The Reith Papers

THE

REITH

PAPERS

THE

REITH

PAPERS

PETER REITH

MELBOURNE UNIVERSITY PRESS

An imprint of Melbourne University Publishing Limited

11–15 Argyle Place South, Carlton, Victoria 3053, Australia

mup-info@unimelb.edu.au

www.mup.com.au

First published 2015

Text © Peter Reith, 2015

Design and typography © Melbourne University Publishing Limited, 2015

This book is copyright. Apart from any use permitted under the Copyright Act 1968 and subsequent amendments, no part may be reproduced, stored in a retrieval system or transmitted by any means or process whatsoever without the prior written permission of the publishers.

Every attempt has been made to locate the copyright holders for material quoted in this book. Any person or organisation that may have been overlooked or misattributed may contact the publisher.

Cover design by Philip Campbell Design

Typeset by Typeskill

Printed in Australia by McPherson’s Printing Group

National Library of Australia Cataloguing-in-Publication entry

Reith, Peter, 1950– author.

The Reith papers/Peter Reith.

9780522862676 (hardback)

9780522862683 (ebook)

Includes index.

Liberal Party of Australia.

National Party of Australia.

Australia—Politics and government—1990–2001.

320.994

Contents

Introduction

1   1993

2   1994

3   1995

4   1996: The election campaign

5   1996: The first year in government

6   1997

7   1998

8   1999

9   2000

10   2001

11   The Back Story

Acknowledgements

Index

Introduction

IN MY BY-ELECTION campaign in 1982, my political handler, Grahame Morris, said I should take a small writing pad wherever I went, and whenever someone asked me to do something, I should write it down and say, ‘I will take this matter up when I get to Canberra.’

I never stopped writing.

But it wasn’t just for voters. I had other reasons for keeping notes. Although I came from a political background, I felt I had to work at understanding the big issues. So I used to write down the arguments for and against any proposed policy or action. In 1988, while in the shadow cabinet, I was following waterfront issues and wrote pages and pages summarising various reports advocating reform, which would prove useful ten years later when I was minister for industrial relations. I continued to make notes on every subject, including details both big and small, once we were in government. I also used my notebooks as leader of the house. I would get to Canberra on the Sunday night and write down the agenda for the forthcoming week. When I walked into the PM’s office for the 8.30 am tactics meeting, I was prepared with my notebook.

I didn’t write every day, though. Often I had no time. I didn’t write much in the Fightback days. With Hewson and our team of economists we’d often meet for discussions after the house finished late and keep going until the early hours of the morning, putting together what would become the 650-page policy document Hewson would take to the polls in 1993. This left little time for journal writing. I kept some notes during the waterfront confrontation, but they were brief. During this period my PA and close friend Jackie Jurd kept newspaper clippings for me, but I was under sustained pressure for months and months and probably a bit too stressed to write a lot in the middle of a huge bunfight with the wharfies. I pasted in the clippings and sometimes letters or faxes, occasionally making notes of my thoughts and reactions alongside them. Other times, I just wrote for the heck of it. I kept an article given to me by Alex Downer on why bald-headed politicians rarely became leader. (He was right: he still has more hair than me and he did become leader.)

One reason I kept notes was that I thought one day I might write a regular column and it would be useful to have a few stories of what had happened in the past to draw on. This proved prescient: my notebooks occasionally provide stories from the distant past for the columns I currently write for the Sydney Morning Herald, and show there is not much new in politics.

I didn’t originally plan to publish my journal entries in memoir form. After parliament, in 2003 Peter Costello appointed me as an executive director at the European Bank for Reconstruction and Development. The work at the bank gave me the chance to put politics behind me and it kept me busy. It wasn’t until I returned to Australia in 2009 that I reflected on politics and I had the time to consider writing a book about my experiences. Tim Fischer, deputy prime minister under Howard, has regularly encouraged me to write my memoirs, on the grounds that Coalition MPs don’t write enough about what really happened on the inside during those years. He is probably right on that score. But perhaps my main reason for writing this memoir is I reckon it is better to write your own story than to have someone on Twitter or Wikipedia do it for you.

