Saturday, December 29, 2007

A gentler, more cautious Cabinet

The one in which John Howard first served, as seen in its 1977 Cabinet papers, released this morning by the National Archives of Australia under the 30-year rule.

Howard was Business and Consumer Affairs Minister and then Treasurer at the time.

Anyone can examine the papers

By 2007 the modern Howard government had completely overhauled Australia’s system of industrial relations, almost fatally weakened student unionism at universities and made economically-unwise tax cuts an annual event.

But 30 years ago the government of which John Howard was a junior minister adopted a far more cautious approach.

The 1977 Cabinet papers, released today by the National Archives, show that the Fraser Government considered decentralising Australia’s system of industrial relations but decided against it...

...noting that central wage cases “provided a focal point for government efforts to influence wage decisions” and provided employers with a “ready defence against industrial claims”.

Concerned that there was “an element in the trade union movement which has decided on a course of deliberate confrontation with the trade union moment” the Employment Minister Tony Street nevertheless advised his colleagues that while they might have to introduce emergency legislation (“already drafted”) they should first attempt to talk to the unions using the National Labour Consultative Council.

The President of the Australian Council of Trades Unions Bob Hawke was a member of the government’s reserve Bank Board (appointed by the previous Prime Minister Gough Whitlam). Prime Minister Fraser reappointed him when his term expired in 1978. The two held regular discussions about industrial relations and the Malcolm Fraser sought out the trade union leader whenever there were problems.

On student unionism the Education Minister Senator John Carrick acknowledged the “extremist” nature of university students’ union but warned against removing the compulsory fees that funded it.

Abolishing the fees “would be likely to have the effect of giving moderate and extremist students common cause,” he said.

Also it was “desirable that any solution should allow student political activities to continue as these form an important part of the tertiary educational experience”.

In any event it remained uncertain as to whether the Commonwealth had any power over universities outside of the two territories.

On tax cuts the Treasurer Phillip Lynch warned against them in January saying they would put upward pressure on interest rates.

“Major tax cuts now would add to the budget deficit and thereby compound the difficulties already confronting the effectiveness of monetary policy,” he said.

“In so doing they would be adding to – not subtracting from – the underlying problems of the economy and in the end, making their solution more difficult.”

The Cabinet decided against tax cuts for the August budget, but by November he had resigned from the Ministry over his taxation arrangements and been replaced as Treasurer by the Business and Consumer Affairs Minister John Howard.

The subsequent election promised big tax cuts promoted with memorable advertisements featuring a fistful of dollars. After the election in his first budget as Treasurer Mr Howard announced that the tax cuts couldn’t be paid.

Interest rates were set differently in 1977 as well. On hearing news of a drop in the rate of inflation in October 1977 the Prime Minister Mr Fraser asked for a report “by lunchtime” on how the government could “move quickly to reduce interest rates”.

The Treasury told him that it could be done straight away. Fraser asked the Bank to cut long-term rates by 0.2 per cent and short-term rates by 0.5 per cent “as quickly as practicable” with the cuts to be made “by Tuesday October 25 at the latest.”

Also from the Archives this morning:

As early as 1977, just a decade after Australia had introduced dollars and cents, they were becoming expensive to produce.

A Cabinet submission warned that the one-dollar note (eventually replaced by a coin in 1984) was no longer paying for itself.

Its short life meant it was “costing more to print and issue than it returns to the Reserve Bank by way of an earning rate on the investment.”

The submission, from the Mint and the departments of Finance and Treasury asked the government to introduce a law that could allow coins to be replaced by regulation rather than by a specific act of parliament.

Other changes the submission thought necessary would be the replacement of the 1c and 2c bonze coins with cheaper aluminum versions (instead the 1c and 2c coins were abolished in 1991) and the replacement of the 5c, 10c and 20c silver-coloured copper-nickel coins with brownish bronze ones.

The 50c silver coin, originally containing silver, had been converted to cheaper copper-nickel some years before.

The 1977 Cabinet also agonized over how rapidly to withdraw official sanction for imperial measurements such as the pint (about half a litre) and the foot (about one third of a metre) rendered redundant by Australia’s conversion to metric currency in 1970.

It decided to proceed quickly noting that “previous experience with and the withdrawal of units such as the reputed pint (425 ml) and the peck (9092 ml) suggests that when it has been done the change will be accepted with equanimity.”