Tiberius with a Telephone

by Patrick Mullins

  These questions were complicated by the existence of the DLP. Preoccupied with defence, and defined, to some extent, by its ardent anti-communism, the DLP had looked with concern on Gorton’s statements about the role of Australia’s military in Malaysia, Singapore, and Vietnam, and the budget’s emphasis on social spending. In light of the close of Britain’s open-ended commitment to the Asia-Pacific region, the DLP preferred to see defence spending increase. Amid speculation about an election, the DLP’s attitude became a significant issue and its disquiet a portent of problems. In October, senator Vince Gair, the DLP’s leader, had a meeting with Gorton, and informed him both of his concern and his decision that the DLP would preference other parties ahead of the government in certain seats, should an election be held that year.

  Meanwhile, divisions were emerging and antagonism brewing between McMahon and Gorton. Late in May, Fred Deer, the general manager of the Australian company Mutual Life and Citizens’ Assurance Co. (MLC), wrote to McMahon to state his concern about an influx of foreign capital in the life-insurance market. Prompted by his desire to protect MLC, Deer asked McMahon and the Treasury to intervene. McMahon replied that he would watch the situation, but was otherwise noncommittal. His was an unsurprising response: as his debates with McEwen had demonstrated, he was open to foreign investment in Australia, and, if not necessarily in favour of a takeover, McMahon was wary of the consequences of legislation to limit overseas shareholdings. Come September, however, press reports that MLC was the subject of a takeover from unknown foreign interests prompted a wholly different response from Gorton, who was acting as treasurer while McMahon was overseas.

  On 16 September, Treasury advised Gorton that caution should be heeded before stepping in, but that, if the government was intent on doing so, then a signal — a statement on the options present in the Life Assurance Act, for example — would be sufficient to deter the bid without deterring foreign investment altogether. But Gorton, concerned by the money involved, preferred to be more explicit about MLC and about foreign investment altogether. Six days later, armed with advice from attorney-general Nigel Bowen, Gorton issued a press statement announcing that the government would amend the ACT Companies Ordinance to remove any option of anonymity for shareholders and restrict the percentage of an Australian company that could be owned or controlled by foreigners. The statement was dressed in unapologetically nationalistic tones:

  The Government believes this action will protect the interests of the policy holders [of MLC]. We also believe that Australians will share our determination that control over their Australian savings, and decisions on the investment of their Australian savings, shall remain in the control of an Australian company and will not be allowed to fall under the control of overseas interests.62

  Issued while on a flight between Perth and Adelaide, without consultation with cabinet and with the barest knowledge of the Country Party, the statement and the decision contributed to growing unease within the government. Privately, MPs were concerned by the prime minister’s deviation from previous lines on foreign investment and his willingness to act unilaterally. That the move won public support did not ease their discomfort; if anything, it exacerbated their concerns that Gorton might repeat this kind of action.

  Gorton had no compunction about the decision. He did not believe that Australia was so in need of foreign capital that it should greet it with an ‘almost dog-like gratitude’, as the Treasury seemed to believe.63 Criticism of the speed of the decision was patently silly for the simple reason that speed was essential. ‘Action had to be taken in a hurry,’ he subsequently told cabinet. On unilateralism, Gorton was willing to admit the charge: ‘I could have been accused of being a dictator,’ he said.64 But that willingness to make decisions came from his position: ‘You [as prime minister] can make a decision and say that’s it.’65 The incident confirmed Gorton’s inclination for decisive, immediate action and his dim view of Treasury and its orthodoxies.66

  For McMahon, the decision on MLC was infuriating. He had found out by telephone while standing in a Zurich train station. The decision had been made in his absence. It was made over his objections. And, in spite of the fact that he had nothing to do with it, when he returned to Australia he was the one who had to sign the amended ordinance giving effect to the decision.67 He made his feelings clear, but was in no position to overrule Gorton or to push him around. Further interference from Gorton, this time in negotiations on the International Monetary Fund agreement, rankled with McMahon, but the MLC decision always remained the key sore point.68 ‘I will not discuss the MLC action, nor its relationship to takeover bids by foreign organisations,’ he said flatly, a few months later. Why? Because he was overseas when it happened and the responsibility was not his. It was for Gorton to explain, he said.69

