The Money Men Read online

  Satisfied, Reid resubmitted the question of federation to the people of NSW, with much more satisfactory results. This time, the vote was 107 420 to 82 741 in favour of federation. The people of Victoria were even more overwhelmingly supportive of the proposed constitution, with 152 563 in favour compared with just 9805 against. The people of Queensland were asked for their views for the first time, and they approved of federation by 38 488 votes to 30 996. When the people of Western Australia also approved, by 44 800 votes to 19 691, the federal project was nearing its completion. Turner had played a key role in this, and he deserves to have his name remembered as one of the fathers of federation.

  The Kingmaker

  Australia’s federal parliamentary democracy got off to a rocky start due to a particularly poor judgement call by Australia’s first governor-general. John Adrian Louis Hope, the seventh earl of Hopetoun, should have known better. Although an English aristocrat, he was no stranger to Australian politics, having been appointed governor of Victoria in 1889, at the age of twenty-nine. He had been an active, popular governor, showing considerable compassion and generosity towards those affected by the bank crashes and depression of the 1890s. Hopetoun was also a politician—in-between his tenures in Australia he had held a relatively minor office in the Salisbury administration in the United Kingdom.

  The new governor-general’s first and most important task was to appoint Australia’s first prime minister, in advance of the federal election that would follow. The new prime minister would, in turn, appoint a Cabinet to oversee preparations for the election and to make other early decisions on behalf of the Commonwealth. Although the prime minister might well be replaced by someone who commanded a majority in the House of Representatives after the election, the widely (and correctly) held view was that the incumbent would have a significant advantage and would more than likely be able to continue in office indefinitely.

  Hopetoun did not have long to make his decision. He arrived in Sydney on 15 December 1900, and the prime minister and Cabinet were to be sworn in on 1 January 1901, in Sydney’s Centennial Park. Hopetoun wasn’t at his best either. He had come down with a serious stomach ailment during the long sea voyage to take up office, and he was still sick and weak when he arrived in Sydney.

  His decision need not have been a hard one. It was widely anticipated that the governor-general would commission the man who had led the constitutional conventions and broader federation movement—the popular NSW politician Edmund Barton. But Barton did not turn out to be Hopetoun’s choice. Instead, after consulting with the chief justice of NSW, Sir Frederick Darley, and the man recently deposed as premier, George Reid, Hopetoun decided to recognise NSW’s primacy as the largest and oldest colony by inviting its current premier, Sir William Lyne, to be the new nation’s first prime minister. Hopetoun’s appointment may have succeeded if a more respected and popular politician than Lyne had been chosen, but as someone who had actively lobbied against federation, Lyne was unlikely to receive support from those who had worked so hard to bring it about. Deakin, for example, was excoriating in his view of Lyne, whom he described as ‘weak and obstinate, stubborn and plastic, cunning but slow … this drab, doleful, monotonous premier’.23

  Deakin and Turner would become the two key figures in thwarting the viceroy’s choice of prime minister. The view of the premier of the second-largest colony would be vital in determining whether the premier of the largest would be successful in his quest to become Australia’s first prime minister.

  Deakin was in Melbourne anticipating a telegram from Barton with the good news that he had been commissioned as prime minister when a disappointing message reached him. Barton was economical with his words: ‘It is Lyne. I have declined to join him.’24

  Barton’s understandable refusal to join the Cabinet meant that it was imperative than Lyne entice enough men of suitable gravitas to join instead. Deakin quickly worked out that Turner would be the key player in this. If Turner agreed to join Lyne’s Cabinet, others would follow suit and Lyne would become a viable prime minister. If Turner refused, however, it would be difficult for Lyne to be regarded as a serious prospect. So Deakin travelled to Turner’s office in the Victorian Parliament and told him that Barton had been passed over. He got the response from Turner he was hoping for, noting that the premier ‘had agreed not to join’.25

  Deakin replied to Barton on 19 December:

  My dear Barton,

  Your telegram upsets our house of cards. Who would have believed that Hopetoun would make such a blunder? To choose the anti-federalist of New South Wales and the least effective member of the convention in place of yourself … Turner and myself will act together if overtures are made.

  Turner and the premier of South Australia, Sir Frederick Holder, subsequently travelled to Sydney to see Lyne in an attempt to dissuade him from accepting Hopetoun’s commission. It was hard going, and Turner cabled Deakin after his first meeting with Lyne to report the lack of progress: ‘So far absolutely unsuccessful.’ But on 23 December there appeared to be a breakthrough. Turner sent Deakin a telegram which simply read: ‘Meet my office morning, highly satisfactory.’26

  When they met, Turner gave Deakin an encouraging report, but he then went on to issue a remarkable public statement on behalf of both Holder and himself. Any chance Lyne had of forming an administration was made non-existent by this polite but unmistakeably strong and clear press release:

  We went to Sydney at the request of Sir William Lyne to give him our advice as to what should be done at the present juncture concerning the formation of the first Federal Ministry … All I say definitely is that neither Mr Holder or I will join in a Ministry with Sir William Lyne at its head, and I have reason to believe that Mr Deakin will also hold aloof.27

  Turner’s view was now public, and Lyne’s position was impossible.

