In Search of Good Government

by Laura Tingle

  If you enter your name on the Visitor’s Book at Government House you will receive an invitation to the next ball that takes place there, if nothing can be proven against you.

  And it will be very pleasant; for you will see everybody except the Governor, and add a number of acquaintances and several friends to your list. The Governor will be in England. He always is. The continent has four or five governors, and I do not know how many it takes to govern the outlying archipelago; but anyway you will not see them. When they are appointed they come out from England and get inaugurated, and give a ball, and help pray for rain, and get aboard ship and go back home. And so the Lieutenant-Governor has to do all the work. I was in Australasia three months and a half, and saw only one Governor. The others were at home.

  The Australasian Governor would not be so restless, perhaps, if he had a war, or a veto, or something like that to call for his reserve-energies, but he hasn’t. There isn’t any war, and there isn’t any veto in his hands. And so there is really little or nothing doing in his line. The country governs itself, and prefers to do it; and is so strenuous about it and so jealous of its independence that it grows restive if even the Imperial Government at home proposes to help; and so the Imperial veto, while a fact, is yet mainly a name.

  Thus the Governor’s functions are much more limited than are a Governor’s functions with us. And therefore more fatiguing. He is the apparent head of the State, he is the real head of Society. He represents culture, refinement, elevated sentiment, polite life, religion; and by his example he propagates these, and they spread and flourish and bear good fruit. He creates the fashion, and leads it. His ball is the ball of balls, and his countenance makes the horse-race thrive.

  He is usually a lord, and this is well; for his position compels him to lead an expensive life, and an English lord is generally well equipped for that.

  The debate about federation was conducted in this curious world that Twain visited, framed by colonies suddenly looking offshore with some sense of stability and prosperity, for whom the governors had largely become an irrelevance in terms of politics, despite still representing the heights of power and influence.

  The move to federation would be driven by economic considerations (protection versus free trade) and by fear of the world outside (keeping Asians out, developing a viable defence force). The debates leading to federation saw powerful ideas of state intervention – reflecting what were already our great expectations – become enshrined in the new national government: conciliation and arbitration between employers and their workforce; White Australia; protection. But the actual settlement of powers for this new government, the constitution, contained little in the way of grand notions of what the nation might become.

  Settling for More

  In a display cabinet in the foyer of the federal Treasury in Canberra, there is a ledger, written in fine copperplate, the work of the first secretary to the Treasury, George Allen. As if for a small business, the book contains the new Commonwealth’s day-to-day expenses in 1901: items such as, “delivery of luggage of Members of Parliament expense, about one pound per week, may be charged to the vote of 10,000 pounds for conveyance of Members of Parliament.”

  Allen headed one of just seven departments foreshadowed in the federal constitution, the others being those of the Attorney-General, Customs, Defence, External Affairs, Home Affairs and Postmaster-General. Allen, a man without formal qualifications, started work with just five staff. As Treasury grew, Allen also became commissioner for pensions. In 1910, he established the Land Tax Office to service the new federal taxes.

  They didn’t have political fetishes about budget surpluses in those days. Yet the federal government’s revenue in the first 1901–02 budget was estimated at £10.3 million, while Commonwealth spending was estimated at just £3.7 million. The Commonwealth was required under the constitution to pass surplus revenue back to the states. “Of the tariff receipts,” Treasury records in its official history, “the major item (£2,975,374) was in respect of stimulants (alcoholic drinks) and narcotics (tobacco and opium products).”

  The point of all this? We forget that the federation started with modest ambitions for the federal government and with the states jealously holding on to as many powers as they could.

  The federal government’s differing ambitions for domestic and international affairs can be measured by the fact of its finances being managed in a ledger, as against the sweeping arrogance of one of the first laws passed by the new parliament. Prime Minister Edmund Barton introduced the Immigration Restriction Bill – the legislative basis for the White Australia policy – to federal parliament on 7 August 1901 with a certain sanctimonious grandeur, quoting from Charles Benson’s National Life and Character. “We are guarding the last part of the world in which the higher races can live and increase freely for the higher civilization,” he intoned. “I place before the house a measure of definite and high policy.”

  Like the history of incremental shifts in power to the NSW colonists in the early years of the nineteenth century, the history of the federation – particularly the financial history – reveals a piecemeal increase in the federal government’s duties and powers. Commonwealth pensions were introduced in 1909, a land tax in 1910, and the first Commonwealth coins were issued only in 1911. An “entertainment tax” was introduced in 1917. Two world wars made a difference, of course. Commonwealth income taxes were introduced as a temporary war measure in 1915 and reintroduced permanently during World War II. Arrangements for funding education, health, disabilities and roads all developed in a similarly piecemeal fashion.