  McMahon returned to Australia well aware of the concern within the government — and the way that it was being muffled, for the moment, in anticipation of a snap election. All the circumstances seemed fortuitous. The ALP was still recovering from its April disarray. The economy was buoyant. Gorton enjoyed public approval for the strong, nationalistic appeals he was making. Why would he not go? Press enquiries to the prime minister’s office on the likelihood of an election in 1968 had been met with only one answer: ‘No comment.’ The refusal to confirm or deny was understandable, but the fervour of that speculation suggested that careful handling would be required should it be punctured.

  Yet Gorton seemed oblivious to this. In a speech on 14 October, he called the speculation ‘fascinating’ and gave the impression that it had all been a game for him.70 When he announced the next day that there would not be an election in 1968, observers in the press, the Parliament, and the government were dumbfounded. In searching for a satisfactory explanation, they seized on the DLP’s threats to preference Labor ahead of the government in selected seats. It became common wisdom that Gorton’s nerves, for once, had got the better of him. His subsequent statement that he had used the prospect of an election as leverage to force through redistribution changed no one’s mind. ‘His last minute retreat does not evidence that degree of strength that one expects as essential and exemplary leadership,’ Arthur Fadden would note.71

  McMahon was frequently butting heads with Gorton and McEwen. Yet there were times where friends and supporters of all three had significant stakes in the outcome of those debates, and the battles fought in cabinet thus echoed battles taking place elsewhere. One such battle occurred late in 1968. Rupert Murdoch, a friend of McEwen and a fan of Gorton, needed approval to transfer capital from Australia in order to take a controlling interest in the firm that published the British tabloid The News of the World. He was facing time constraints, and secrecy was essential to the bid. Murdoch was sure that the Treasury would oppose the request, just as it had in the past; moreover, he was sure that McMahon would leak it in order to satisfy the whims of Sir Frank Packer, an antagonist of Murdoch’s who had once vowed to send him ‘back to Adelaide with his fookin’ tail between his fookin’ legs’.72 Only recently, Packer had managed to reduce Murdoch’s ownership of various Sydney and Melbourne TV stations from 25 to 10 per cent.73 Murdoch could not allow Packer to thwart him again.

  Murdoch approached McEwen to ask what could be done. McEwen decided to work around the treasurer and Treasury. Deliberately waiting until a weekend that McMahon was not in Canberra, McEwen rang Gorton and asked him to look at the paperwork on the application. At the Kurrajong Hotel, with Murdoch supposedly waiting in the garden, Gorton and McEwen went through the request together.74 Gorton’s support was a given. ‘I was so much in favour of Australians owning overseas interests,’ he said later. Moreover, he liked the young press baron. His support was a lock. ‘I always liked Murdoch,’ Gorton said later, ‘and I started him on his way.’75

  Thus, when the matter arose in cabinet, McMahon was destined to lose. His comments — that while the Reserve Bank appeared to agree with Murdoch’s application, its
advice was not ‘a definite or precise recommendation’ for approval — were discarded. His arguments for refusing the application fell on deaf ears.

  Gorton stated that he was in favour of approving the request, as did McEwen and a host of other ministers. McMahon’s argument that the current rules did not allow it and that approval would open ‘an area we have so far refused to open’ were trumped by arguments that to refuse the application would stifle enterprise. McMahon’s was a lonely, dissenting voice. Absent a derisory comment from Hasluck that Murdoch was a ‘brigand’, other ministers in the cabinet were for approving the application. ‘Consensus is for,’ Gorton said.76 The decision was made. And, with that, the prime minister had won himself a powerful ally and Murdoch could establish his beachhead in the British tabloid market.77

