Penny Wong

by Simons, Margaret;

  Penny Wong called a press conference – the biggest of her career so far. Australia was world news. The media crammed into the courtyard of a hotel. The preparation had been intense; Penny was absorbing briefings on the run. Olenich was nervous.

  He needn’t have been. The media conference took over twenty minutes. In the humidity and under hot lights, everyone was swimming in sweat – except Penny Wong. One journalist asked how she managed not to perspire. She told him she was – just more quietly.

  The Australian reported ‘a remarkable performance … she calmly managed one of the toughest baptisms of fire possible for a young new minister’. She had repaid Rudd’s faith in her.6

  Penny Wong had a reputation with some in parliament for being ‘dour, detail-obsessed and dogged, willing to dig and claw her way relentlessly in pursuit of whatever rodent she has been sooled onto’.7 Now she had emerged as something else entirely: a charismatic negotiator. A future leader.

  As time ran out, Wong was invited to chair a dialogue in a bid to rescue the deal. The bureaucrats who watched her in action describe her performance that day as ‘breathtaking’. ‘She took hold of that meeting and did an absolutely textbook job on them, defining the issues, keeping them in line, pushing and pushing,’ said one. Wong briefed the media in the final hours that an agreement looked unlikely. Just ninety minutes later, it was announced that at the last minute the United States had caved in and agreed to support the ‘Bali roadmap’ – a series of measures to take the world to Copenhagen.

  On the way home, Wong, Olenich and their team crossed the hot tarmac at Denpasar Airport to board a Qantas flight that had been delayed just for them. Ahead they saw Indonesian president Susilo Bambang Yudhoyono, just as he saw Penny. She had made a mark by chairing the dialogue at the meeting. On that tarmac, Yudhoyono turned and nodded to Wong in an unmistakable gesture of respect. Olenich recalls, ‘It was arresting. We went straight from a junior shadow ministry basically scrapping for attention to the leader of the fourth most populous country in the world paying her that acknowledgement.’

  ‘Move over, Kevin Rudd. You may be running the country, but Penny Wong is running the world,’ wrote News Limited journalist Glenn Milne, reflecting on her performance. She had emerged from the ‘almost subterranean’ shadow portfolio of public accountability to being a star with an international profile.8

  Before Bali, there had been some anxiety about working for Wong among the senior bureaucrats, several of whom were to be shifted to the new department. She was not an unknown quantity to them. One remembers when he was first quizzed by her at a Senate Estimates hearing in 2002. He returned to his department and asked about the ‘very bright young lawyer’ who was new to the Senate. Over the years Wong had developed a reputation in these hearings as someone for whom you needed to prepare. ‘If I knew she was on the team, I’d be swotting the night before and nervous at breakfast,’ remembers one. Now, having watched her performance in Bali, and seen her sop up their rapid briefings, they were reassured, and impressed.

  Some of these same bureaucrats noticed a more disturbing issue in the months ahead. Wong had a strong reputation as a negotiator, but they were taken aback by her combative approach in international discussions. It emerged not only when she was dealing with a clear opponent – which is rare in international diplomacy – but also when negotiating with people broadly in sympathy with her position. They found it puzzling. Discussing it among themselves, they assumed it was her union training – a ‘take down the bosses’, no-prisoners approach. As the months went by, their regard for Wong increased. She won their respect as decent, well motivated and ‘in the top deck’ intellectually. This combativeness, however, remained. ‘At times it made her a very poor negotiator,’ one says. Some wonder how events might have been different if Penny Wong were less aggressive with others in the parliament.

  Meanwhile, amid all the optimism and hype following the Bali conference, Wong and Rudd were being cautious. Australia would not set a target for reduction in carbon emissions, they told journalists, until the government had reviewed the results of the Garnaut Climate Change Review.

