The Money Men Chris Bowen (the red fox clan .txt) 📖

The key to anti-inflation is equity and fairness. It is continued economic growth, not economic recession. Perhaps inflation could be reduced by 5% a year, but it would likely be at the expense of throwing 350,000 people into unemployment … That is too high a price to pay.22

Cairns also saw himself as a more effective counterweight to Whitlam than Barnard had been. He still thought Whitlam too imperious and not consultative enough, and he thought he could use the deputy leadership to insist on a more collaborative and consultative approach. The Caucus agreed and elected him with a comfortable margin of fifty-four votes to forty-two.

In keeping with the convention followed by both of Australia’s major political parties, that the deputy leader is able to take the portfolio of their choice, Whitlam offered Cairns the Treasury. Much to the chagrin of his close supporters, Cairns declined. He told his friends he was unsuited to the role and wanted to influence the government’s economic policy without being bogged down in the detail that inevitably accompanies the treasurership. Cairns chose instead to keep the overseas trade portfolio and insisted on an expansion of his personal staff, hoping to turn it into the government’s central policy unit.

Cairns was very effective in using the deputy prime minister-ship to exert control over economic policy. All the indications in the immediate aftermath of the 1974 election were that the government would accept Treasury’s advice and implement a contractionary Budget. Certainly, both prime minister Whitlam and treasurer Crean were in favour of this approach. At the June Premiers’ Conference, Whitlam announced a freeze in the level of Commonwealth grants to the states and also publicly adjusted the government’s rhetoric, from blaming inflation entirely on overseas factors to acknowledging the influence of domestic policy settings. Whitlam then discussed the need for a contractionary Budget with a ‘kitchen cabinet’ of Cairns, Crean, Bill Hayden and Clyde Cameron. Cameron was vociferous in his opposition to deflation, while Cairns insisted on a full Cabinet discussion, which Whitlam wanted to avoid. Cabinet rejected the plan in July, with Cairns and Cameron leading the opposition to the prime minister and the treasurer.

Cairns then used his role as chairman of the Caucus Economics Committee to develop an alternative approach. (It was a remarkably dysfunctional structure to have the deputy prime minister as chair of a Caucus committee. These days, much more sensibly, Caucus committees are always chaired by backbenchers.) Cairns proposed a balanced or mildly expansionary Budget, accompanied by personal income tax relief to encourage wage restraint, the introduction of a capital gains tax, more power for the Prices Justification Tribunal, and more jobs and retraining schemes. This was the plan adopted by Caucus, although the lack of spending restraint meant that only very modest personal tax cuts could be introduced. Thus Crean was forced to introduce a Budget in which he did not believe. Cairns was making Crean’s continued tenure as treasurer unviable.

Both Whitlam and Crean came to the same conclusion. Crean asked Whitlam to appoint him as chairman of the Commonwealth Bank. Whitlam and Cairns were both sympathetic to this request. However, when Australian Council of Trade Unions (ACTU) president Bob Hawke was consulted, as the likely Labor candidate for Crean’s seat of Melbourne Ports, he was vehemently opposed to the idea, on the basis that the government’s political fortunes were so dire that it would be unlikely to hold the seat in a by-election. Soon after, the proposal was leaked and therefore abandoned.

Whitlam then proposed that Cairns and Crean simply swap portfolios. His view was that as Cairns was now setting economic policy, he should also have the other responsibilities that went with the office of treasurer. Crean was agreeable, but Cairns was non-committal. Whitlam’s frustration with Cairns oozes out of the pages of his account of his government:

Now it was more important than ever for him, as the key figure in economic policy processes within the Government, to accept greater responsibilities. Cairns once more wavered. He was characteristically reluctant to appear to be advancing his own interests. He retained a skill for having others do that for him … I had to persuade Crean with Cairns silently standing by.23

The portfolio swap was finally agreed between the three key players. It was also agreed that the change would be announced after Cairns’ return from an imminent overseas trip. The plan quickly leaked, though, for which Whitlam blamed Cairns, leading to more humiliation for Crean. Still, the announcement was not formalised until Cairns had returned, at which point he again expressed misgivings about taking the Treasury portfolio. An exasperated Whitlam declared that he was moving Crean anyway and would appoint special minister of state Lionel Bowen as treasurer. This was enough to push Cairns into accepting the job.

Cairns’ appointment as treasurer goes down as one of the most unusual appointments to the position, not only because of the nature of the process but also because of Whitlam’s reasoning. Cairns was not appointed because of Whitlam’s confidence in his economic abilities. On the contrary, Cairns had just led a revolt against a plan that Whitlam had believed was the right one. Instead, Cairns was appointed in an act of capitulation by Whitlam to him in the battle for control over policy. Whitlam could have stood his ground. He could have called on the reserves of his prime ministerial authority to insist on what he believed was the right policy. He, ultimately, could have threatened resignation unless the government followed the prescription that both he and his treasurer judged to be the right one. Instead, he handed Cairns more power. It was a decision he would rapidly come to regret.

Cairns’ Inheritance as Treasurer

In 1972 Gough Whitlam had sought and received a mandate for an expansive social program that involved considerable increases in government spending. Whitlam was proud of the detailed nature of his election manifesto, and took his mandate to implement ‘the program’,