By the time I left parliament, I had more than 120 notebooks – most of them the blue notebooks I wrote in frequently, but also red notebooks, which I used for overseas trips. Each extract quoted is identified by a notebook number and a page number. For example, the entry labelled 18BNB118 comes from blue notebook number 18, page 118. RNB numbers refer to entries made in the red notebooks I used when travelling. These notebooks form the basis of this book, and are quoted more or less verbatim. The notes are presented as I wrote them at the time. I have not changed the text in any way that would alter the sense of what I was saying, but only to clarify my meaning. However, because of the abbreviated nature of some of the entries or the extensive editing that was needed to cover some years or events, I have written around the original entries to give context. Fortunately I had enough material to ensure that the contemporary comments reflect the situation at the time. I had imagined I might refer to my notebooks often in my post-parliamentary life, but most of the notes have remained unread until recently. It’s not easy to explain the experience of rediscovering your thoughts of twenty years ago or more. At times, I was surprised by my comments and have wrestled with the issue of making public some personal comments. But in the end I decided I couldn’t write a memoir based on diary entries if I excised the bits that some people may not appreciate. There were very few people in politics that I didn’t like; the fact that no one is perfect is no reason not to tell the story as it happened.

I am proud to have been a member of the Howard government and one big reason for that was that we knew what had to be done right from day one when we took office in 1996. We wanted to improve living standards significantly and give people the chance to work, but what we achieved in the first two terms was extraordinary. Howard was a good people manager and committed to reform. Costello’s first budget cut spending, bringing the budget into surplus and keeping it there. Reforms to the relationship with the Reserve Bank were important per se but also sent a strong message that the government knew how to manage a modern economy. Then, to cap off a huge year, by Christmas we had negotiated with the Democrats to pass the biggest reforms to industrial relations in decades. By the end of its second term, the government had taken on and succeeded in introducing not just any tax reform but a goods and services tax: probably the most difficult policy challenge there is. By 2000, Australia was on track for the best living standards and job conditions in many years.

It’s easy to look back at success and then make the mistake of concluding that this year’s crop of politicians are not nearly as good as previous MPs. I do not believe that. Looking back, the Howard government faced all sorts of alleged calamities while I was there. As my notes show, we were forever wondering about our fate at the next election. With hindsight, the Howard years seem idyllic. By any standards it was a first-class government but it certainly didn’t feel like that very often.

It’s too early to make judgements on the present government. As I write this in September 2015, the government has only been in office for about two years, and just changed leaders to Malcolm Turnbull. The Abbott government did some important things, like stopping the boats, launching important security initiatives and getting rid of the carbon tax and the mining tax. It also took the right position on the car industry and worked to manage the country’s budget. As a commentator I have not hesitated to complain about its lack of policies on workplace relations and other issues. No one has a crystal ball to tell us if the Turnbull government will do more to tackle the big outstanding economic reform issues. However, if Turnbull does not meet the expectations of better economic management he raised in his challenge to Abbott, then he will be more vulnerable to losing office. Prime Minister Turnbull has plenty of good performers in his team, so it is up to him and his senior colleagues to make the most of their opportunity.

Any change of leader, especially a first-term prime minister, is difficult. When Abbott was first elected I didn’t see him as a future leader. I got that wrong: John Howard was a better talent spotter than me. I got on well with Abbott when he was appointed junior minister in my portfolio. We were a good team and his first policy job went well. The new employment jobs market had a number of teething problems and Abbott worked with all the participants and got them fixed. Soon after he was calling me ‘brother’. That was okay with me until he said Bronwyn Bishop was his political mother. After his stint as my junior minister he was ready to move up into the cabinet.

I found a note about Abbott I made on or around 19 March 2001 in my diaries, not long after I’d taken over from John Moore as minister for defence. Moore had resigned his seat in parliament, prompting a by-election, which we lost to Labor. The note read:

I was asked at the doorstop at yesterday’s cabinet meeting if I was really the reason for Moore’s departure and thus the cause of the by-election in Ryan because John Howard wanted to ‘protect’ me. Howard did want a wider shuffle but the reason was not about me but to promote Abbott, which is why John said it was about generational change. He wanted Abbott into cabinet because he and Abbott are philosophically close and he sees Abbott as having the potential to challenge/supplant Costello.

