The Money Men Read online

  THE MONEY MEN

  MELBOURNE UNIVERSITY PRESS

  An imprint of Melbourne University Publishing Limited

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

  [email protected]

  www.mup.com.au

  First published 2015

  Text © Chris Bowen, 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.

  Typeset in 12/16pt Dante by Cannon Typesetting

  Cover design by Design by Committee

  Printed in Australia by McPherson’s Printing Group

  National Library of Australia Cataloguing-in-Publication entry

  Bowen, Chris, author.

  The money men: Australia’s twelve most notable Treasurers/Chris Bowen.

  9780522866605 (paperback)

  9780522866612 (ebook)

  Includes index.

  Australia. Department of Finance (2013–)—Officials and employees.

  Finance ministers—Australia.

  Politicians—Australia.

  Finance, Public—Australia—History.

  336.01294

  Finance is government and government is finance.

  William Pitt

  To be the economic manager of the nation was an overwhelming privilege. It was in many ways a more significant role than that of prime minister, although some former treasurers who have moved on would clearly not agree with that assessment.

  Bill Hayden

  The way of the world is that prime ministers will always leave their dirty work to treasurers.

  John Howard

  I always had the belief that as Treasurer, I was working in a tradition and it was important, if not paramount, to preserve the legacies of those who preceded me.

  Wayne Swan

  To Rebecca, for everything.

  And for Australia’s future treasurers,

  in the hope that history helps.

  CONTENTS

  Introduction

  1 Sir George Turner

  2 William Alexander Watt

  3 Sir Earle Christmas Grafton Page

  4 Edward Granville (Ted) Theodore

  5 Joseph Benedict (Ben) Chifley

  6 Sir Arthur William (Artie) Fadden

  7 Dr James Ford (Jim) Cairns

  8 William George (Bill) Hayden

  9 John Winston Howard

  10 Paul John Keating

  11 Peter Howard Costello

  12 Wayne Maxwell Swan

  Acknowledgements

  Endnotes

  Index

  INTRODUCTION

  Australia is the only nation to have a treasurer running the economy.

  In 1819, John Thomas Bigge travelled to Australia to conduct an inquiry into how the colony of New South Wales (NSW) was being governed. His report, published three years later, was highly critical of governor Macquarie’s administration. In it, he stated: ‘With respect to the collection of the internal revenue of the colony … I should recommend that the duty of collection, receipt and account, should be entrusted to an officer, to be named the Colonial Treasurer.’ NSW and the other colonies duly appointed treasurers, and on Federation the title was adopted for the national economic manager. Hence, a uniquely Australian office was created.

  Every national government, of course, has a Cabinet-level office holder who is responsible for the economy. Most are called ‘minister for finance’. The British economic manager revels in the title of the chancellor of the exchequer, the United States has a secretary of the treasury, and some countries like Argentina have a minister for the economy. But while almost every soccer club, chamber of commerce and stamp collecting society in the world has a treasurer, Australia is unique in having one in charge of the country’s finances.1

  When the Australian treasurer meets with their international counterparts, they undoubtedly contemplate the similarities and differences between the offices they hold. The Australian treasurer will always be one of the most senior members of the Cabinet.2 They will sometimes combine the post with being deputy prime minister but regardless will almost always be within the top three most senior ministers. Since 1977, an Australian treasurer has shared responsibility for government spending with the minister for finance but in many ways has much more responsibility than their international counterparts. An Australian treasurer has responsibility for foreign investment (through the Foreign Investment Review Board), the Reserve Bank of Australia (although the central bank is independent, the treasurer is responsible for the key appointment of its governor), competition (through a competition commission), prudential regulation (through a prudential regulation authority), the production of currency (through the mint) and financial regulation (through the Australian Securities and Investments Commission, or ASIC). Few ministers around the world have this much responsibility for the management of various parts of the economy.

  So who are these money men? (All treasurers to this point have been men.)

  While there have been bookshelves of volumes written about Australian prime ministers, no book has ever been written about Australian treasurers, an office widely seen as the second most-important post in the country. This is a gap that this book has been written to fill.3 It seeks neither to provide hagiographies of previous treasurers nor to condemn them. I started each chapter from a perspective of sympathy for the men who worked hard to create a better economy for their country, and the varying success they had.

  I was the treasurer briefly and aspire to be again, which has allowed me to write about the office with an insider’s perspective. In fact, I’ve learnt things writing this book that will make me a better treasurer should I receive the honour of serving in the post again. As the British prime minister and writer Benjamin Disraeli said: ‘The best way to become acquainted with a subject is to write a book about it.’

