Makes an interesting read.....nothing much has changed....Era...

Makes an interesting read..

...nothing much has changed....

Era over before it began
By Paul Kelly
January 1, 2004

THE 1973 cabinet documents reveal that Gough Whitlam's agenda of sweeping social reform was in economic trouble just seven weeks after his December 2, 1972, election victory.

Cabinet of 73: From row (from left): Charles Jones, Gough Whitlam, governor general and ex-Menzies minister Paul Hasluck, Lance Barnard, Jim Cairns, Doug McClelland, Al Grassby. Back row (from left): Fred Daly, Rex Patterson, Bill Hayden, Bill Morrison, Kim Beazley snr, Moss Cass, Tom Uren,, Leslie Johnson, Jim Cavanagh, Kep Enderby, Francis Stewart, Rex Connor, Reginald Bishop, Clyde Cameron, Lionel Murphy, Lionel Bowen, Kenneth Wriedt

In a cabinet submission dated January 20, then Treasurer Frank Crean warned that the "(budget) deficit as it stands is very much larger than ever before", and spending growth was running at 15.5 per cent.

While it was not all the Whitlam government's fault, Crean's submission from Treasury said Labor's new spending was a problem and Australia faced a serious inflation challenge. He wanted a "pause for stocktaking".

The cabinet papers show that the early conflict of the Whitlam years - between his social agenda and managing a high-inflation economic boom - emerged at the government's inception.

Labor's most dramatic response was the 25per cent tariff cut of July 18, 1973. This was the single greatest blow against protection in our first century, and was taken without a written cabinet submission. It followed a report from a committee headed by Tariff Board chairman Alf Rattigan.

The cabinet records say: "Its decision was seen by the cabinet as a means of restraint of the inflation rate."

This is the only reason given for the decision. An attachment said the tariff cut "is designed to reduce local prices of imported goods by slightly under 6per cent".

The tariff cut was the responsibility of Whitlam and then overseas trade minister Jim Cairns, who put the joint recommendation to cabinet. Having the support of Cairns, a protectionist, was essential to persuading the cabinet on a two-to-one vote.

A driving force behind this decision was Whitlam's special adviser, HC "Nugget" Coombs. The rationale for the tariff cut was to limit inflation, thereby allowing Crean's first budget to permit the Whitlam spending agenda to proceed.

The limitations of Labor's budget were exposed the next month, September 1973, when interest rates were increased to curb inflation - then running at an annual rate above 10per cent. In launching these 1973 documents last month, Whitlam said allowing this credit squeeze was his government's "greatest mistake".

Later the same month when he was acting Treasurer, Bill Hayden asked Treasury to prepare for cabinet "a hard-hitting paper on inflation" to give a "pretty fair jolt".

The submission under Hayden's name dated October 5, 1973, said: "During this century, runaway inflations have occurred in several countries, resulting in complete collapse of their monetary systems, devastation of the economy and impoverishment of large social classes.

"Australia is not at that stage, but the present stage is bad enough. As the national government, it is our responsibility to regulate the economy successfully. The longer we let the present situation drift, the worse it will get. We cannot allow ourselves to drift into a position where severe demand-management methods, involving recessionary economic policies with attendant unemployment and a grind-down in production, are all that are left to us."

The warning was not heeded. Not that Treasury emerges with clean hands. When its secretary, Frederick Wheeler, was asked the same month by labour minister Clyde Cameron if rising interest rates would cause unemployment, he replied there was "no indication" that they "will cause general unemployment".