by Derek Rielly
‘Keating has put huge effort into rewriting history.’ Garnaut smiles, something he does more to add emphasis to a statement than to indicate pleasure. ‘He’s got the huge advantage that he didn’t have much formal education and that affects his sense of objective historical reality. So, with Paul there is a bit of a sense of: what I think is real is real. And history is the story that’s told. He was a great storyteller and that had political value, but the economic reforms wouldn’t have happened without Hawke. They may or may not have happened without Keating. I think his strengths were greatest as treasurer working within the broader political framework established by Bob. His achievements as prime minister, much less lasting or prominent.’
Can you support your claim that Hawke was Australia’s best prime minister?
‘Well,’ says Garnaut, ‘I’m very interested in the question of Australian leadership and I’ve read just about all the biographies about all of them. But he changed Australia’s views of what was possible in public policy. They go well beyond economics to education, to foreign policy, to health, the reintroduction of Medicare after Fraser had got rid of it. Some people might’ve been a little bit shy of that after Whitlam introduced it and was criticised for it, but Bob brought it back and this time it stuck.’
What else?
‘He changed the environment of industrial relations in Australia, which had been a very, very contentious and combative one. Quite a few areas of social policy: the introduction of family allowances, much more tightly means-tested social security so that we were able to finance much further in effectively targeting low-income people.’
And the big economic reforms, of course.
‘The achievements were very considerable and the partnership between Hawke and Keating was very effective. It had a new approach to macro-economic policy: the very difficult reforms on tax that previously were thought to be too hard. It was a major revamping of the tax system. And he achieved all of that. Change is hard politically and all while being re-elected four–nil. As a win-loss ratio, it’s equal with a few who won one and didn’t lose any, but when you look at the magnitude as well as the ratio, it’s unparalleled. Menzies, of course, lost one-and-a-half elections.’
I tell Garnaut that Howard had said the Hawke government’s success could be attributed to a non-obstructionist opposition.
‘Well, that’s true in part,’ says Garnaut. ‘Probably the most difficult and the central economic reform was the removal of nearly all protection. And that, at first, wasn’t bipartisan. By the end it was. Hawke started educating the community for major reductions in protection from his first month in office. But it was very strongly the view that if you wanted permanent changes that stick, you don’t take people by surprise. Public education is the key to it, so you talk about it. Get people used to the idea, and so when change comes they understand it and you don’t get a backlash.’
Garnaut says Hawke used Whitlam’s sudden decision to cut tariffs by 25 per cent in 1973 as a model of what not to do. It made imports cheaper, good, but blew a hole in local manufacturing. Not so good.
‘Fraser and the opposition made hay against it and there was no protection against it because there was no understanding in the community about it,’ says Garnaut. ‘Hawke went about a big program of public education in his speeches and his press conferences. He talked to relevant groups, trade unionists, business and community groups right from the beginning. And the reforms of tariffs started at the beginning. At first industry by industry, then a big, across-the-board tariff cut in ’88 and the biggest of all in ’91. And these huge changes occurred with very little negative political reaction. Now, looking at Australian history before Hawke one would’ve thought that was not possible – and he did it.’
Hawke says you were a co-architect of the government’s economic reforms, I tell him.
‘Bob’s role as prime minister was essential, my role wasn’t. I was replaceable. But I thought all those things had to be done. To be honest, when I went to work for Bob I didn’t expect that what we went about achieving would be possible. He thought it was possible.’
How grave were the economic challenges the Hawke government faced in 1983?
‘It was a depressing time. The highest unemployment since the Great Depression – at that time; it went a bit higher in the ’91 recession. But up till then it was the highest we’d had. And we still had high inflation. That’s a pretty big achievement. High inflation and record high unemployment. That’s what Fraser left. And, more importantly, there was despair and pessimism, not much of a feeling that we could get out of it. [Plus] great clashes within society between organised labour and business but also between established interests and the broader community. Books were being written about that confrontational culture being part of what Australia was. So not only were the immediate political problems difficult but there was a general pessimism that we could find our way out of them. And one of the great achievements of the Hawke leadership was he turned all that around.’
On the flipside, Garnaut, who was chairman of BankWest (after a stint as Australia’s ambassador to China) by the time of the 1991 recession, regards it as the grand failure of the Hawke government as it oversteered to correct the late-eighties boom. Employment scratched 11 per cent. Families lost their homes as interest rates soared. Major financial institutions, including the State Bank of Victoria, the State Bank of South Australia, the Teachers Credit Union of Western Australia, the Pyramid Building Society and merchant banks Tricontinental and Rothwells, failed. Australia wasn’t alone, of course. Of the eighteen OECD countries of relative economic heft, seventeen of them went into recession in the nineties, ten worse than Australia’s. But still. Despite Keating describing it as the ‘recession we had to have’, Garnaut says it wasn’t inevitable.
‘Late one night, chewing the fat, long after he ceased to be prime minister, I said to [Hawke] that was his biggest failure as prime minister,’ says Garnaut. ‘And we talked about how that had happened and he said that he hadn’t been aware how vulnerable the economy was as we tightened monetary policy through the year and a half leading up to the recession. That was a period after the breakdown of relations between Bob and Paul, affecting how their offices communicated.’