  Before the 2007 election, as part of Rudd’s positioning, Labor had used the fact that it was in power in all states and territories to get COAG to appoint economist Ross Garnaut to study the impacts of climate change on the Australian economy and advise on the best response. After the election, the new government’s policy development process and the Garnaut review ran in tandem. From Garnaut flowed an interim report, a discussion paper, a draft report and then a final report in September 2008. From the government came a Green Paper, Treasury modelling, a White Paper and then the release of new measures and changes. The early idealism was accompanied with great caution and meticulous policy development over more than a year.

  As for the politics, after Bali it was all downhill.

  *

  There she was, sitting behind Kevin Rudd, in that windowless room.

  ‘Opposite us was US President Barack Obama, flanked by Secretary Hillary Clinton,’ Wong has recalled. ‘To my right was President Luiz Inácio Lula da Silva of Brazil, with Dilma Rousseff behind him, German chancellor Angela Merkel, Swedish prime minister Fredrik Reinfeldt, and French president Nicolas Sarkozy. Also spread around the room were British prime minister Gordon Brown, Indian environment minister Jairam Ramesh, Chinese negotiator He Yafei, South African president Jacob Zuma and Mexican president Felipe Calderón. Next to me sat the Bangladeshi delegation, whose prime minister made an impassioned plea for action in the late hours of that night. I thought to myself, this room could do anything. The combined political, economic and strategic power assembled here could deliver transformational change. But it failed to do so.’9

  Another image from the months before. Penny Wong, in tears, in the second half of 2009, as she is trying to negotiate passage of the Carbon Pollution Reduction Scheme (CPRS) through the parliament. Rudd has sent her to see if she can cut a deal with the opposition. Labor does not have the numbers in the Senate.

  Wong goes to see Julia Gillard, because she doesn’t know what Rudd wants her to do. Should she cut a deal, or crash the negotiations so that Labor can call an election on the issue and get a renewed mandate?

  The account of that meeting is from Gillard’s memoir.10 Wong says it is ‘not inaccurate’. But she also claims, ‘I knew what I was trying to do. I was trying to get a deal.’

  Then, another image, this from April 2010. Rudd is being pressured by a key cabinet subcommittee – Strategic Priorities and Budget, better known as the Gang of Four – to drop the CPRS, because it has become a political liability. The decision about whether to include it in the federal budget has to be made now. Gillard and the treasurer, Wayne Swan, on Rudd’s account, insist it must go. Rudd rings Penny Wong, who is in Honolulu, on her way back to Australia. He discovers that Gillard and Swan have kept her in the dark about their plans to ditch the policy. Rudd will rail in 2018: ‘This was outrageous, given she was the minister responsible … Penny argued passionately against the proposition … Penny was in tears on the other end of the phone. I could hear it, even over a bad line, as I sat on the edge of my desk, with the other three sitting in the burnt orange lounge chairs in the middle of the office.’

  On that call, Wong gives her leader some prescient advice. Alone of the senior people advising him, she calls the politics correctly. Has he considered, she asks, the impact of a decision to drop the CPRS on him personally? ‘PM, if the funding line is removed [from the federal budget] then the immediate conclusion of the public and the commentariat would be that we no longer cared about climate change.’ Rudd concludes, ‘Of course, Penny proved to be absolutely right, once again.’11

  But Penny Wong loses out. The CPRS is dropped from the federal budget. Rudd’s standing in the opinion polls dives, and within weeks Julia Gillard replaces him as leader.

  So how did it all go wrong?

  *

  After returning from Bali, Penny Wong used
a speech to the Australian Industry Group to outline the framework for a national emissions reduction scheme. Olenich had worked on the speech while Wong was overseas, talking to her frequently by phone. It was a key piece of positioning, and began stirringly:

  Future generations will look back on us all and ask what we did. With the prospect of sea levels encroaching upon our mostly coastal population, they will ask why it took so long to act. Seeing our river systems die before our very eyes, they will ask how this was allowed to happen. With our knowledge that climate change puts our food and water supplies at risk, they will hold us accountable.12

  The scheme under development would have a cap-and-trade emissions reduction framework. A cap would be placed on the total amount of emissions allowed. Tradeable permits, with the number tied to the cap, would be issued to polluters. Companies would have a choice – either reduce pollution or buy permits, whichever was cheaper for them.