  It seems likely that Turner had told Lyne that he would serve in the Cabinet only if Deakin would, knowing all along that Deakin would never serve, thus wrecking Lyne’s chance of taking the prime ministership while maintaining some rapport and friendliness with him. Lyne was right in pointing to his failure with the Victorians as being the main reason he did not become Australia’s first prime minister.

  It is unclear from the records as to whether Hopetoun and Turner communicated directly with each other while the latter was in Sydney, but it is safe to conclude that while Turner could have facilitated Lyne’s commissioning as prime minister, he chose not to do so. Instead, Turner advised Lyne to return his commission and suggest to the governor-general to send for Barton. This is exactly what Lyne did, and Hopetoun, who was not about to make the same mistake twice, asked the popular Barton to take his rightful place as prime minister.

  Throughout this ordeal—arguably Australia’s first constitutional crisis—Turner showed good judgement. It would have been an inauspicious start to the Commonwealth to have a divisive anti-federalist as the first prime minister. This may have been Turner’s most profound influence on Australian history, even though his term as Australia’s first treasurer was yet to begin.

  First Treasurer of Australia

  Barton received a fine Christmas present on 25 December 1900, when the governor-general belatedly invited him to assume the prime ministership. The swearing-in was scheduled to occur on New Year’s Day, so there was little time for reflection in constructing the first federal Cabinet. Barton was determined to pay due deference to the new states by inviting each premier to serve in the Cabinet. An added advantage was that he liked and trusted most of the premiers. Premier Forrest of Western Australia accepted immediately, without reservation, as did the passed-over Lyne and Tasmanian premier Elliott Lewis. Frederick Holder was not contactable, so Barton offered the South Australian place in Cabinet to the former premier and statesman Charles Kingston. Queensland premier Robert Philp declined to join, allowing another Queenslander, Sir Samuel Griffith, to accept.

  Turner also accepted. He was guaranteed a place in the Cabinet
due to his credentials as premier of Victoria, but it was likely that Barton would have been keen for him to serve in any event, given the steadfast loyalty he had shown the man who was now prime minister. Having appointed each premier who wished to be in Australia’s first federal Cabinet, Barton proceeded to invite his good friend and fellow warrior for federation, Alfred Deakin, and the respected NSW politician Richard O’Connor to also join.

  Treasury was the natural portfolio for Turner, given his love of accounting, his active role in financial matters and his reputation as a successful treasurer of Victoria. There was conjecture as to whether Turner would take the Treasury portfolio alone or add customs and excise to it, but Barton decided to appoint a separate minister for customs.

  Within a month of being appointed, Turner had invited senior officials from each of the state treasuries to Melbourne to advise him on how the federal Treasury would best be constructed. This was, in effect, the first meeting of the Commonwealth Heads of Treasury (HOTs), which still meet to this day (although no longer with the federal treasurer). Turner told the officials in his opening address:

  I wish to thank you, Gentlemen, for your courtesy in coming, at inconvenience, to this state, for the benefit of giving me the benefit of your advice and assistance. I have accepted the difficult position of Treasurer of the Commonwealth and while many of my colleagues have taken over departments in working order, I am taking over a new department. I thought, therefore, that if I could get you gentlemen who have knowledge of the practical working of the departments under you in the various states, to assist me, we should be able to devise some scheme for the financial working of the Commonwealth for the first few months.28

  Amazingly, it appears there was some discussion among the officials as to whether the creation of a federal Treasury department was even necessary. TM King, the Queensland under-treasurer, argued:

  It will be necessary to have some central authority to whom the information as to revenue and expenditure shall be sent by the different sub-treasury offices. Therefore I think it should be imperative that there should be someone to correspond with, who is constantly near the Federal Treasurer.29

  Turner saw the main role of the Treasury as being the accurate keeping of the Commonwealth’s accounts, and the main role of the federal treasurer as ensuring that those accounts balanced, with receipts roughly matching expenditure. He did not desire to make the Treasury a particularly powerful bureaucracy or to impose his will on other ministers, apart from the treasurer of the day having some control over general spending levels to ensure that they did not significantly outweigh revenue. Accordingly, Turner worked to recruit the best accountants from the various state treasuries to populate the new federal department. Unsurprisingly, he chose the Victorian Treasury accountant George Allan as the first secretary of the Commonwealth Treasury. Allan had no formal qualifications but had learnt the art of accountancy ‘on the job’ in the Victorian Treasury, which he’d joined in 1851 at the age of nineteen. Allan would serve in the role of secretary for the next fifteen years. Four other accounting staff were appointed to assist him, and thus the federal Treasury commenced with a complement of five staff.

