Brian Toohey
Albanese needs to take his Gough medicine

As the Albanese government marks its first 100 days, 50 years after the election of the Whitlam government, it’s time for Labor to drop the outdated assumption that it has nothing positive to learn from Gough. The idea that Whitlam tried to do too much has been used since as an excuse to do too little. His crash-or-crash-through approach has been characterised as chaotic, but his government did more to transform the country and had a greater and more enduring legacy of policy achievements than any other since 1950. Against this backdrop, the Albanese Labor government has ample scope to learn from Whitlam and introduce worthwhile policy reforms of its own.

I was a staff member of the Whitlam government for seven weeks after the election, before joining The Australian Financial Review’s Canberra bureau, where I was much more critical of that government than I am now. Soon after the 1972 election I was present when the Treasury head, Sir Frederick Wheeler, sat opposite Whitlam at a heavy wooden table in a meeting room in Old Parliament House. Rocking back in his chair with his arms folded, Wheeler looked at the ceiling as he told the new prime minister in a gently chiding voice that the nation could not afford the $1.50 rise in the age pension promised in Labor’s policy speech. The table jumped as Whitlam’s fist came crashing down. “We have not spent 23 fucking years out of government,” Whitlam snarled, “to be told that one of the first things I must do is break my election promise to pensioners.”

Wheeler had picked the wrong battle. Like so much else that occurred in Whitlam’s tumultuous term as prime minister, the $1.50 pension rise became an enduring reform rather than an example of profligacy. At the time, the age pension was equal to 19.5 per cent of average weekly earnings. The $1.50 increase was the initial step in lifting the pension to 25 per cent. John Howard’s Coalition government enshrined the 25 per cent in law.

The budget deficit peaked at 2 per cent of GDP in 1975-76, which was used to brand Whitlam as a bad economic manager. There was less condemnation of subsequent governments when the 1983-84 deficit was 3.4 per cent, then 4 per cent in 1992-93 and 34.8 per cent in 2021-22. Unemployment reached a peak under Whitlam of 4.5 per cent, well below 11.2 per cent reached in December 1992 under Paul Keating.

While the Whitlam government was condemned as economically illiterate, it was replaced by ideologically driven policies that were demonstrably nonsense. A leading exponent of one dogmatic crusade, Milton Friedman, promised that controlling a particular measure of money supply would control inflation. In 1985 the Reserve Bank quietly dropped this policy after it became impossible to measure, let alone control, the money supply.

Friedman’s monetarist theory rested on the proposition that the money supply is somehow injected into the economy from outside and that central banks are able to control the rate of injection. In a series of speeches and articles in 1989 and 1990, Ian Macfarlane and Stephen Grenville, later governor and deputy governor of the Reserve Bank, explained the money supply was generated from within the economy and could grow in response to price increases rather than the other way around.

Friedman’s claim that financial speculation is always stabilising was also disproved by events. Whitlam may not have been economically literate, but he had never promulgated the hogwash that underpinned these theories.

This backdrop suggests that the Albanese government, which is refusing to increase the $46-a-day jobless benefit, could be more reformist. A distinguished economist, John Quiggin, has devised a scheme to replace the existing social security system with a “participation” payment at the same rate as the age pension. It would go to those who contribute to society without being paid in the labour market. Examples include caring for children, volunteering, starting a small business and full-time study. It would be withdrawn as paid work increased. The cost could be covered without increasing the budget deficit, if desired.

Some of the Whitlam government’s achievements during its three years in power are as follows: It established Medibank, the forerunner to Medicare; it began funding schools on a needs basis; it established the tertiary education assistance scheme, the technical and further education commission (TAFE); it funded local organisations to establish childcare centres. It made a strong start to recognising Aboriginal land rights, gave assistance to sewer-neglected suburbs, passed legislation to protect the environment and the national heritage and established the Australian National Parks and Wildlife Service.

Whitlam’s government began implementing equal pay for women, initiated benefits for single mothers, gave Commonwealth funding for women’s refuges, appointed the first women’s adviser to government, passed the Family Law Act and introduced no-fault divorce. It reduced the voting age to 18 and established one vote, one value in elections.