  The proposed CPRS was one of the most comprehensive systems in the world – covering three-quarters of Australian emissions and all six Kyoto greenhouse gases – and was being introduced in the world’s most carbon-intensive economy.13

  The ambition was obscured by disputes over the target for total emissions reduction, which would govern the number and price of permits, and over how much assistance industry and households should receive to help them adjust. On these issues, Rudd and Wong were cautious. The intent, Rudd told Garnaut, was to get a scheme up and running, then seek a mandate at the 2010 election for stronger action.14 At first Rudd and Wong set the target for reductions at just 5 per cent below 2000 levels, with an increase up to 15 per cent if there was an international agreement for action at Copenhagen in December 2009.

  The Green Paper that outlined these plans was released on 16 July 2008. Wong had worked on it throughout the winter break. It committed to using all the funds raised from an emissions trading scheme (ETS) to compensate households and business. Those industries hit hardest would get a specified number of free permits.

  A profile of Wong published around this time pondered:

  So how do you usher in a huge and complex economic reform in just 18 months – one that is going to result in higher prices for much of what we consume – without causing excessive political pain at a time when anxiety over living costs is palpable? Most people would turn to jelly. Yet Senator Wong, difficult to read, often mechanical in her delivery and apparently unrelenting in her pursuit of detail, appears calm.15

  The modesty of the emission reduction targets and the levels of assistance to industry meant that, once the White Paper was released in December 2008, the scheme came under attack from all sides. The environmental movement and the Greens wanted more ambitious targets and little or no compensation for industry. Business was prepared to accept change but sought more compensation. Meanwhile, Garnaut regarded the amount of compensation the government was proposing to pay industry as unjustified. He went public. ‘Never in the history of public finance has so much been given without public purpose, by so many to so few.’16 Given his reputation, Garnaut’s criticism carried weight.

  Today Penny Wong includes Ross Garnaut in her critique of why action on climate change ultimately failed. His advice was good: ‘The Garnaut report is impressive. Nothing I say about him should be seen as a criticism of his work.’ But ‘there was a little bit too much of his ego associated with this … he decided if we didn’t do what he said he was going to criticise us. I think he gave grist to the forces of darkness … I think he should have looked at the nation, and what was needed. And what was needed was people standing behind the prime minister to deliver a major reform.’

  She adds, ‘This sort of change is hard, really hard. If you go back through the history of our country and the big reforms, they’re all hard-fought. And they have to involve compromise. Unfortunately we had too many fundamentalists on both sides.’

  Given the size of the reform, it is extraordinary in retrospect that the original plan was to introduce it so quickly – by July 2010. The CPRS was not only about the environment. Introducing an ETS would touch every home and business in the land. It was, Penny Wong said at the time and maintains today, the biggest restructuring of the Australian economy since the Hawke–Keating moves to float the dollar, dismantle tariffs and open Australia’s financial system to the world. It was huge.

  With it came risks. The new department, and Treasury, were working overtime on the implications. She recalls, ‘We had to make sure we had a policy that didn’t have unintended consequences. Those risks were throughout it. Are you going to have this massive crash in the energy sector? Are you going to impinge on exports? Will polluting companies just move offshore, and we lose those jobs? All that had to be worked through, and compensation for adjustment was part of the assessment of those risks.’

  By early 2009, it was clear that the scheme was sinking under the weight of criticism from all sides. Wong met with Rudd and successfully urged him to renegotiate with business and environmentalists. She and her chief of staff, Don Frater, brand new in the job, flew to Noosa to see the president of the Business Council of Australia, Greig Gailey, who was on holiday there. At the same time, she was roping together a coalition of the more moderate environmentalist groups, trying to garner support for the government’s plans from both sides of the debate.

  Meanwhile, the effects of the global financial crisis were hitting the nation. This would have provided an excuse for the scheme to be dropped. Instead, Rudd held firm but announced a one-year delay in implementation, with a low fixed price of $10 per tonne to remain on carbon until mid-2012. The government also raised the reduction target. If the world came to an agreement on climate action at Copenhagen, Australia might aim for up to 25 per cent. Other changes included a $4 billion increase in compensation to business, now amounting to $7.3 billion.