  All this led McMahon to recognise that he would need to adapt to his new leader, on policy as well as political grounds. Though Gorton gave priority to economic growth, McMahon understood that the prime minister was less amenable to the belief that growth could better come through economic efficiency — a belief that was holding increasing sway within the Treasury.78 More troublingly, McMahon perceived that Gorton’s economic outlook was closer to McEwen’s than his own. It called for adroit manoeuvring. Thus, by December, McMahon was reluctantly participating in Gorton’s moves to restrict foreign capital, most notably in a measure that made it possible for shareholders to prevent a foreign takeover of a listed company unless it enjoyed the full support of every shareholder.79

  McMahon’s colleagues and the press reacted adversely to these moves. To those within the party, like Howson, McMahon could explain. ‘He realises, above everything else, that the Treasury must keep control and not let Gorton get this into his own hands,’ Howson wrote, after an explanatory phone call. With the press, however, McMahon had to defend the decision. ‘We do want this large inflow of capital but we don’t want unfair practices by financial and industrial interests overseas that are so powerful that, if they care to move in in strength, they can take over Australian companies,’ he said in December.80 The press was scathing. Even friends like Maxwell Newton attacked him for this heresy. The treasurer, wrote Newton, had ‘abandoned any claim to be respected as a minister who stands for the implementation of sound economic principles [and] abandoned any claim to be the latter-day exponent of traditional Liberal policies’.81 The Australian Financial Review similarly noted just how quickly the old shibboleths were being expunged:

  The consistently permissive, but clear-cut policies towards foreign investment in Australia sedulously built up by successive Liberal-Country Party governments over nearly twenty years of power-sharing are being shot to pieces by the Gorton Government.82

  The treasurer was aware that his leader was pushing him towards areas and policies that he was averse to. He knew he would come under fire from the press for going along with it. And he knew, too, that Gorton was spreading the case against him. The prime minister’s hostility was barely disguised. He disliked his treasurer almost as much as he disliked the Treasury.83 It was obvious in private, palpable even in front of the press. In a briefing on 11 December, Gorton told journalists, on background, that the government had requested papers from Treasury on foreign capital in September, but that the papers had not been received. ‘They seem to be taking a long time to do it,’ he said lightly. ‘I can only say I keep asking for it.’84

  Nonetheless, McMahon was not willing to break ranks. He knew what was ranged against him. He knew that in an open dispute he had no chance of victory. Yet in spite of this he was also unwilling to vacate the field. He would not countenance retirement. He would not accept a diplomatic appointment. He would persist — in private and in public — and he would survive.

  He would have observed that the political landscape was shifting. There were the concerns within the government about Gorton, yes — but there were other, more significant portents.

  One of those was in tariffs. There was growing friction between McEwen and the chairman of the Tariff Board, Alf Rattigan, over tariff policy and levels of protection. Rattigan’s increasing assertions of the board’s independence saw him lead it towards a more stringent logic in its inquiries. To wit, a Tariff Board inquiry into the worth of hot-water bags — initiated by Australian rubber company Ansell, whose bottom line was being hit by the increasing prevalence of electric blankets — concluded that, on the basis of figures submitted to it by Ansell, it was doubtful whether manufacturing of the bags in Australia could ever be economic. The resultant report thus suggested that tariff duties on imported hot-water bags be removed so as to phase out an economically inefficient industry. In December, when McEwen took the report to cabinet for debate, he surprised some by seeking that it be rejected — and that, in fact, the industry should have the opportunity to request another inquiry. With Gorton’s support, McEwen succeeded in having his way, though to McMahon’s suggestion that the government ‘should be calming down on tariffs’, McEwen was sharp: ‘What does that mean?’

  ‘Means in public discussion,’ McMahon said.

  ‘This public debate started when Maxwell Newton fomented it for Japanese reasons — i.e. out of his secret contract with them,’ the Country Party leader snapped.