His government implemented a more independent foreign policy than now exists, ended support for the Vietnam War, abolished conscription, gave diplomatic recognition to Beijing as China’s capital, scrapped support for apartheid, granted independence to Papua New Guinea, ratified the nuclear non-proliferation treaty, ended the White Australia Policy, stepped up the process of abolishing appeals to the British Privy Council and replaced the British honours system with Order of Australia appointments.

It introduced the Trade Practices Act and what became the Australian Competition and Consumer Commission; set up the Industries Assistance Commission, later called the Productivity Commission; cut tariffs across the board by 25 per cent; abolished unjustified handouts to industries; put controls on foreign ownership and implemented a national employment and training program.

It increased support for the arts, began construction of the National Gallery of Australia, set up the Australia Council for the Arts and the Australian Film Commission and introduced freedom of information and administrative appeals laws.

There were struggles, however. Because Labor had been out of office for 23 years when it won the election in 1972, its parliamentarians had no ministerial experience. When chosen for the ministry, most coped reasonably well, often helped by highly competent public servants. Whitlam was an extraordinarily hard worker who had prepared detailed policies in opposition, often with the help of academic specialists. His government was enhanced by ministers such as Bill Hayden, Ken Wriedt, Jim McClelland, Don Willesee, Tom Uren and Lionel Murphy.

It’s often forgotten that Labor also won the 1974 election, but its political position deteriorated soon afterwards when Whitlam, despite his imposing height and imperious presence, was unable to control three reckless ministers – Rex Connor, Clyde Cameron and Jim Cairns. These men played a significant part in his undoing.

Connor, the minister for Minerals and Energy, was by far the most damaging. He became fixated in 1974 on secretly using a minor con man, Tirath Khemlani, to raise a $4 billion loan from the Middle East.  Although it enraged the White House, there was nothing wrong with trying to raise money from the oil-rich Middle East, rather than continuing to go through Wall Street; the key proviso was that intermediaries must not be used, and this Connor ignored.

Once Whitlam learnt about this folly, he should’ve stopped it immediately, but he didn’t. He did ensure Khemlani was not paid a retainer. Even after Connor had lost his authority to seek the loan in early 1975, he kept using Khemlani, who was been monitored by United States agencies. Khemlani soon found American sources willing to pay him to leak, including the fact that Connor was still seeking the loan. This finally convinced Whitlam to force Connor to resign in October 1975 after nine months of extraordinarily bad publicity.

Without this scandal, there is a good argument the opposition leader Malcolm Fraser would not have been able to convince his colleagues to block the 1975 budget supply. This would have deprived the governor-general, Sir John Kerr, of the pretext he used to dismiss the Whitlam government in November 1975.

Shortly after Whitlam first won government in 1972, Clyde Cameron asked Walter Rice, the fiercely anti-Labor American ambassador, whether the US would “send in the Marines” if Labor nationalised the economy, despite the party having no intention of doing so. It was a self-indulgent “joke” from Cameron that counted as another black mark against Labor in Washington.

In June 1975 Whitlam removed a resentful Cameron from the Labour and Immigration portfolio. The then CIA station chief in Canberra, John Walker, later told me he used to have drinks with Cameron in Canberra. Cameron confirmed this. Walker said he was surprised how “bitter” Cameron was about Whitlam but wouldn’t say what damage the notoriously vindictive politician tried to cause.

Whitlam removed Jim Cairns as treasurer in June 1975 for misleading parliament over a more minor loans matter. Whitlam was furious that Cairns was neglecting his job because he was sexually preoccupied with a woman on his staff – his principal private secretary, Junie Morosi.

By contrast, Albanese’s frontbench is the most experienced the parliament has seen in decades. The most senior figures around him have already served as ministers in previous governments. Albanese is well placed to run an effective and reformist government. He just needs to shake the foolish notion that Whitlam was a warning against this kind of government. Look at the legacy: Whitlam should be an encouragement.

This article was first published in the print edition of The Saturday Paper on September 3, 2022 as "Gough medicine".

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