  Federation was the first point at which the country could design a future for itself. The most heatedly negotiated issues concerned government intervention: free trade versus protection, centralised wage fixing. The issues that helped to maintain the drive to federation as these battles raged were external and defensive ones: the desire to keep Asians out and fears that we were vulnerable to invasion.

  In a speech in 2005, the Labor senator John Faulkner reflected on Henry Parkes’ call in 1889 for the colonies to work towards federation:

  Twelve years later, Australia became a nation. I find it hard to imagine Australians today having enough faith in our political classes to bring the Commonwealth Government into existence. But then, Henry Parkes was not asking his contemporaries for that much faith. His appeal was for a government of limited powers compared to our government today, and by insisting on a directly democratic model, Parkes’ model of federalism extended the power of the Australian people rather than the power of Australian politicians.

  The founding fathers had strictly defined and limited aspirations for the new federation, but seeping through its fabric was a history of not just government intervention but also high expectations of what government would provide. Paul Kelly writes that:

  The nation was founded not in war, revolution or national assertion, but by practical men striving for income, justice, employment and security …

  Australia was founded on: faith in government authority; belief in egalitarianism; a method of judicial determination in centralised wage fixation; protection of its industry and its jobs; dependence upon a great power (first Britain, then America), for its security and its finance; and, above all, hostility to its geographical location, exhibited in fear of external domination and internal contamination from the peoples of the Asia/ Pacific. Its bedrock ideology was protection; its solution, a Fortress Australia, guaranteed as part of an impregnable Empire spanning the globe.

  Much of what was constructed through the federation – not the constitution itself, but the agreed policy framework that saw the colonies vote in favour of change – would be undone in the 1980s and the 1990s. Centralised wage arbitration eventually came to an end, as did the edifice of industry protection. As to the White Australia policy and imperial benevolence, they had already started to unwind, but some might argue we have never banished them in sentiment. However, the pillar of the Austral
ian settlement relevant to this essay is the one that we don’t hear quite so much about, and which is perhaps the least understood: faith in government authority, or state paternalism.

  Kelly defines it as “individual happiness through government intervention” and notes its origins in 1788. “The individual looked first to the state as his protector, only secondly to himself,” he writes, going on to quote the earlier history of Keith Hancock, who wrote in 1930 that “to the Australian, the State means collective power at the service of individualistic ‘rights.’ Therefore he sees no opposition between his individualism and his reliance upon government.” And Donald Horne noted in The Lucky Country, “the general Australian belief is that it’s the government’s job to see that everyone gets a fair go.”

  The idea of state paternalism is embedded in our relationship with government, and has been since the time our convict forefathers expected Governor Phillip to fix the small problem of starvation rather than do anything about it themselves. We have expected governments to intervene to create equality. The very way funding is divided up among the states is based on a premise that everyone in Australia, no matter where they live, is entitled to a similar level of government services. More than the other pillars, it is an implicit idea, buried in policy and politics – not explicitly stated in the way that the commitment to a working wage or to the ANZUS alliance have been.

  Perhaps for this reason, state paternalism has never been dismantled, or even identified and exposed to analysis, in the way the other parts of the settlement were. The capacity of governments to intervene on our behalf, to protect us, was obviously reduced by the dismantling of the ’80s and ’90s, yet we have largely ploughed on, expecting governments to act as they did in a world where they had many levers of economic control, which have now disappeared.

  And in the failure to break down the habits of state paternalism we have the seeds of much of our modern national anger. We have had many arguments about the explicit policies. We have had debates about deregulating particular industries, and about the need for smaller government and less taxation. But we have never debated what the implications of deregulation and a smaller state might be for our expectations of government itself. Do we Australians understand that government no longer has the control of things it once did? Do we understand that the corollary of less tax is less ability to fund services? Are we comfortable and relaxed with that idea? What will we put in its place?

  The great political battles of the 1980s and 1990s were fought over the idea that government intervention in markets was bad and removing it was good. But the implicit belief that government would ultimately put things right has proved the hardest to shift, perhaps because it is so intrinsically tied up with the business of politics. Politicians are always telling us what they can do for us, or what they have done for us. We, in turn, always expect politicians to fix things we aren’t happy about. Our history has been one of politicians looking for opportunities to intervene, to protect us from the harsh realities of the world. State paternalism is what politicians do. It is a hard habit to break.

  Yet the old habits came under enormous pressure from the time the Hawke government floated the dollar in 1983. No one had predicted the float or promised it as part of a political manifesto. It was set off simply enough by newly powerful financial markets putting irresistible pressure on the exchange rate following the election of a Labor government, which, to the markets, had overtones of a return to the financial chaos and excessive spending of the Whitlam years.

  The push to undo the Australian settlement – for that was what the floating of the dollar triggered – was politically bipartisan. Pressure for reform had been resisted for decades, with the renovation of many economic institutions and structures long overdue. The states had continued to regulate large sections of the economy, meaning there were no uniform rules for doing business across the country. The highly regulated financial system could not provide flexible finance to underpin economic growth. Few argued that we shouldn’t deregulate the economy (and those few that did were howled down); most debate was about the speed with which it happened and how to protect people through the change.