Politics is mainly a two-horse race, but the quality of the contestants can tilt the outcome, as I now expect in favour of Turnbull. When John Hewson was opposition leader, he lifted the policy standards by forcing Keating to match him. Bob Menzies faced a divided Labor party and that probably helped him stay in office for his sixteen years. Since the start of the Howard years, Labor has seriously undermined the respect it gained, particularly during the Hawke years when it was active in promoting economic reform. Labor’s policy choices have become more left-wing and more under the thumb of the union movement. The unions have been losing members for years and the good old days when more than 50 per cent of workers were in the union are over. The unions are Labor’s base but the base has become smaller and less reflective of Australian values. The unions now have no more democratic standing than any other small, factional, single-issue party. For the sake of a robust political system, Labor needs to implement real change, sooner or later. But that is a problem for Labor to deal with. For the Coalition, good government must be the goal – not just being better than Labor, but setting first-class policies for the benefit of our country. That was what I tried to do during my time in politics.

In picking out the material for these memoirs, I have aimed for a representative coverage of the concerns of the day. There is a strong focus on the major reforms, but I took notes on many other subjects, from plans for new Indigenous employment programs to the republic debate, an interest of mine going back to my university days. As I did not write all the time, particularly in very busy periods, some issues were not mentioned in my notebooks at all, while others were mentioned but were not worth repeating here. I have had to be selective about what I included, for reasons of space, but I have not avoided the harder parts of the story. I mention the ‘children overboard’ affair, which started late in 2001, towards the very end of my ministerial career. I also touch on the fracas over the Telecard, which was a big story at the time. In both cases, the stories were mightily exaggerated. But that’s politics.

My notes remained largely untouched until the last few years. I have been quite surprised to go back and remember things that I had forgotten. It’s easy to forget the pressure of being a busy minister. I could never have written my memoirs by merely relying on my memory: it was not that good. My opponents would say how convenient. However, I can say that my blue notebooks express exactly what I thought at the time. History shows I got some things wrong, some right.

1993

AFTER WINNING MY seat of Flinders in a December 1982 by-election, I lost it at the general election only three months later. That was the first of five election losses in a row. I regained Flinders at the 1984 election under Andrew Peacock’s leadership, but the party lost that election and lost again in 1987 under John Howard. And again under Peacock in 1990. And one more time, in 1993 under John Hewson. I know what it means to start politics at the bottom. But while we kept losing to Labor, I kept moving up the ladder within the Coalition. By the time the 1993 election had come around, I was deputy leader and shadow treasurer. After we lost that supposedly unlosable election – even in a deep recession, the electorate chose Labor over Fightback’s GST and industrial relations reform – I was at a crossroads. Things looked bad for me. But even then, I did not regard myself as finished. It was time to regroup and start again. One thing I learnt from Hewson was always to start with an assessment of the economic and the political situation.

18BNB118

On or about 11 March 1993

On policy issues, Australia is in a state of long-term economic decline. We were once the world’s richest people but today we are 18th according to a recent OECD survey. We have over one million people unemployed and our borrowings are more per person than virtually any other country in the world. If Australia goes on making peripheral change, as has happened under Labor, then our circumstances will continue to gradually erode even though that erosion may be masked by the ebb and flow of the economic cycle.

I do not believe that the party should jettison the principal elements of the economic policy presented at the last election. Australia still needs to undertake major reform of the tax system and industrial relations, microeconomic reform, privatisation and many other aspects of economic management.

Having spent three years as deputy leader, I had learnt to talk more to my colleagues, so I rang many of them to discuss the election result. John Howard, then a frontbencher and former leader, said he was reserving his position and it was the worst result for 20 years. The South Australian senator and frontbencher Amanda Vanstone said that I should stay and that Hewson would not last. Ian McLachlan, the member for Barker in South Australia, said that we had lost the unlosable election and ended up the target. He said leadership was a problem and he and others had felt outside of the policy process. Jim Carlton, member for Mackellar in New South Wales and a former Fraser government minister, said John Howard couldn’t come back. Peter Costello, a junior frontbencher and member for Higgins in Victoria, said the result was ‘the worst’ and that the party should not support Howard’s return to the leadership because having Howard would be going backwards. His actual words were: ‘Howard is going back.’ David Kemp, a shadow minister and member for Goldstein in Victoria, was pleased that Hewson was staying but the issue for him was whether he had learnt from the experience. He said it would not be personal if I copped it. Michael Wooldridge, the member for Chisholm in Victoria, had made it clear to Howard that he would not support him. Peter Durack, West Australian senator and former leader of the opposition in the Senate, had no doubts that Hewson should go, as he would not change his spots. Durack said that on industrial relations we went too far, Medicare was a big sleeper and we left ourselves open on education. He said the deputy’s position was an even bigger problem: I was tied to Hewson, for Costello it was too soon to step up, and he would not support Downer.

