, towards a fuller and more productive use and control of the natural riches of our own country.’4

  But the fights over these proposals and tariff policy worried the prime minister. On 24 March, just before the proposals went to cabinet and on the same day that his brother died, Holt expressed concern about McEwen’s reactions, and suggested that McMahon allow McEwen to win a few of their debates.5 Though angered, McMahon also realised that it would be unwise to push McEwen too far. Bert Kelly, who had been given a ministry after the 1966 election, recalled this awareness after McMahon encouraged him to attend a cabinet committee meeting on tariffs on stationary cars: ‘Come along Bert, and carry the argument against it.’ When Kelly did so, and McEwen ‘started to do his block’, McMahon told him it would be better to be quiet: ‘You’re carrying things a bit far.’6

  The rift between the men was verging unconscionably close to being played out in public. During Question Time on 11 April, the Labor member for Bendigo, Noel Beaton, asked McEwen whether he agreed with McMahon’s dismissal, made on television, of the effect on Australia of the mooted British entry to the European Common Market. McEwen did not rise from his seat. He made no move to answer the question at all. He simply sat there, steadfastly ignoring the waiting MPs and colleagues around him. Eventually, the Speaker, William Aston, was forced to intervene: ‘I do not think the Minister for Trade and Industry is responsible for a statement made on television by another Minister.’7

  The dispute over the AIDC was a proxy for the longer, larger battle. McEwen believed that McMahon’s continued opposition to all that he did went beyond any policy-based difference: ‘I thought on a number of occasions that he was attacking particular proposals simply because I was putting them forward and not on their merits.’8 He also believed that it was fought over in a consistently scurrilous way:

  McMahon did all he could to oppose this [the AIDC], even bringing in a Bill which he thought, incorrectly, would make the Corporation unnecessary. At one stage a paper attacking the notion of the AIDC and arguing that this body would be used to further Country Party interests was circulated in Cabinet … It transpired that the document had been written by a Treasury official and that it was being circulated on McMahon’s authority but not through the normal channel provided by the cabinet secretariat.9

  Hasluck agreed, suggesting that McEwen was ‘subjected to constant misrepresentation, disclosures to the press of departmental information, and attempts to rally various lobbies of opinion against him’.10 For Hasluck, the method was bound up in character: ‘By nature, he [McMahon] would prefer the devious route to the direct route.’11 Was McMahon so devious as to leak? ‘Undoubtedly,’ said David Solomon, a journalist in the Press Gallery at this time. ‘There wasn’t anyone in the Press Gallery who didn’t think so … McMahon’s principal target (of the leaks) was McEwen.’12 Their relationship was heated: ‘They hated each other like poison,’ Don Chipp would later say.13 ‘It was a real, genuine hatred between McEwen and McMahon,’ said journalist Alan Ramsey.14 Their policy differences exacerbated their considerable personal differences, as Doug Anthony later argued. ‘They were a bit like water and oil,’ he said. ‘They didn’t mix very well. I think that over a period of time, McMahon told stories to the media that annoyed John McEwen.’15

  However McMahon fought, no one could deny that he was doughty, even formidable, in cabinet. John Bunting, secretary of the prime minister’s department, thought that McMahon’s approach to that forum was key. ‘He was tenacious in cabinet as a minister,’ he remarked. ‘More than anyone else, he used to regard it, if necessary, as a battleground.’ This was an approach that had gone on for years. ‘If he, as minister for labour, or the navy in the early days,’ Bunting said, ‘or foreign affairs, later, or Treasury — if he came in there as the minister for any of those, [then] he battled and if he didn’t get total victory he went out wounded, and he seemed to think it was a point of honour.’16 Richard Farmer agreed: ‘McMahon showed much more strength in those internal debates than people give him credit for … He fought his corner, and invariably won.’17 Howson attributed McMahon’s victories to extensive preparation, wide consultation, practised arguments, and hard work. ‘The reason Treasury won,’ he said, ‘was because McMahon had done his homework much better than McEwen had.’18

  It was undeniable that both men had supporters in the press. McEwen could usually rely on support from Rupert Murdoch’s Australian; in The Sydney Morning Herald, he could count on Ian Fitchett, the moustachioed, aloof political correspondent, to echo his point of view. McMahon, in turn, could rely on Sir Frank Packer, Alan Reid, and Maxwell Newton. Farmer, a journalist who joined Newton’s growing stable of newsletters, recalled that the relationship between McMahon and Newton occurred almost entirely over the phone, even though Newton worked barely a suburb from Parliament House. ‘They’d talk for hours every Saturday.’ Sometimes McMahon would call from his home, sometimes from a payphone. He would never say hello. Just: ‘Is Max there?’ Farmer invariably answered, and, upon hearing the recognisably ‘squeaky voice’, would get Newton. Overhearing Newton’s part in the conversation, Farmer had no doubt what was happening: McMahon would be going through economic matters on the cabinet agenda, and Newton would provide advice.19 McMahon’s press secretary, Peter Kelly, concurred. Was there an exchange of ideas, informat
ion, and perspectives between McMahon and Newton? ‘Yes, all the time,’ he said.20