  The twelve treasurers written about in this book were chosen as the most notable of Australia’s thirty-eight treasurers4—not necessarily the best, not the worst, but twelve of the most interesting. This is not intended as a slight to those treasurers who do not appear here. Several others (Richard Casey, Harold Holt and John Dawkins, for example) could have been included. But a line had to be drawn somewhere. Each of the treasurers in these pages was chosen because his tenure had something unique to commend it—for example, being treasurer at a particularly challenging time for the economy, or at a time of great turmoil, or great reform as a parable of success or an example of failure.

  I chose to write about George Turner because he was our first treasurer and we need to better understand the pioneer to understand the office. William Watt is a spectacular example of what can happen when a prime minister and a treasurer lose faith in each other. Earle Page, on the other hand, provides a case study in just how effective a good working relationship between a government’s two most senior members can be. Ted Theodore was an intellectually curious, self-taught treasurer who had an insight into how to deal with the greatest economic test any treasurer has had to deal with, but who was thwarted and frustrated. Ben Chifley was treasurer during what was arguably our greatest-ever crisis, World War II, and provides a best-practice case study through his relations with his prime minister. Arthur Fadden was a pioneer among modern treasurers as he implemented Keynesian fiscal management. Jim Cai
rns provides a fascinating profile: he was our most academically qualified treasurer but clearly one of our most disastrous. Bill Hayden attempted to right the fiscal ship of the Whitlam government and did a very good job, but he was appointed too late. John Howard was a young and inexperienced treasurer who grew in the job but failed in his attempts at economic support as his relationship with his prime minister deteriorated. Paul Keating asked Australians to embrace more economic change than any of his predecessors or successors, and an unprecedented period of uninterrupted economic growth was the result. Peter Costello was a competent and solid treasurer who implemented one big reform, the Goods and Services Tax (GST), and who changed the way Australians think about budget surpluses. Wayne Swan faced the biggest economic test since his Queenslander predecessor Theodore, and he employed the Keynesian tactics that Theodore had wanted to implement to ensure that the uninterrupted growth continued.

  Modern-day treasurers and their predecessors have dealt with diverse issues, but there are obvious recurring themes. Earle Page picked a massive fight with the powerful owners of Australian cinemas when he brought in a film tax, sparking a significant advertising campaign against him. The lessons of Page’s tenure might have been instructive for Swan as he introduced the Resource Super Profits Tax and took on the mining companies.

  So history teaches us much about treasurers. What are the key lessons that I have learnt by writing this book?

  A prime minister and a treasurer are partners.

  This is a theme that comes up again and again in the chapters that follow. Successful treasurers work in partnership with a supportive prime minister. A prime minister and treasurer do not need to be friends. They may even have once been rivals. But they must work together. A successful partnership will involve a prime minister and treasurer jointly developing and agreeing on an economic plan. A treasurer needs the support of the prime minister to implement reforms. A good treasurer pushes the envelope and argues for a robust approach to vital reforms; to be successful, they do not need to win every argument, but they do need to win most.

  Many prime ministers and treasurers have fallen out at the end of their terms and have squabbled about who should be given the most credit for their successes and who should be blamed for their mistakes. But that is not to say that they were not successful partners in office. There are case studies in good and bad practice within this book.

  Knowledge counts, not qualifications.

  Some of our best treasurers have had a well-developed, acute but entirely self-taught understanding of economics. Keating was unusual among modern treasurers in not having a university degree, but he sought out older, more experienced men of business and taught himself so well that he had a remarkable grasp of market economics. A lack of tertiary education was much more common in earlier times. Theodore left school at twelve but was still one of the most widely read men in parliament. Like Keating, he also sought out experts to help him understand the economy. As a result, he understood what policy needed to look like during the Depression much better than some of the so-called experts who argued for a cut in government spending during a time of acute economic downturn. Hayden had an economics degree, but it was one that he earned by working alone in the parliamentary library late at night at the expense of socialising with his colleagues. He was essentially self-taught as well.

  A few economics graduates have also become treasurer. William McMahon and Les Bury (not included in this book) were two, followed by Hayden. I am the most recent. Cairns held a Doctorate in economic history. He was a man of undoubted intelligence but questionable judgement. His story is a case study in how an academic career that might be considered useful preparation for becoming treasurer can in fact be a precursor to a less-than-successful stint in the job.

  A treasurer and the Treasury: another key relationship.

  Every treasurer will work closely with the Treasury, but some will work more successfully than others. A good treasurer will neither be a captive of the Treasury nor ignore it.

  Running through this book is the theme of the development of the Treasury as an institution under the tutelage of successive treasurers. The Treasury established by George Turner was a body of accountants, set up to keep accurate accounts for the government. Theodore searched for advice from economists about how to deal with the Depression but found no such people in the Treasury; he had to look elsewhere. A series of treasurers then oversaw the professionalisation of the Treasury—Percy Spender (not covered in this book), Chifley and Fadden can all claim credit for this. By the end of Fadden’s tenure in the late 1950s, the Treasury was a highly professional organisation on which treasurers could rely for good economic advice.