I would remain as deputy leader until the party meeting. I expected to be the sacrificial lamb and my first thought was to resign and go quietly. My father, Alec, disagreed. And I did feel that I had done a good job. I spoke to Howard about 7 pm on 17 March. By then I had spoken to at least 40 of my colleagues. Hewson told me that he was standing as leader.

18BNB139

Party meeting, Canberra, 23 March 1993

Hewson won convincingly over Howard. Eight stood for deputy. David Connolly, Alexander Downer, Ken Aldred went out in the first ballot. Wilson Tuckey and I tied in the next ballot with 12 votes each. Tuckey was then eliminated. I was out in the next round. David Jull out next and Wooldridge defeated Costello.¹

I announced that, as the party obviously wanted a change, then I could not stay as shadow treasurer and so the sensible thing was for me to go to the ‘sin bin’ – the backbench. I had seriously thought about not standing at all but the party put me in – it was for them to put me out. I also thought I had a reasonable chance of getting back although I knew that I didn’t really know where the votes would end up.

Got a long letter from John Hewson entreating me to stay. John Elliott said I was the next leader and he’d help. Austin Lewis said the same this morning. John Howard said going to the backbench was the right thing. Andrew Peacock thought I’d have a better profile if I stayed on the frontbench. Fred Chaney wanted me to stay in shadow cabinet but appreciated that being out for a while wasn’t a bad thing. Jeff Kennett rang and offered help, spoke to Richard Alston and Wooldridge. Downer thought my going to the backbench was tactically brilliant. Neil Brown offered membership of the ex-deputies club.²

18BNB145

Handwritten letter from John Hewson, 24 March 1993

Personal and confidential

Dear Peter

I just thought I would drop you a quick note as you must be feeling particularly low today. And I feel very bad that you were treated to some extent as a ‘scapegoat’ for what were principally my mistakes and my responsibility.

I believe that what you and I tried to do with Fightback was a clear cut above anything that anyone else has ever tried to do in Australian politics. And we almost pulled it off! On March 12, we were being hailed as geniuses and heroes. On March 13, we were hailed as fools and failures. Clearly we took all the political risks, we made some mistakes and even at times expected too much of others, but I feel time will show that our basic direction was right. Although none of the media will probably ever write that and few if any will ever say so we will know and those who matter to us will know. And in the end, you got to be able to live with yourself – others come and go around you.

I know how difficult it is to say much at times like this, but the words of Theodore Roosevelt say it pretty well as far as Caroline and I are concerned – we’ve referred to them often over recent months.

‘It is not the critic who counts, nor the man who points out how the strong man stumbles or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena; whose face is marred with dust and sweat and blood; who strives valiantly; who errs and comes short again and again, because there is not effort without error or shortcomings, but who does actually strive to do the deed; who does know the great enthusiasm, the great devotion; who spends himself in a worthy cause; who at best knows in the end the triumph of high achievement and who at the worst, if he fails, at least he fails while daring greatly so that his place shall never be with those cold and timid souls who know neither victory nor defeat.’

Surely there is no more ‘worthy a cause’ than the long-term security and future of our children.

Peter, I could not have had a better partner in policy, a loyaller deputy or a better friend. I sincerely thank you for all you did and for all you mean to me and are to me.

But please don’t leave the arena – stay in and continue the fight. John

I certainly was not going to leave. I was not despondent. I was getting on with the job. I soon had a list of things I wanted to do.

18BNB161

On or about 30 March 1993

Jobs for when I return from a one-month break following the 1993 election:

Visit/contact – all branches

Visit local schools, businesses, local press and the Rosebud Hospital

Interstate – business organisations, tax reform groups, Liberal Party, state party and organisation

Policy issues – immigration and foreign policy

Ring Ted Baillieu³

Release Cole committee to library⁴

Secure a regular column.