  The proposals for McEwen’s AIDC and McMahon’s Bankers’ Development Refinance Corporation (later known as the Australian Resources Development Bank) were put on the cabinet agenda for discussion on the same day. When McEwen saw this, he ‘sniffed the air’ and beat a tactical retreat.21 McMahon’s proposal was approved and the bank duly established. But McMahon was not content with this victory. When McEwen wrangled an agreement that ‘a study’ would be made of the practicalities of the AIDC, McMahon did all he could to see it killed off.22 The Department of Trade just wanted ‘an all day sucker’ to keep it quiet, he said later.23 Thus, on 15 May, he wrote to Holt to report the unfavourable findings of a Treasury officer who had sounded out overseas bankers about McEwen’s proposal. In the process, he accused McEwen of impropriety for sending a public servant overseas on a similar mission:

  Employing travelling salesmen to sell one Department’s ideas in a field belonging to another Minister’s responsibilities, and before Cabinet has reached conclusions on them, is carrying impropriety to lengths that should not be tolerated.24

  On 16 May, with McEwen absent at trade talks, Holt revealed his susceptibility to McMahon’s arguments. Holt criticised the Country Party minister for social services and acting minister for trade, Ian Sinclair, for a speech made two days earlier, which had suggested the AIDC was going ahead.25 Calling the whole issue ‘an embarrassment’, Holt complained that ‘the impression being spread is that we have taken [the] main decision and [that] only details [are] left for consideration’.

  When asked to speak, McMahon gloated. He said that the continued references to the AIDC undermined the Treasury scheme. ‘This [is] not permissible and I object,’ he said. He expressed his ‘surprise’ and ‘deep regret’, and spoke of the ‘impression’ of ‘hostility’ between Trade and Treasury — and between ministers. He then brought up the reports of officials within McEwen’s department canvassing reception to the AIDC: ‘This [is] intolerable.’ Sinclair denied any intention of an attack on Treasury, but defended the ‘consulting’ that those officials were doing. Holt tried to draw it all to a close: ‘We’ve got [a] certain amount of water under the bridge.’26

  But McMahon’s and Treasury’s lobbying against the ‘McEwen Bank’, as it came to be known, did not stop. It went on behind the scenes and in the press. ‘We have here a plan for a Government bank,’ wrote Maxwell Newton, the next day, ‘under the control of the Country Party, to be known as the AID Corporation, under the mantle of Mr McEwen, going out to borrow money overseas on Commonwealth Government guarantee and then to relend that money to Mr McEwen’s friends.’27 Sir Richard Randall wrote to McMahon and Holt, arguing that the Department of Trade and Industry had ‘no formal responsibilities in the area of public finance, banking, loan raisings, local or foreign, or for the regulation of investment’, and yet had put forward its proposal without ‘any consultation whatsoever’. Approval of the AIDC would challenge ‘long established financial policies and procedures’ and enlist the Commonwealth government as ‘the guarantor of loans raised for investment in private enterprise’, Randall argued. Most importantly and fundamentally, it was ‘a challenge to the hegemony of the Treasury over one of its most important and difficult fields of responsibility’.28 The advocacy from McMahon and Randall worked in pushing the AIDC off the agenda — which was just as well, for other, long-running issues were moving towards their climaxes, seemingly all at once.

  One such issue was discontent over the findings of the royal commission that had investigated the collision in 1964 of HMAS Voyager and HMAS Melbourne and the subsequent deaths of eighty-two navy personnel.29 Led by the former attorney-general and the then–chief judge of the Industrial Court, Sir John Spicer, the commission had criticised Captain John Robertson, commanding officer of HMAS Melbourne, in terms that implied negligence on his part, and apportioned him with the heaviest blame for the disaster. When the Naval Board subsequently failed to defend him or clear him of the imputation, and he was given an appointment that amounted to a demotion, Robertson resigned from the navy.

  Politics entered the affair almost immediately. The minister for the navy and Liberal member for Perth, Fred Chaney, prevented Robertson from receiving a pension, and cabinet concurred. But John Jess, Liberal member for La Trobe, believed that the government’s handling of the affair had been ham-fisted, and that the denial of a pension to Robertson was unjust. Jess had met repeatedly with Menzies to discuss the issue, and, in the lead-up to the 1966 election, had presented Holt with what he regarded as evidence that warranted another inquiry: chiefly, that the commanding officer aboard Voyager, Captain Duncan Stevens, had a history of being unable to exercise command due to inebriation.

