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massive challenge in front of him in restoring faith and trust between the government and Treasury. Facing the most difficult economic circumstances in forty years made better relations even more imperative. Hayden also had to get government expenditure under control. He immediately set about doing this as he began to frame the next federal Budget.

The 1975 Budget

Hayden became federal treasurer on 6 June 1975. He had to deliver his Budget on 19 August. Hayden’s staff recall him working in the office until midnight each night and returning early each morning with the paperwork he had taken home fully completed.14 Every treasurer is used to extremely long hours, but for Hayden, the size and urgency of the tasks at hand were particularly acute.

His most important job was to reduce the size of the deficit. Hayden was briefed on coming into office that the projected budget deficit was $4.8 billion. The new treasurer quickly communicated his preferred level of deficit, $1 billion to $1.5 billion, to Sir Frederick Wheeler, the secretary of the Treasury. Wheeler expressed misgivings that this would be too dramatic a turnaround in the public finances to realistically achieve, and that it would have too contractionary an impact, recommending instead a target of $2 billion to $2.5 billion.15 Hayden accepted this advice and informed the Cabinet of the new target. He also told them that ‘the days of imaginative big spenders were over,’16 and warned that the deficit was heading towards an amount that would cause ‘pervasive psychological shock’.17 Hayden said:

Our desire for social and economic reform through redistribution will be discredited for a decade or more. Our record as a Government will be jeered and our capacity to manage the basic affairs of the country ridiculed. If we don’t courageously and responsibly handle the present economic problems successfully, we will be seen to have wasted our chance to fulfil those promises we held out and talked about so articulately for so long.18

Hayden had briefed Whitlam prior to the Cabinet meeting, telling the prime minister that he would resign if the deficit target was not achieved. He was determined not to be a lame-duck treasurer.

In order to bring the necessary rigour to the budget process, once the deficit target was spent, Hayden convened the first Expenditure Review Committee (ERC) of the Cabinet for ministers not only to put forward spending proposals for scrutiny, but also, more relevantly, to present the case as to why their portfolios should not be subject to cuts. To give Whitlam due credit, the ERC process had been established by the prime minister while Cairns was still treasurer in order to lend more discipline to government decisions over spending. Hayden was the first treasurer to use the process to construct a Budget, and it has been used by every treasurer since.

The Cabinet members all agreed on the proposed deficit target, but many argued their own portfolio was too important to make a contribution to the savings task. Hayden formed the view that he needed to win a big, early battle on spending to signal his seriousness and establish his authority, sending a clear message that no-one was immune from the need for savings. So he decided to take on one of the biggest names of the Whitlam government. Kim Beazley Senior was a veteran of Labor’s years in opposition, and had won John Curtin’s seat of Fremantle on his death in 1945. Beazley Senior was deeply respected across the Caucus and the Cabinet, and he held the education portfolio, which was a key area of policy reform and a priority for the government. In his autobiography, Hayden eloquently describes why he chose to wrestle with this most notable minister over spending: ‘On my figuring, Beazley Senior would be the most formidable opponent with whom to grapple. He had a capacious intellect, argued a well-constructed and detailed case cogently, and could be devastatingly effective with his use of language and analogy.’19

Hayden first had to struggle with the same conundrum as every other treasurer who has had to embark on cutbacks: whether to believe your own Treasury officials about the impact of cutbacks or accept the advice of the relevant minister. A minister who is facing cutbacks will almost inevitably warn of the very grim policy and political implications of a reduction in their funding. The Treasury (and these days the Department of Finance) will likewise normally provide reassuring advice that the cuts can easily be absorbed without adverse impacts. A key task for a treasurer is to use their judgement to asses which of these is right—or more typically, on the balance of probabilities, which is more likely to be the least wrong. Hayden faced just such a challenge in his first budget foray: Beazley Senior calmly argued that the cutbacks would lead to a mass retrenchment of school teachers around the country; Treasury assured Hayden that this was not the case. Hayden accepted the Treasury advice, and he went on to win the skirmish and book his desired level of savings with the education portfolio. But in relation to one particular program affected by the cutbacks, the story didn’t end there, as Hayden’s autobiography explains:

I was uneasy … At the morning break I rang the relevant group at Treasury and instructed them to convene a meeting with Beazley’s officials to make sure there was no error on the part of Treasury, on whose assessments I had to rely. What came down the line, however, was pained offence: the omniscience of Treasury in those days was unchallengeable. Lesser departments, meaning all departments other than Treasury, made mistakes—but not Treasury! Later, a somewhat deflated official reported that Treasury had indeed been in error. I restored the programme shortly after receiving this information.20

Hayden was more successful in achieving savings in the other portfolios, although several ministers fought hard, including urban affairs minister Tom Uren, who wrote to Whitlam claiming the proposed savings in his portfolio were unacceptable.

Although Hayden did not achieve the target of a $2 billion

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