  Both Rudd and Wong thought – and still think – that changes on the scale of the CPRS needed bipartisan agreement. Business needed certainty that the scheme would not be unpicked with a change of government. Alongside this, both decided early not to continue to engage with the Greens. Wong considered this an appropriate decision. She thought the Greens were positioning themselves as more morally pure than Labor. They were not willing to do the work and undertake the compromises needed to achieve reform.

  In theory, the opposition supported action on climate change. As the 2007 election had approached, Howard had announced that he, too, would introduce an ETS – in 2011. He was later to admit that this was not a matter of principle but a political response to a ‘perfect storm’ of record levels of public concern, the drought and Rudd’s position on the issue.17 Nevertheless, both sides of politics had, at least in theory, committed to action.

  Brendan Nelson, who had become opposition leader following Howard’s defeat, lost the leadership to Malcolm Turnbull in September 2008. Turnbull was strongly in favour of action on climate change, but in reality bipartisanship support was weak. The Coalition was deeply split between climate-change sceptics and those who supported action. Turnbull was vulnerable.

  The CPRS legislation came before the parliament for the first time in June 2009, and was defeated in the Senate with the Greens and the independents voting with the Coalition. In an attempt to paper over the divisions, the Coalition had decided to oppose the legislation this time around and consider its position on the bills’ second presentation.

  The stakes were higher when the legislation came before the parliament the second time, in October. If the bills were rejected, Rudd would have the trigger for a double dissolution election – having resoundingly won a climate change election less than two years before.

  Rudd sent Wong to negotiate a compromise with the opposition. Turnbull was keen for it to happen. He hoped to get the credit for making the scheme more business-friendly.18 Rudd, on the other hand, was according to some always sceptical about whether an agreement would be possible. Perhaps this was the reason for Penny Wong’s confusion over what he wanted h
er to achieve – a deal, or a crashing of the deal so Labor could win another climate-change election. At first, Wong’s negotiating partner was Greg Hunt MP. It was hopeless, she says. His idea of negotiating was to ‘tell me why I was wrong … I said to Turnbull, “Give me someone else.”’ That someone else was Ian Macfarlane, who had been the minister for industry, tourism and resources under Howard. Penny Wong and Ian Macfarlane made an odd couple: he a right-wing Queenslander and she a left-wing Adelaide feminist. As negotiators, though, they worked well together – both of them combative but straightforward. The media reported that they came to trust each other (although he declined to be interviewed for this book).

  In November, with the bills again before the parliament, they met every day, as she remembers it, ‘working it through sector by sector, gas by gas’. Meanwhile, Turnbull had been weakened by missteps in the Utegate affair. Turnbull had alleged that Rudd had acted improperly in seeking financial assistance for a Queensland car dealer. Turnbull had based his allegations on a leak from a Treasury official, Godwin Grech, who turned out to be a fabricator who had forged an apparently incriminating email. The affair damaged Turnbull. A leadership challenge was brewing.19

  Meanwhile, against expectations, Penny Wong and Ian Macfarlane had struck a deal. The resulting CPRS legislation passed in the House of Representatives on 16 November, and came before the Senate the next day. On 20 November Abbott publicly declared he did not support the deal Macfarlane had negotiated, and seven days later he announced he would call for a leadership spill if Turnbull didn’t quit.

  The Senate debate began on Monday 23 November. Today Penny Wong thinks this was a turning point – a moment when a better outcome might have been achieved. She recalls, ‘I was saying to people that time was running out, that we had to make the Senate sit, that we had to get enough of [Turnbull’s] senators to vote for a motion to say we sit until we finish, over the weekend if necessary. And it didn’t happen. I remember coming out of the chamber on the Thursday and saying, “Are we going to sit over the weekend?” and the decision had been made that we wouldn’t.’ Why? She won’t say, beyond, ‘Some people didn’t want to do that.’