  A good treasurer will test their department. They will hold its advice up to the light and convince themselves of the merit of the Treasury’s ideas. Once convinced, a good treasurer takes the Treasury’s proposals and argues for them, as well as developing their own proposals and seeking the Treasury’s advice on them before settling on a way forward. There will be mutual respect. However, distrust can breed between a treasurer and the Treasury, as it did with Cairns and, to a lesser degree, Howard towards the end of his tenure. This makes it very hard for a treasurer to do well. In extremis, the Treasury officials will begin leaking against their treasurer, as they did with Cairns, making it very hard to function effectively.

  What does all this mean for a modern treasurer? A treasurer needs a good relationship with their prime minister, but they also need to push the envelope when it comes to reform. A treasurer must argue internally for politically difficult but necessary economic reforms. Prime ministers will naturally be nervous about these reforms, but a good prime minister – treasurer relationship will see a balance reached. Importantly, a prime minister will feel more comfortable giving a treasurer the authority to embark on economic reforms if they are confident in the treasurer’s ability to sell those reforms. As John Howard said to me in 2014: ‘A treasurer must be in the media every day. Every day. Making the case for change, being one of the government’s most effective communicators.’

  The job of the treasurer is to be a competent manager of the economic cycle, ensuring growth that is as smooth as possible and avoiding recession. It is also to be an advocate for reform, within the government and in public. It falls to the treasurer to explain the need for economic reform. If a treasurer can effectively explain why difficult decisions are in the long-term interests of the country, a government will be much more likely to be successful.

  I write as a partisan participant in the political debate. But I have attempted to write an objective and fair account. While I’m very proud of Labor’s political legacy, it would of course be churlish to pretend that every Labor treasurer has been brilliant and every conservative a disaster. We can learn from the mistakes of our predecessors and build on their achievements. Indeed, the starting point of The Money Men was sympathy with the men profiled in the book. They all worked hard. They all wanted the best for their country. They all dealt with economic challenges to some degree. As Ian McLean writes in his recent, important book Why Australia Prospered, about Australia’s economic track record over the last century or so: ‘Few economies have been as successful over so long a period.’5 Australia’s treasurers can claim to have made a pretty good contribution to the nation’s remarkable economic success.

  So who are our best treasurers? For the scale and scope of his reform program and his ability to explain the need for the reforms he was proposing, Paul Keating is top of the list. Australia’s twenty-four years of uninterrupted economic growth has many parents, but Keating is entitled to be regarded as the most important of all.

  Honourable mentions go to Earle Page, Ted Theodore, Arthur Fadden, Bill Hayden, Peter Costello and Wayne Swan. Page was an anchor of stability in a long-term government and engineered lasting reforms in Commonwealth–state financial relations. Theodore used initiative and imagination as he dealt with the Depression. If he had been allowed by the par
liament, his party and the central bank to implement his policies, the Depression’s impact would have been ameliorated. Fadden was competent and prepared to innovate as he pioneered the road to Keynesian intervention. Bill Hayden should have been treasurer much earlier in the Whitlam government—he was easily its best treasurer, and also the best of the 1970s. He got increasing spending under control and engineered major tax reform in just six months in the country’s top economic job. Costello, our longest-serving treasurer, showed considerable command of detail and an ability to persuade and argue as he implemented the GST reform. Finally, Wayne Swan implemented effective stimulus and urgent financial regulation changes which assisted Australia in being one of very few nations to avoid recession.

  Within these pages are the stories of twelve interesting men who did their best to improve the lives of Australians. The work of the money men goes on, hopefully to be matched in the future by the work of the money women. Our continued prosperity as a nation depends on the treasurers of the future, as it does on the legacies of treasurers past.

  1

  SIR GEORGE TURNER

  A Treasurer Pioneering

  Born: August 1851, Melbourne

  Died: August 1916, Melbourne

  Treasurer: 1 January 1901 – 26 April 1904

  17 August 1904 – 4 July 1905

  EVERY SO OFTEN, an opinion poll shows that comparatively few Australians can name Sir Edmund Barton as Australia’s first prime minister. It is undoubtedly the case that even fewer people could name Sir George Turner as Australia’s first treasurer. It is not so much that history has treated Turner badly; more that it has forgotten him. This is unfair. While Turner might not have had a sparkling personality, he was an influential figure in the formation of the Australian nation. His quiet determination and pragmatic approach to controversial questions were integral to the process of federation. He also played a key role in ensuring that Barton became the country’s first prime minister instead of the less inspiring Sir William Lyne. And as treasurer, he kept a steady, reliable hand on the nation’s finances. Turner made sound financial management a hallmark of his work, and he set important precedents in the Treasury portfolio.