I wanted to learn from our mistakes so I spoke to national Liberal Party director, Andrew Robb, on 30 March. He said the undecided votes went 42:58 against us. If it had been 45:55, we would’ve won the election. But the voter hesitation to shift to the Coalition was over 60 per cent on the GST. The hesitation figures on unemployment and economic management grew during the election but they never went above double figures for any other issue. There were two events that locked in voter sentiment against the GST:

1) the GST cake incident on Channel 9 with John Hewson and Mike Willesee, in which Hewson had trouble explaining how a GST would apply to a cake sold commercially

2) Canadian prime minister Brian Mulroney losing office due to the unpopularity of a similar tax he had introduced (a story grossly exaggerated by the ABC).

Robb said the last two weeks were a roller-coaster and expectations of us winning rose in the last four days. The marginal Coalition seats we lost had a swing of 2.45 per cent against us.

I was back on the backbench sitting between Christopher Pyne, member for Sturt in South Australia, and John Moore, member for Ryan in Queensland. I did not expect to be there permanently and anyway there were lots of things I could do while I was there.

A lot of people think that if you don’t make it as a minister, then somehow you missed out. This is not true. There have been lots of people in the Australian parliament who have made a real difference. One was Bert Kelly, member for Wakefield, who only spent a couple of years as a minister but was widely respected for his many years on the backbench of the Liberal party and his significant role in advocating free trade. Victorian state MP Alan Hunt was another; he took up the case of a woman who was in dispute with the Victorian government. Premier Henry Bolte did not appreciate Hunt making trouble and kept him out of the ministry for years. In his son, Greg Hunt, my successor in Flinders, I hoped for the same commitment to principle.

Ever since the 1988 referendum campaign I had been active on constitutional issues. With prime minister Paul Keating pushing for a republic I wrote down my thoughts, ready to play a role in the party room and elsewhere.

19BNB5

4 May 1993

A rough outline: my position on the Republic

The strategy committee can’t be a substitute for policies being decided by the party room.

  1) We are a republic anyway. It’s probably inevitable, but that could be many years away. Defending Charles and Di is hard and they don’t show interest in us.

  2) We should not have a knee-jerk opposition to the idea of a republic. It paints us badly whether you are for or against. It’s important at this stage to be constructive.

  3) The detail is important.

  4) We should encourage the formulation of the detail.

  5) A Keating proposal with the Nats opposed is likely to get knocked over, but the position is not yet clear.

  6) There should be a constitutional convention.

  7) We should take a constructive attitude to the debate.

  8) It’s early days – we don’t want to be the issue.

  9) Make it clear that we support federal system.

10) We should oppose creeping republicanism.

In July I prepared for a trip to Israel, a sort of consolation prize for losing the deputy leadership. The invitation came from the Israeli Democracy Institute and I was asked to deliver a paper on economic reform, comparing Australia, New Zealand and Israel. George Schultz, the former US secretary of state, was the chairman. My first trip to Israel had been with former National Party leader Ian Sinclair. He suggested that as I was going to Israel for a second time I should balance things up and go to Egypt as well. I took his advice but it meant I needed some more shots from the doctor.

In the surgery, the doctor asked me how I felt, checked my ticker and by the end of the day I was in the Epworth Hospital. There’s not much privacy in politics. While I was being carted around the hospital for tests I took a phone call from Graham World of ABC Radio. He said he had a report that someone had seen me in hospital and he wanted to know if I was well. I did not want to give any of my colleagues any false hopes of my condition so I said I was absolutely fine, and I had no idea who would tell him that. That kept him off the scent. In fact, a specialist had told me that I’d had a heart attack without realising it and that it had probably happened a while back. One of my arteries was completely blocked. About 4 per cent of the population have these silent heart attacks and it was definitely silent for me: I hadn’t felt anything. Obviously, during my time as deputy leader in the lead-up the 1993 election, I’d been under some stress. It was the Fightback heart attack. Sixteen years later in 2009, back from six years in the UK, my condition had worsened and I had a triple bypass in the Epworth Hospital. A nurse informed me that I was in a bed that Andrew Peacock had used when he was a patient there. As I was leaving after the operation the surgeon bade me farewell and said, ‘See you in twenty years!’

