Saturday, December 31, 2011


Michael Gordon January 1, 2012
ONE of the great unresolved disputes of Australian political history is set to be reignited today by the release of previously secret cabinet papers from 1983.
The decision to float the Australian dollar that year is seen as the most important economic reform since World War II. But who deserves the most credit: Bob Hawke, prime minister at the time; or the treasurer who eventually tore him down, Paul Keating?
On the eve of the papers' release, Mr Hawke insisted he did not want to get into a ''slanging match'' with Mr Keating, but essentially stuck with his version - that a reluctant treasurer had to be persuaded to move.
This has prompted Mr Keating to accuse Mr Hawke of having a ''very poor'' memory of the events that led to the decision.
''I am trusting that his utterances on this subject arise from diminished memory of events [almost] 30 years ago, rather than from any express intention to diminish my role, central as it was in this seminal event,'' Mr Keating said in a statement to The Sunday Age.
Mr Hawke described the decision to float the dollar as ''not a hard one'', saying he had the benefit of his own understanding of the Australian economy and exceptionally good counsel from his adviser, Ross Garnaut. ''We were across the issues and the facts and it was quite clear to me that this had to be done.''
Of his treasurer, he added: ''Paul was to some extent influenced by the views of Treasury at the time, that they were opposed and they expressed that opposition, but the important thing is that after discussion in the cabinet … it was supported by all the relevant ministers, including Paul.''
In his memoirs, Mr Hawke went further, asserting that his office was ''the engine room driving economic change in Australia'' in the first year of government, and that Mr Keating had to be persuaded to back the float because he was ''in the thrall'' of his department, which remained ''implacably opposed''.
Mr Keating rejects this version, insisting that he raised the issue with Mr Hawke some seven months before the decision was made, telling him that the managed exchange rate system was no longer appropriate.
''I told this to Bob Hawke privately. This was the first Hawke had officially heard from the treasurer of a propensity to move away from the existing managed system, but it was a view with which he broadly concurred,'' Mr Keating said in a statement.
''At around the same time, I authorised the Reserve Bank governor, Bob Johnston, to have the Reserve Bank … lay out the field of action the government and the authorities might take when the moment in markets was propitious to move to a float of the spot rate.''
The only issue from that moment, Mr Keating insists, was getting the circumstances right.
So, what do the secret cabinet papers - released under a 30-year rule - say? Despite Mr Keating's confidence that they would show that he introduced the matter to cabinet, they make virtually no reference to the issue.
Not only is there no formal cabinet submission, setting out the attitude of the two men and their departments, there is not even a document recording the decision reached on December 9.
This confirms the view of John Stone, the Treasury secretary who opposed the decision. Although he has since called it ''the best'' economic decision by a postwar Australia government, he says it was badly wanting in process.
The absence of documentation adds to the intrigue. Was it the product of an unwillingness of senior bureaucrats to be held up as scapegoats if the decision backfired? Or was it simply circumstance?
In an expansive interview with The Sunday Age, Tony Cole, who was Mr Keating's principal adviser at the time and later became secretary of the Treasury, insists the two politicians were of like mind on the need to float the dollar within weeks of the government being elected in March 1983.
Mr Cole argues the key to the decision was the inquiry led by Sir Keith Campbell into the financial system that reported to the Fraser government in 1981 and recommended deregulating financial markets and floating the dollar.
Within weeks of becoming treasurer, Mr Keating signalled his support for the thrust of the Campbell recommendations and, in May, established a review chaired by Vic Martin to report to the following year.
''It [the float] was going to happen,'' says Mr Cole. ''Paul was trying to manufacture the circumstances in which it would seem like a natural decision rather than a cowboy decision. He wanted to have the Martin report available and it wasn't. Events moved too quickly.''
In the end, the catalyst was the news that $1.5 billion would arrive as capital inflow in the first week of December, driven by rumours of a jump in the dollar's value. This led to a crisis meeting of Mr Hawke, Mr Keating, their advisers and officials from Treasury, the RBA and the Prime Minister's department, which decided to proceed despite Mr Stone's objections.
Mr Cole says his only explanation for Mr Hawke's assertion that Mr Keating had reservations is that the treasurer wanted his department to back the decision.
''Paul thought that this was an extremely important decision and it was important that the Reserve Bank and Treasury actually support it, and he kept trying really hard to get the Treasury people to not object, even if they couldn't agree,'' Mr Cole says.
In the end, the blessing came only from the RBA (though not in writing), and this was underscored by Mr Keating's request that RBA governor Bob Johnston sit with him at the press conference announcing the decision.
As for the lack of paperwork, Mr Cole can explain that, too. ''The paperwork was meant to be created by having the Martin committee come out and recommend it, but events transpired so we couldn't wait.''
The release of the cabinet notebooks recording the views expressed around the table will shed further light on the dispute, but that won't happen until 2018. In the meantime, history's view is that this was the product of one of the best political double acts this country has ever had - even though it ended in tears.
This story was found at: http://www.theage.com.au/national/whodunit-really-we-still-dunno-20111231-1pgae.html

No comments:

Post a Comment