  Gorton intervened to cut off the argument, and Hasluck made a joke: ‘We’re supposed to be deciding with bags, not hot water!’85

  The sharp exchange confirmed the continuation of the struggle over tariffs and the new direction of economic policy. The decision drew applause and derision, the latter most acerbically from Maxwell Newton, whose response would have surely provided some succour to McMahon. ‘Mr McEwen is at pains to commit the government to blanket protection regardless of cost to the nation,’ Newton wrote in Incentive. ‘He is even prepared to commit the government to the ridiculous proposition that however much it costs the nation’s pensioners, we must sustain a local hot water bag industry.’86

  Less than a month later, McMahon received another reminder that he still had friends and allies when, a year to the day since Gorton had taken over, Alan Reid published his first book. Notable for popularising the writing of contemporary political history in Australia, The Power Struggle was a punchy and dramatic account of the summer of 1967 — the infighting between McMahon and McEwen, Holt’s disappearance and death, and Gorton’s unexpected election. It contained a largely accurate summation of Casey’s letter to Holt, and confirmed rumours that there had been unrest within the government before Holt’s death. Since word of its composition began, the book had been keenly anticipated within government circles. It was, wrote one journalist, the ‘most talked-about back-of-the-hand subject’ in Parliament House, rumoured to contain information that could harm Gorton and the government both.87

  After reading an advance copy, McMahon disdained the book in private conversations, describing it as ‘rather sketchy and journalistic’, but he nonetheless discussed it repeatedly and urged colleagues to read it.88 Some of its contents were a surprise even for those who featured in it; to the public at large, the book added new dimensions to the events of the previous summer while remaining accessible, even exciting, to read. Upon publication, Gorton supposedly had a copy especially delivered to him while he attended the Commonwealth Prime Ministers’ Conference in London; McEwen was alleged to be furious at the dark, vengeful pen portrait of him and the lighter, much nobler depiction of McMahon; and within the Press Gallery, the publication and impact of the book enhanced Reid’s prestige perceptibly.

  Most importantly, perhaps, the book was still relevant. Its protagonists and themes, the issues it sought to explain, the manipulation and manoeuvres that it described — all were still topical in January 1969. For McMahon, it would have been another reminder in a new year that he was not entirely alone.

  EVEN without allies, McMahon was never entirely helpless. His nervy manner, which could suggest weakness and indecision, belied a resilience to withstand stress and setbacks, to
endure pressure and political posturing.89

  He was well aware of the currency that rumour could enjoy, the way it could harden like concrete and become, by repetition and invocation, almost the same as evidence. Journalist Mungo MacCallum recalled that McMahon was blatantly obvious about it: he would ‘ring up to try to have a chat and try and plant some idea in the reporter’s mind’.90 Dudley Erwin, a critic of McMahon’s, recalled that he was especially good at starting rumours. McMahon would make a suggestion while at a party or a dinner, giving just enough information for it to be credible while remaining deniable, and allow those who heard it to carry the rumour from there. ‘All McMahon had to do was drop it in the right place and the couriers were on it,’ he said later.91

  One such example came on 10 February 1969, when Gorton announced the appointment of Hasluck as governor-general to succeed Casey. Almost immediately, rumours began to swirl. Gorton had appointed Hasluck in order to remove a potential rival for the leadership, the main strand of them went, and to remove a dissident from Gorton’s thinking in foreign relations and defence.92 Judged against the context of Gorton’s unilateralism and willingness to intervene over the heads of his ministers, the rumour seemed credible, even satisfactory. But, much later, Hasluck would write that he had decided long beforehand to retire at the 1969 election, and that the appointment, therefore, was untainted by any kind of conspiracy by Gorton. Hasluck pinned the blame for rumours to the contrary on McMahon. ‘I felt at the time that McMahon was doing a great deal to denigrate me and to harm my reputation and his only motive that I can see was to destroy me as a possible rival,’ he wrote. Gorton’s supposed malevolence was likely McMahon’s, he thought. ‘If I were seen by some to be a potential rival to Gorton, by the same token I was no less dangerous to any ambitions that McMahon might have had for the Prime Ministership.’93