  By March 1967, Jess had enough allies on the swollen government backbench to force a reckoning on the issue. Despite the best efforts of the new minister for the navy, Don Chipp, to evaluate the veracity of the new evidence, Jess would not be persuaded to desist.30 McMahon became involved as a relay between Jess and Holt. Jess wanted the royal commission reopened, the findings against Robertson and other officers re-examined, and the new evidence that related to Stevens examined. Jess stated that he was prepared to raise the matter in the House, resign from the party, and resign from Parliament altogether if his demands were not met. Support for Jess’s campaign continued to grow, but cabinet held firm. McMahon advised Holt against any ex gratia payment to Robertson and, on 2 May, Holt delivered exactly that message to Jess. Within three days, news that there was a dispute had leaked to the press; within a few days of that, the issue at hand was widely known. Political pressure became immense: the press, the ALP, and the government’s backbench were agitating for a new inquiry. Unable to withstand it, Holt agreed that the House would debate the affair on 16 May.

  It was the same day that Holt had taken Sinclair to task over the AIDC, and, during the evening debate, he made an egregious error. The new Liberal member for Warringah, Edward St John, was making his first speech in the House. A Sydney-based QC turned politician who proudly noted his relation to Oliver St John, the counsel who had defended John Hampden from Charles I’s attempts to collect ship money without parliamentary approval, St John had a wowser’s propensity for disapproval and an ambition exceeded only by a zealous regard for the truth. He had decided to speak about the sinking of Voyager — a deliberately provocative matter to address. Holt attended the beginning of the speech, left, and then inexplicably returned to listen. After declaring his belief in the veracity of the new evidence, St John asked:

  Is it irrelevant that the captain of a destroyer in port is perpetually drunk, comes back every morning at eight o’clock under the influence of liquor, sleeps all day, and then starts drinking again? … Is this irrelevant? Is not this one of the facts and circumstances leading up to the Voyager’s disaster? Or have I lost the meaning of the word ‘irrelevant’? Are we playing a battle of semantics? What is the meaning of the word ‘irrelevant’?31

  Angry and red-faced, Holt was moved to interject: ‘What is the meaning of the word “evidence”?’32

  Holt’s breach of courtesy was conspicuous. No one had interrupted an MP’s first speech in more than a decade.33 Holt’s undisguised embarrassment pointed to his immediate regret at having done so. Some observers picked it as the moment that revealed ‘how the pressures of his job were beginning to eat away’ at Holt.34

  When he summed up the debate the next day, McMahon tried to slap St John down and give the initiative back to Holt. ‘The Government has not closed its options,’ he said. ‘The Prime Minister after considering all points that have been raised will take the matter back to the party room and then decide exactly what is to be done.’ Nonetheless, it was evident that an inquiry would have to be held, which was exactly what Holt confirmed on 18 May.35

  Nine days later, a long-gestating and repeatedly rescheduled referendum was finally held. The
referendum posed two questions. The first proposed to amend section 24 of the constitution, ‘breaking’ the nexus between the House of Representatives and the Senate, which provided that the House should, ‘as nearly as practicable’, be twice the size of the Senate; the second question proposed the removal of discriminatory references to Aborigines from sections 51 and 127 of the constitution.

  The timing of the referendum was poor. In blows to Holt’s authority and standing, six Coalition senators declared their opposition to the first question, and it was resoundingly defeated nationally and in every state except New South Wales. However, the second question was carried overwhelmingly, with 90.77 per cent of the vote, in all six states. The margin of that result provided impetus for Holt to establish the Council for Aboriginal Affairs and to enlarge Commonwealth government involvement in Indigenous Australian matters.

  Yet again, unhappily for Holt, the tensions between McMahon and McEwen continued to bubble and froth. In private, McMahon was critical of negotiations McEwen had undertaken on wheat prices at trade talks in Geneva. ‘Bill McMahon tells me that it’s going to cost us quite a lot in foreign exchange and is hardly worth our taking part in the agreement,’ Peter Howson recorded.36 McMahon’s criticisms undoubtedly occupied some of the weekly telephone conversations he was having with Maxwell Newton, who recorded very nearly the same things in Incentive: ‘Meanwhile, Mr McEwen has so far achieved virtually nothing in his negotiations in Geneva … He has had to accept what he said he would not accept before he left Australia.’37 By mid-June, McMahon and McEwen were arguing volubly: ‘The row has been so fierce that Harold Holt himself has had to intervene between the two of them,’ Howson wrote, after McMahon told him about it.38