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

Cabinet accepted his recommendation when it came to deposits, but it rejected the lifting of the ceiling on loans. Howard knew that this decision was nonsensical and unsustainable, but was comfortable that he had taken a big step towards the eventual deregulation of the financial sector.

The Campbell Inquiry’s final report was handed down in November 1981. It took a clear and robust deregulatory approach, concluding that ‘the committee in effect is asking that more confidence be placed in the disciplines and processes of the market’.31 Among other things, the committee recommended that all government controls over interest rates be abolished, all government lending controls be removed, banks be paid market interest rates on their deposits with the RBA, the Australian dollar be floated, all controls on foreign exchange be abolished, barriers to domestic companies starting banks be abolished, and barriers to foreign banks opening in Australia be substantially eased.

The process of the government’s consideration of the Campbell Inquiry report got off to a bizarre start. Fraser heard that Howard had a copy of the report, which he had not shared with the prime minister. Fraser also ascertained that Treasury officials had received a copy of the report and that a Treasury taskforce had been established to consider how to implement the recommendations, with instructions from Howard to hold on tight to the report and not share it within the government. Fraser rang Howard to demand a copy of the report. A diary note from Fraser’s office records Fraser telling Howard that while not opposed in principle, he was deeply concerned about the timing of any move to deregulate loan interest rates. Politics was clearly on Fraser’s mind.

Howard, meanwhile, took the view that there should not be a comprehensive response to the report. That would mean ruling recommendations in or out, and he was not confident he would win the majority of the arguments. Howard was being cautious, but he was also being realistic about how much support he would receive from Fraser. Howard told Fraser, ‘It is important I think to avoid the expectation of a single, all embracing response by the government. Equally again it is highly desirable in my judgement that the government be seen to be responding in an orderly and methodical manner to what has been recommended.’32 The lack of a comprehensive response resulted in the same outcome that Howard feared from a detailed government response: very little happened.

The one recommendation that Howard took up was the admission of foreign banks to Australia. The Prime Minister’s Department strongly supported Howard’s submission, although it suggested that twelve foreign banks be allowed instead of Howard’s proposed eight. Eventually, the Cabinet agreed in principle to let up to ten foreign banks in, despite the ABA’s vehement opposition—this was in the fine tradition of industry groups that support free markets except when it comes to government-imposed barriers to competition for their members, which they support wholeheartedly. Even the decision to allow ten foreign banks to operate in Australia came too late, however, and it could not be implemented before the fall of the Fraser government. This, like the other recommendations, had to wait for the election of the Hawke government to come to fruition.

The case for financial deregulation between 1975 and 1983 was a strong one. While we might be accused of judging with the benefit of hindsight, the fact is that the Hawke government embarked on a substantial deregulatory agenda not long after its election in 1983. There were also plenty of voices on the Fraser government back-bench that were contemporaneously arguing for a more free-market approach, whether it was in relation to the financial system, workplace relations, taxation or protection.

The dysfunction and difference of philosophy that led to a lack of progress in financial deregulation was symptomatic of the wider malaise afflicting the Fraser government’s economic policies. Howard’s budget speeches seeped with frustration at the high wages growth that was the result of an inefficient centralised wage-determination system. Yet, apart from Fraser’s quixotic, abortive and ineffective wages freezes, there was no strategy to deal with it.

There is no doubt that Howard became a strong and frustrated advocate of financial deregulation. This occurred fairly late in his term as treasurer. I asked Howard in 2014 whether, if the Fraser government had been re-elected, the dollar would have been floated during that next term. His reply was clear and telling: ‘No. Even in the face of a currency crisis like late 1983, I never would have been able to convince the Fraser Cabinet of the merits of the float. I just don’t think it would have happened.’33

It would have been better for Howard’s record if he had more clearly and formally advocated for deregulation within the government, but then again, even if he had, he would not have succeeded.

Afterwards

Rivalled only by Sir Earle Page, Howard had the longest and most successful political career of any Australian politician after leaving the Treasury portfolio. He went on to become Australia’s second-longest-serving prime minister. However, this came after more than a decade of setbacks and false restarts in his political career. His post-Treasury career was a master class in tenacity in the face of adversity.

Following the defeat of the Fraser government and Fraser’s resignation as Liberal leader, Howard made his run for the leadership. Despite the fact that Peacock had challenged him, while Howard had been a loyal if critical deputy, Fraser gave his support to Peacock, who prevailed by thirty-six votes to twenty votes. Howard continued as deputy leader and shadow treasurer.

It was widely speculated that Howard would challenge Peacock in the lead-up to the December 1984 election. However, Peacock ran a strong campaign against the Hawke government’s decision to apply an assets test to the age pension, and the government’s eventual majority was not as large as had been expected. This forestalled any potential leadership challenge. Despite this, Howard was regularly asked if he would challenge Peacock for the leadership, particularly as the Hawke government’s popularity improved in 1985. Howard