While busy with my list of things to do on the backbench, it wasn’t long after the 1993 election that the Keating government’s political fortunes were turning negative.

In many ways, Fightback took its revenge on Keating as soon as the 1993 election was over. One of the great strengths of Fightback was that it not merely predicted economic improvements such as reduced unemployment. It also provided the nuts and bolts of an economic plan that could fulfil the predictions. The detailed Fightback brochure stated ‘we pledge to generate two million jobs, halve the unemployment rate and reduce the size of government’. During the election, Labor struggled to make any firm commitments. One junior minister said that the Keating government might reduce unemployment to 6 per cent, but no one believed that Labor was the solution to Australia’s unemployment – instead Labor was seen as the problem. In contrast, the Coalition not only had a policy but detailed plans in industrial relations reform, the abolition of payroll tax and wholesale sales tax and other reforms that clearly would make an impact on unemployment. Keating’s defeat of Hawke was predicated on the proposition that he would make a better response to Fightback than Hawke. And his response to Hewson was the claim that he could manage the economy as well if not better than Hewson, but without the ‘nasty’ reforms. This was the fatal flaw. Keating had no answer other than rhetoric and some stimulus spending.

Six months after the defeat, Hewson wanted me back and I was ready to return to the fray. On 8 September, I returned to the shadow cabinet as shadow special minister of state. My job was to coordinate the Coalition’s response to the High Court’s Mabo decision, the controversial decision of the High Court to acknowledge the native title property rights of Aboriginal people. The backbench was busy and useful but I wanted to be back in the centre of the political action and policy development.

My appointment had some irony. For three years I had been the Coalition’s principal economic spokesman. After the election, some MPs were saying that we concentrated too much on economics and it was time to give greater emphasis to social issues. The biggest social issue in 1993 was Mabo, and I got the job! I was ready for the job because I had already been working on it from the backbench. In the early months of 1993, I was spending more time on Mabo. It was an issue where you had to tread carefully. Apart from the politics or anything else it was a very complex legal issue. I was lucky; just when I needed a real lawyer I was able to turn to my friend and long-time adviser Hugh Logue to provide the intellectual grunt that we needed to properly understand and then make decisions about the issues.

Within a few weeks, page 6 of my new notebook was headed ‘possible policy position’. By the end of the month, I had had discussions with: the West Australian Greens senators Christabel Chamarette and Dee Margetts; leaders of the National Farmers’ Federation; New South Wales premier John Fahey; West Australian premier Richard Court; backbencher Bob Katter, who said he would want compensation for acquisition of property rights; frontbencher John Moore, who said he’d take a hard line, but he was okay with my general outline; and a well-attended meeting of the backbench committee. I spoke to Jeff Kennett on 5 October as he was seeing Keating the following day. He had spoken to West Australian premier Richard Court and made the point that we would not win if Keating could paint us as being unfair.

It was not an easy issue for either side of politics. Keating was under pressure from his backbench. He had not spelt out his approach. There were allegations that the minister for Aboriginal and Torres Strait Islander Affairs, Robert Tickner, was keeping the caucus in the dark.

20BNB29

Mid-October 1993

My role is specifically dealing with Mabo whereas my colleague Peter Nugent deals with broader Aboriginal issues including reconciliation. This is an ongoing matter although I think many people would be disappointed with the events of last Friday. Leaving aside genuine differences, it is regrettable that many Aborigines feel that they have been betrayed. It is even more regrettable that the PM should accuse Aboriginal leaders of acting in bad faith.

In truth, it was Keating who unrealistically raised expectations in his Redfern speech and who in the last ten days has been selling Plan B to the caucus, Plan C to the states and giving a wink and a nod to the Aborigines.

I was thrown out for calling Keating a hypocrite but he openly admitted that the positions being negotiated were incompatible.

On the one hand, with the states, his Mabo plan is to narrow native title, and with the Aborigines it is to broaden the impact of native title.

His disappointment that he could not reconcile the irreconcilable is all the more intriguing as he himself has said on numerous occasions for months that you’ll never please everybody and yet he’s been trying to do so. The 11th hour trip to see Richard Court was only to avoid the criticism that he was ignoring Western Australia – not to talk seriously.

By mid-October, the West Australian MPs were very concerned about the Coalition’s likely final position. Senator Winston Crane told me