re: paul keating and the " Among the nuggets is a note Keating prepared as background for the then Opposition leader Mark Latham in 2004 to counter the Coalition's scare campaign on interest rates. Keating wanted Latham to defend Labor's past, in particular the policy decisions that led to the 1991 recession.
The most revealing aspect of this document is that Keating still claims credit for the "recession we had to have". He believes the pain was worth it for the nation, even though it ultimately cost him government.
"Wages were held and inflation was beaten," he wrote of the battle to rein in the spending boom of 1988-99. "There was no return to [treasurer John] Howard's 1982 wage explosion of 17 per cent and his 11 per cent inflation. Australia came out of the recession in 1991 with inflation at 1 per cent. Had a wages boom happened again at the end of the 1980s, there would have been no success in the '90s."
The job of terminating the boom, fuelled as it was by the "crazy lending of the banks", was always going to be "ugly", Keating wrote: "The Reserve Bank by its timidity made it worse. But, nevertheless, despite the pain for the government and the community, it was the turning point for Australia.
"It broke, once and for all, the dismal boom and bust legacy of wages explosions and profit crunches. It gave us 14 years of strong low inflation growth. It is why the government said at the time 'it was the recession we had to have', for without it, wages would have gotten away again and inflation would not have been beaten. The problem was the [Reserve Bank of Australia] made it a deeper and much harder landing and a far costlier one than it should have been."
Keating showed me the note in June 2005. Six months later, he received the most unexpected endorsement of all: from Ian Macfarlane, the RBA governor who had been appointed by the Howard Government soon after its election in 1996.
Macfarlane agreed with Keating that the recession had been worth it:
"I think that some of the economic interpretations are completely wrong and, even more importantly, the political interpretations are completely wrong. The episode in Australia which returned us to a low-inflation, stable growth economy was regarded as a policy error, whereas in America it is regarded as a policy triumph."
The recession still haunts the post-Keating Labor Party, almost 15 years after it ended and 10 years after Howard came to power on the back of it. Labor did win two elections despite the recession, in 1990 and 1993. But it has lost its way in the recovery.
Keating thinks that Labor made a mistake in turning its back on the economy that he and Bob Hawke built between 1983 and 1996.
"What's happened to the Labor Party since 1996?" Keating asks. "It has gone back to the old anvil. It's walked away from financial innovation, from the opening up of the economy and the whole meritocracy model of widening its own appeal to single traders, to sole operators of business, small business."
The former prime minister believes that deregulation created a new type of voter, the former blue-collar worker turned small businessman. But Labor vacated the field of economic reform and allowed this voter to move into the Liberal camp.
Howard says the upwardly mobile rejected Keating's social policies for a republic and reconciliation.
"They're a natural fit for me," Howard says of the self-employed voter. "The thing is, a lot of those people are socially conservative, they don't like all this trendy stuff."
In their interviews with me, Howard and Keating agreed the election that Labor got most wrong was 1998, when Kim Beazley aimed his tax cuts too low in response to the GST package.
"Labor completely misread the 1998 election, the size of the One Nation vote," Howard says. "One Nation made that rather odd decision to preference against all sitting members; and because, with a big majority, we, by definition, had more sitting members, Labor did unexpectedly well out of that.
"But it didn't mean that that was really half the Labor vote they'd lost in '96 returning, and I think Beazley fundamentally misunderstood that. And that affected him from '98 right through to 2001.
"He thought he was halfway there. His primary stayed virtually static. One Nation took 7 per cent off our pile and handed half of that to Labor. In 2001, half of those One Nation votes came back to us, and then in 2004, in mathematical terms we [got the rest].
"They still haven't gone through any of the policy reappraisals that we went through after we lost in 1983."
Keating makes roughly the same point, though he doesn't give any credit to Howard for picking the electoral mood better than Beazley. Labor had forgotten how to win, which allowed Howard to win by default, Keating says.
"Howard nearly lost in '98; you see, they didn't like him by '98. But they'd lost our middle ground vote by now."
Keating has no personal criticism to make of Beazley. In fact, he wishes him well and says Beazley has his full support. Keating remains loyal to the party and its supporters. His comments are carefully worded and take aim at Labor as an institution, which he fears has reverted to its pre-deregulation type.
Keating says Labor has been an agent of change three times in the nation's history: during World War II with John Curtin, briefly in the early 1970s with Gough Whitlam, and then with Hawke and himself. But apart from that, nothing.
"The Chifley years simply squandered the Curtin inheritance," Keating says. "[Ben] Chifley was trying to nationalise banks, trying to build a command-and-control structure, which the country didn't need. I regarded Chifley as a very modest performer and so his government was defeated accordingly.
"What have we got then? We've got the Labor Party in the '50s and '60s rent by division but also rent by division over ways and means.
"Then we take the Whitlam government, which had clarity about the need for an assertion of our national character but a complete confusion between ways and means, between economic outcomes and economic objectives.
"So if you look through the 83 years until Hawke and I come to office, there is no ability on the part of the federal Labor Party to put anything in place like the '83 to '96 years, no technical ability, no grasp of the major economic issues in a systemic kind of way.
"You might have had Curtin's manful measuring-up to the challenge of the war, and his ability to move people around in respect of things like conscription. But take that out of it and the Labor Party from 1900 to 1983 is a pretty modest beast.
"Will we see the likes of the '83-to-'96 government again? Well, maybe, maybe not. Institutionally you could have no confidence that the Labor Party could now breed it. In fact, it probably never bred it; it was more good luck than good management."
Keating's punchline is: "The Liberals have actually showed more promise in understanding the need to open it up than the Labor Party does."
I'm interested in how Keating would have handled Howard. He gives me an anecdote about the 2004 election. While Latham was finalising his tax and welfare changes, Keating called to urge him to cut the top personal rate of tax from 47c in the dollar to 39c. Don't worry about what the Labor pollsters say, it would drive Howard mad, Keating told him.
But Latham had already baulked at this option earlier in the year and wasn't in a mood to revisit it.
Keating didn't have anything more to do with Latham, though he did ring just before polling day to wish him luck. Latham replied that he expected to struggle, but he was happy that he got to run his argument in the campaign about "easing the squeeze" on families.
Keating shakes his head: "I said, 'Listen, mate, you know what the squeeze on families is in Sydney, how they move up from a two-bedroom apartment to a terrace house, how they trade in their Commodore for an Audi, that's the squeeze on families.' He says: 'You're joking."'
Later that evening, Keating hosted a small election party that became a wake once it was clear that Labor had lost for the fourth time to Howard. A woman in her early 30s who works for one of Keating's friends approached him for advice. She and her partner had a small two-bedroom apartment in inner Sydney and wanted to ask the former treasurer and prime minister whether they should upgrade to a $1.2 million terrace. "Will we be safe to buy if we enter into a fixed loan?" Keating recalls her saying.
"These are voters for Labor and they are crying into their beers about losing, and the next question is: How do we move up? This is the squeeze on families."
Adapted from The Longest Decade by George Megalogenis, published this week by Scribe ($32.95)."