  Previously, if you brought money into Australia as an investor, it was hard to get it out again. Now money could come and go as international investors saw opportunities and assessed how competitive we were with other countries. This meant we had to improve the systems of governance over our corporate sector, give companies access to the finance they needed to restructure, and make them stand on their own two feet.

  Yet here is the crucial point: voters weren’t consulted about the changes – except belatedly at the ballot box, when both major parties were in fundamental accord. There were few negotiations with the states. The government and its major spokesmen – Bob Hawke and Paul Keating – became both teachers and proselytisers to the Australian community about the need for a new economy. They did this from a defensive position, for there was suddenly a new constituency to win over: the financial markets. The markets brought suspicion, and sometimes hostility, to their view of a Labor government. Hawke and Keating found themselves not only trying to explain the benefits of deregulating markets to the electorate in political lingo that everyone could understand, but also having to deal with constant demands to prove their bona fides to sceptical bankers, brokers and international financiers.

  These were alarming times to live through for a populace that had been protected from the ways of the economic world. The currency became a floating measure of our net worth. When the Australian dollar went up or down, so did the polling for the government. The electronic media started giving the daily value of the currency at the end of their bulletins, along with the sports results. We were being hourly valued by the rest of the world, and, it often seemed, not very highly.

  Most dramatic was the “banana republic” crisis of 1986, which saw the value of the dollar plummet and an alarm ring out about foreign debt and foreign investment. This crisis galvanised the public debate. The prime minister addressed the nation on Sunday night prime-time television. There was a high-profile “Buy Australia” campaign, complete with sentimental theme song. The polls at the time suggested that while voters didn’t like this new uncertainty – so far removed from the relatively safe world they had lived in until this point – they were persuaded that Australia needed to change.

  Leading the economic education of the Australian populace was the treasurer, Paul Keating. Before Keating, economic debate had played a limited part in political discussion, only raising its head at times of crisis, such as the regular recessions that had dogged Australia. There might be a debate about high inflation or high unemployment, but as often as not it was seen as a reflection of something the rest of the world was also experiencing. Debates about government budgets were also limited, although there were exceptions: Whitlam’s spending binge, and the legend of Malcolm Fraser’s “razor gang” (which turned out to be more of a threat than a reality). Now the whole story of how government spending, taxing and borrowing interacted with the economy was up for discussion. In Keating, the community had an eloquent, entertaining and persuasive schoolmaster.

  “Current account deficits” became a topic of general interest. Keating popularised all sorts of esoteric concepts, such as the J-curve – the idea that Australia had to import a lot of capital goods in the short term to boost its output and exports and that, as a result, the current account would get worse before it got better. Cartoonists even drew J-curves in tabloid newspapers.

  Keating’s lectures worked, and they gave the electorate some ownership of the reform process. Labor’s pollster Rod Cameron recorded the mood at the time and remembers “finding ordinary people in the suburbs being at least at the first level of understanding economics and the need for deregulation. They would use words like that. This was an extraordinary revelation to us.”

  The idea that Australians were living beyond their means came to the fore and the public started to contem
plate what it might mean for them and for the country. Cameron says that:

  The secret to Keating’s educative skill was that he was not just able to lecture, he was able to bring it home to the kitchen table. And it became something that people could buy. Australians will respond to something like that. They will say, look, as long as I can see that it is going to be good for future generations, or my kids, I will cop some pain. They won’t always do this, but there is a chance that they will buy that message if you can explain how it will help future generations.

  Australians endured this period of reform because they were persuaded that it would produce better outcomes for their kids, for the future. The government might have been undoing the structures that had helped establish the cosy world of state paternalism, but it was also promising voters that the change would leave them in a safer place in the long term. The political debate was not taking place at the level of what the reforms might mean for the individual, or what citizens could expect of governments in the future; it was being fought at the level of institutions, such as the centralised wage-fixing system, and the national economy. Between the conflicting demands of the Australian electorate and the markets, the government tried to forge a new path, a new relationship between the individual and the state with which to secure the people’s support for a new economy.

  The government also challenged the major lobby and interest groups to debate issues in terms of the national interest, rather than their own interests narrowly conceived. It was the era of “peak body” summits. The Accord struck between the government and the trade union movement during the 1980s and early 1990s harnessed the centralised wage system to buy the deals that helped Australia make the economic transition. The Accord bought wage restraint and, as a result, lower inflation. In return there were individual tax cuts, targeted welfare assistance and increased superannuation. There was also the “social wage” – all the elements of state paternalism repackaged: an implicit contract that, in return for wage restraint, there would be new services and help from the government.