Are you suggesting that it was the breakdown of relations between Hawke and Keating that caused the recession?
‘Well, it meant that Bob didn’t have access to alternative advice in relation to Paul and the treasury advice. And I think the breakdown in relations might’ve contributed to that.’
Could the recession have been avoided?
‘First of all, there was excessive monetary expansion after the financial crash of ’87, so the origin of the recession was in that excessive expansion. And then there was an overreaction to the inflationary effects of that expansion.’
Briefly, I forget my high school economics and the fundamental difference between monetary and fiscal policy. Monetary works the interest rates lever. Fiscal turns on the government spending spigot. So when I suggest that it was massive cuts in government spending that dragged Australia down the hole, Garnaut smiles indulgently and gently corrects my mistake – it wasn’t government spending – and repeats, ‘Could it have been avoided? You’d have had to have started avoiding it in the boom. That’s when it got out of hand. But then we undoubtedly overdid the tightening. It was a mistake that, in retrospect, various people played a role in. They sought to justify it on the grounds that it ended inflation so it was worth it. They didn’t know that they were getting the highest unemployment in Australia since the Great Depression.’
I remember it well. Squeezing into ill-fitting, $15 shirts and polyester pants and pounding the streets with my hand-written (and mostly confected) CV trying to get a job. Any sort of job. It didn’t have to be meaningful or even vaguely satisfying.
A painter with Main Roads? A teller in a suburban bank? I’d have taken either if there weren’t 200 other kids panting at the door for the gig.
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‘Shocking. Damaging period,’ says Garnaut. ‘A pity. And while one can say it’s the treasurer’s job, everything is the prime minister’s job. So if the treasurer is causing a recession, it’s the prime minister’s job to stop him.’
As Hawke’s chief economist between 1983 and 1985, were you caught in the middle of the great tension between Hawke and Keating?
‘The great tension came later. At the beginning, we were a very happy family, with Paul recognising that Bob understood the economic issues more confidently and was coming to talk to him about everything,’ says Garnaut. ‘But it was clear right from the beginning that Paul was very ambitious; nothing unusual about that. People who get to that position need to be, otherwise they wouldn’t have got there. He wanted to be prime minister. My view is he recognised that he would have difficulty in becoming prime minister from opposition, from winning an election, and so his best chance of being prime minister was to succeed Bob in office. And as the years went by, he became desperate about that. But I think that the feeling that he had to succeed Bob in office was there from the beginning.’
Keating says Hawke sleepwalked through his final seven years as prime minister. Is that your experience?
‘No, that’s fantasy. The really interesting thing is Paul’s done such a successful job in promulgating that view. I think that might be partly the way Paul came to office. He had to justify taking down the most successful prime minister in Australia’s history – won four elections, never lost one. And similar things happened to a couple of earlier prime ministers who were dragged down by people on their own side. I think [Australia’s first prime minister] Edmund Barton was a much more substantive figure than he was later recognised as being, and he was really pushed out by Deakin. People associated with Deakin were quite effective in diminishing Barton. That phenomenon when someone tears down someone from their own party, they sort of have to psychologically diminish the person they tore down to justify what they did.’
Garnaut first encountered Hawke when he was working as a research assistant during university vacations at the New Guinea Research Unit in Port Moresby. The young economist would often stop by the Arbitration Court hearings where Bob was arguing the case for indigenous workers to be paid the same as their white counterparts.
‘He was already a major national figure,’ says Garnaut. ‘Like lots of Australians, I was very interested in this well-educated, articulate person who seemed to be able to connect very well with the Australian people. He connected very well with the Papua New Guineans he worked amongst as well. For me, he was an impressive Australian.’
Had Hawke arrived at the same economic conclusions as you by the time you were hired in ’83, or did you swing the PM to your way of thinking?
‘He called me on his first Monday in the job and told me he wanted me to come to work as his economic adviser. His first question: “Is there anything in our platform that gives you any doubts whether you’d be comfortable in the job?” And he said, “Before you answer that, let me say, you need not be worried about the rather protectionist stuff in the party platform – we won’t be doing that, nor will we be suddenly cutting tariffs. We’ll be starting from the beginning to prepare the community for change that has to happen. You needn’t worry about that. We’re in the same boat on that one. Is there anything else?” And I said, “Well, I’m a bit worried about your whole macro-economic platform. You promised to hugely expand public expenditure to stimulate the economy, but over the last year Malcolm Fraser has given the economy the biggest stimulus in history, and if we give it any more then the top will blow off the place!” And Bob said, “You needn’t worry about that either. I’ve absorbed the treasury briefings and we realise that the job is to pull back the anticipated budget deficit rather than expand it.” So he established that there was no barrier to my joining him. But, in terms of the question you asked me, trade liberalisation was there from the very first conversation.’
Why does Hawke regard you as a soul mate?
‘Bob’s political philosophy is one that I grew up with and shared. It was a view of Australia as essentially an egalitarian society in which we could be creative. We had lots of talents and capacities for individual initiatives, but it wouldn’t all work unless the fruits of economic success were being shared equitably. Bob held those views … strongly, more clearly, unequivocally and strongly, than other political leaders of my adult life.’