  The emphasis on accounting skills was underlined by prime minister Barton when he wrote to the state premiers in December 1901 to update them on the establishment of the Treasury:

  As regards the qualifications of the persons to be appointed, it is essential, seeing that the staff of the Treasury is small and the work highly important, that appointees should be possessed of more than average ability, should have considerable experience in accounts, and be skilled in the preparation of financial returns.30

  Thus, on Turner’s watch, began the tradition of the Commonwealth Treasury being an accounting body, rather than an economic policy unit. This was understandable and indeed, to a degree, inevitable given the paucity of professional economists at the time, especially in Australia. The nation, however, would pay a price for this focus, which held for most of the next half-century. By 1903 the Treasury had twenty staff, but they were all bookkeepers or people with accountancy skills. The first professional economics advice was sought under the auspices of the Joseph Lyons government in the late 1930s. When Ben Chifley was treasurer, the surge in professionally trained economists during and immediately after World War II encouraged the professionalisation of the Treasury. This process reached its apogee with treasurer Arthur Fadden’s appointment in 1951of the first professional economist as Treasury secretary, namely the brilliant Sir Roland Wilson.

  Although the Australian Government was formed on 1 January 1901, the nation waited until 8 October to hear the reading of its first Budget. Indeed, the prime minister showed a remarkable degree of opaqueness when it came to publicly setting the date of delivery of the first Budget, telling the Melbourne Argus on 20 July that:

  None of us really knows. I do not know, Mr Kingston [minister for customs] does not know, in fact nobody does. If we fixed a date it might possibly leak out. You can never tell. The only way to guard against such a contingency is not to fix upon any particular date.31

  It was reflective of the role of the treasurer as the chief accountant of the government, as opposed to that of a senior decision maker, that Barton singled out the minister for customs as the key stakeholder, rather than the treasurer, when it came to the Budget’s timing. The vast majority of federal revenue was raised through customs, and the minister for customs rivalled the treasurer as the government’s key economic minister.

  Turner was never backwards in sharing with his audience how onerous he found the task of establishing the federal government’s accounts. Presenting the first federal Budget, he told the House:

  I desire to thank honourable members for their kind, encouraging cheer. I can assure them that I feel today a greater difficulty than, I think, any Treasurer has ever felt—certainly a far greater difficulty than I have ever felt when introducing a Budget into the State Parliament … The difficulties surrounding the task which has had to be carried out by myself, so far as the financial portion of our proposals is concerned, have, indeed, been very great. When you are dealing with one State, you can obtain your information with some ease; but when you come to deal with six states, some of them far away from the seat of Government, it is very hard, indeed, to get proposals before a committee in such a form that they will be clearly understood … I have unfortunately suffered from the absence of my right hand man, my Secretary has been laid up for the last five weeks, therefore a very large proportion of the work that would have been done by him has fallen on my shoulders.32

  Turner would go on to deliver another three federal budgets. These first Australian budget speeches were long and detailed affairs, with Turner providing copious information to the House on estimated expenditure and revenue. While declaring in his first speech that the Commonwealth raised £10 million in 1901/02 and spent just £4 million on its own account, he also took time to reveal that the customs minister’s office had added £3, 15 shillings to the expenditures. Turner’s budget speeches were also regularly peppered with questions from members as to detail, which he invariably answered factually. As the historian H Campbell-Jones says of him, ‘he worried through the dry statistics till he understood them. He could explain every line of the estimates.’33

  Economic times remained difficult during Turner’s tenure, with the economy not yet fully recovered from the depression of the 1890s when it was hit by the drought of 1902. Per capita, real income fell 6.1 per cent between 1889 and 1895, and it did not return to its peak levels until as late as 1909.34 Between 1890 and 1914, Australia lost its position as the world’s richest country per capita, which had been achieved through the gold and agricultural booms.35 Turner did not concern himself with such matters, however, concentrating instead on ensuring the accounts of the Commonwealth were in good order. Having been Victorian treasurer, Turner was sympathetic to the states’ needs and regularly returned any surplus Commonwealth funds to them instead of hoardi
ng them for the purposes of his own government.

  The most important economic decisions of the new Commonwealth Government in its early years were the establishment of a restrictive and racist immigration policy, a uniform national tariff, and a national conciliation and arbitration system to settle industrial disputes.36 This is often referred to as the Deakinite national settlement, after the man who championed it as both an economic and social policy for the new nation. The policies were first developed under Barton and reached their high point in Deakin’s prime ministership. Several ministers were involved, most notably Lyne as home affairs minister when it came to immigration, and Kingston as customs minister when it came to the tariff.

  Turner cannot be identified as a champion of any of these policies, so he cannot be held responsible for their impacts. Instead, Turner took great pride in keeping the finances of the new Commonwealth on a firm footing and developing the Treasury as a body that would keep accurate accounts of the new federal government. He was an inherently cautious man who was not keen on innovation, rejecting a suggestion that Australia adopt decimal currency (this would wait until 1966) and even the notion that it would be a good idea to bring down the federal Budget before the financial year that it was going to cover (this would wait until 1987).