Do you and Hawke often talk about the fate of the species?
‘We do a bit. We often talk about foreign policy, about the international scene. Bob’s going on eighty-eight and is still very clear-headed, very well-informed, very interesting to talk to about foreign policy, China, US development, US–China relations, Europe, the rest of Asia, how it all fits together, what threats there are to peace, what threats there are to democracy.’
What threats to our western societies do you and Hawke see?
‘Now, Bob’s pretty optimistic that with good leadership, for all of the weakness of our contemporary political culture, it could still be pulled together. I don’t disbelieve that, but I think some of the problems of our political culture have become pretty big. For example, the question of money politics, the influence of money over policy in the democracies, but especially in the United States and Australia.’
On the theme of optimism, I tell Garnaut that Hawke is optimistic – publicly, at least – about Trump. Garnaut smiles… although it might be more of a wince.
‘I don’t think he’s gone overboard with enthusiasm. He knows the risks of Trump and the limitations of Trump. But generally Bob’s optimistic about what is possible through effective leadership in our democracy. And I must say that at times historically when he’s been more optimistic than me, he’s been right. [That was] certainly the case with the period in his cabinet. On a number of issues he tackled them head-on and appealed to the better angels of the electorate’s nature – and won.’
Such as in 1988, when the Coalition opposition revealed their One Australia policy calling for an end to multiculturalism and a slowing-down of immigration from Asian countries.
‘I do believe that if in the eyes of some in the community it – Asian immigration – is too great,’ said Howard, ‘it would be in our immediate-term interest and supportive of social cohesion if it were slowed down a little, so that the capacity of the community to absorb was greater.’
In parliament a few weeks after the policy launch, Hawke unequivocally condemned the opposition leader.
‘One of the great and rare distinctions of Australian political leadership in the last generation has been its bipartisan rejection of race as a factor in immigration policy,’ said Hawke. ‘This has been a triumph of compassion over prejudice, of reason over fear, and of statesmanship over politics. Twenty-two years ago my party, the Australian Labor Party, disowned its own historic White Australia policy, and the government led by Harold Holt, to its everlasting credit and honour, abolished the White Australia policy and began to dismantle the administrative machinery of discrimination.’
Hawke wanted to make it very clear that he wasn’t accusing Howard of racism or of being a racist. His motives were much worse, said Hawke. Howard was a cynical opportunist, pulling out the threads of cohesion from the fabric of society, and all for a swag of dirty votes.
‘His polling shows that there is this prejudice in the community and he has unleashed within his coalition and within the wider community the most malevolent, the most hurtful, the most damaging and the most uncohesive forces. Far from “one Australia” he has guaranteed a divided Australia.’
According to Garnaut, ‘It wasn’t certain that Hawke’s position would be supported electorally. Bob was clear that it was right and that’s why he was doing it. But it was clear to Bob that he would win. And he did!’
What do you think was Hawke’s finest achievement in office?
‘Historically, the most important for the country was paving the way for a successful multicultur
al, multiracial Australia by maintaining non-discriminatory immigration through a large-scale immigration program. Now, White Australia being the defining idea of Australia from Federation until the sixties, it took the initiatives of four prime ministers to change that. First of all, Holt, who made it less rigid. A university teacher from Hong Kong could now, if he got a job at the university of Melbourne, come in, whereas it was impossible before. A Japanese or Chinese or Indian who married an Australian could come in after Holt. But it was just a trickle. Whitlam abolished discrimination in immigration but greatly reduced the size of the immigration program so almost no one came in. The first large-scale Asian migration was through Fraser. Indochinese refugees. Vietnam. Cambodia. Laos. Historically, that was enormously important.’
So Hawke was just continuing Fraser’s policy?
‘No, he expanded it. Fraser’s great contribution was to preside over a large refugee program. Hawke, being prime minister for eight years, and followed by Keating to continue those policies, he had long enough to bed down those programs. The bedding down of non-discriminatory immigration, I think, was essential for Australia’s future. Central for our place in the Asian region. And the opening-up of the economy. But to do both of those things and to have Australians comfortable about them within a social democratic framework, so that it was consistent with Australian egalitarian values – that, broadly stated, is the Great Achievement.’
Do you believe Hawke was able to sell the policies because Australians viewed Hawke as one of them? He was, after all, a vastly different man to Fraser or Whitlam.
‘Overwhelmingly, Australians were confident Bob was an Australian who shared their values and would work in their interests. So if he did something, he wasn’t selling them out.’
Do you think Fraser would’ve had a different result?
‘I don’t think he could’ve done it. I don’t think Turnbull could’ve done it. I don’t think Abbott could’ve done it. I don’t think Howard could’ve done it.’ Garnaut’s voice goes husky; passion brings out the burrs. ‘And Paul couldn’t have done it because Paul was a different personality. People didn’t think he shared in their values, and his win-loss ratio was one–one. And the one was against John Hewson. And John, who is a good mate of mine, recognised himself as the most unelectable leader of a major party!’
