13. The Coalition Starts to Slide With the retirement of Arthur Fadden in 1958, the Country Party leadership went to John McEwen (later Sir John), an Australian World War I soldier-settler. He entered Parliament in 1934 and was long recognised as one of the strongmen of the Menzies Government. As Deputy Prime Minister, McEwen was entitled to take over from Fadden as Treasurer, but McEwen had been advised Fadden had secured all the tax advantages for farmers that were possible. He decided to set up a powerful new Department of Trade. McEwen had been Minister for Commerce and Agriculture when he made the switch to Trade and therefore lost responsibility for agriculture. A new department was created—the Department of Primary Industry—and, to everyone’s astonishment and mirth, the first Minister for Primary Industry was none other than the Liberal William McMahon, who had held the Social Services portfolio. Labor wit Fred Daly remarked that McMahon was the ‘Kings Cross farmer’. ‘All he knew about farming was growing flowers in his window box’, Daly chuckled. After the 1958 election, the Country Party won back the Department of Primary Industry, with the plodding Charles Adermann as minister. Following the 1963 election, McEwen’s department was expanded into the Department of Trade and Industry—a change giving McEwen ministerial control not only of trade negotiations abroad, but also of tariff protection at home for Australian manufacturing. McEwen was seen as an arch protectionist. But his critics could not deny that had it not been for McEwen, the Australian car industry would have disappeared and much of the infrastructure of manufacturing and engineering would have been lost. McEwen told the author he wanted the manufacturing industry to have the Australian market as its base, and this solid base would allow it to achieve export success. This seemed a sensible view and had wide support on both sides of Parliament. Most MPs remembered the Depression years of the 1930s and full employment was the rock on which all political parties’ policies were based. The war had aroused a sense that Australia had to develop to enhance its economic and strategic independence and this continues as a basic policy of all political parties. As well as general approval for immigration and development of northern Australia, manufacturing was the largest employer, and politicians from both sides of the Parliament believed in protection, as did a majority of gallery journalists. McEwen’s willingness to protect the manufacturing industry naturally brought a generous flow of funds into the coffers of the Country Party. This was important, but by no means McEwen’s motive. He genuinely believed, despite his party’s base among farmers, that for its own security, Australia needed to develop a powerful manufacturing sector. The protectionists’ domination 147 Inside the Canberra Press Gallery started to slip under steady attack from the media, and farmers increasingly saw that protection for manufacturing was a burden they had to carry in the form of increased operating costs that they could not pass on in the export market. Towards the end of the Menzies era, the first stirrings of opposition to McEwen’s protectionist policies were beginning to surface. Charles Robert (Bert) Kelly, a farmer, came into Parliament in 1958 as the Liberal Member for Wakefield, and remained on the back bench until he entered the Holt ministry in 1966 as a junior minister. Because of his tireless advocacy of lower protection and criticism of the Menzies Government’s protectionist policies, Bert played a far more important role on the back bench than he ever did as a minister. I remember innumerable speeches by Kelly on the tariff issue and, although he was anything but an orator, his case was well put and slowly he began to influence the Parliament and the gallery. Another important player in the protection debate was Alf Rattigan. A former deputy secretary of the Trade Department, later Comptroller-General of Customs, he was appointed Chairman of the Tariff Board by McEwen in 1963 and remained in that position until 1979, although the organisation’s title was changed to the Industries Assistance Commission (and is now the Productivity Commission). Rattigan surprised many by immediately resisting the protectionist policies of his former political master, McEwen, and he had a considerable influence on the decision of Whitlam in 1973 to cut tariffs across the board by 25 per cent. Alan Wood, when only a junior economic writer in the Australian Financial Review’s bureau in the gallery, was a supporter of Rattigan and was tireless in opposition to McEwen and the Trade Department. The fundamental argument against protection was that less efficient companies or industries should not be shielded from import competition and the resources (meaning capital) being used behind a tariff barrier should be deployed to more efficient industries. This argument was convincing when movements of capital in and out of Australia were strictly controlled by the Reserve Bank. With the arrival of globalisation—permitting capital to be seamlessly shifted around the world—many formerly flourishing and protected industries have disappeared or have been substantially reduced. Sacked workers found that the capital freed up did not go to other Australian industries, but rather to China or other emerging economies. Products made in Australia thus became imports. This is leading to a resurgence in support for protection, particularly as the world slips into a global recession. The protection debate is not yet over. In the 1960s, the Basic Industry Group (BIG) came under notice. Financed by a number of wealthy graziers, it set out to force the Menzies Government to reverse its protection policies. The financing of BIG was largely provided by Charles Russell, a wealthy Queensland grazier, who had been the Country Party 148 13 . The Coalition Starts to Slide MP for the seat of Maranoa from 1949 until he was defeated in 1951. The major operative for BIG was Max Newton, who had returned to Canberra and started a newsletter called Incentive. Don Whitington and I regarded this apprehensively as direct competition. Fortunately, it turned out not to be. Its purpose was to argue the case against protection and McEwen’s administration of the Trade Department and its readership was therefore limited. Newton had hoped farmers would subscribe to Incentive, but as publishers before and since Newton have discovered, farmers are tightwads when it comes to buying anything in the media. Most of them read the local paper and one of the major farm papers such as The Land and that is enough information for them. BIG addressed the tariff issue from the narrow focus of its impact on the wool industry, dominated by the landed aristocracy, and McEwen used this to his advantage. Much of rural industry and those who worked in it were the beneficiaries of one form or another of government subsidy or protection. There were the statutory marketing bodies established by legislation, operating what clearly were anticompetitive systems of selling on the domestic market. Margarine production quotas were imposed to limit competition with dairy farmers; rail freight rates for hauling grain in one direction and fertiliser in the other were subsidised by State governments; and, most important of all, farmers enjoyed a variety of tax concessions, tailored for them by the Country Party. McEwen also argued that protection was needed to attract migrants who would not come to Australia if their jobs were threatened by imports. In turn, this would see population growth slowed and the domestic market for rural products would diminish. All this was sound enough for industries such as dairying, horticulture, feed grains and, to a degree, beef and lamb. But it was not so with wool. The free-trade argument was undeniable if confined to the wool industry, with its overwhelming reliance on export markets. Protection of the Australian manufacturing industry raised wool producers’ costs—not necessarily recoverable by auction selling of wool. The threat from BIG to McEwen and protection finally disappeared in the early 1970s when the wool industry agreed to the establishment of a reserve price system for wool (which eventually proved a disaster and was scrapped by the Hawke Government). This was not the end of Max Newton. He had supporters such as Bill McMahon (thereby ensuring McEwen was an enemy) and Secretary of Treasury, John Stone. Newton was contracted to the Japan External Trade Organization (JETRO) in Sydney and was engaged in providing submissions to the Tariff Board and a general information service on tariff issues of interest to Japan. At least one senior journalist, Ian Fitchett, complained about Newton carrying out this work whilst a member of the gallery. A gallery constitution had finally been hammered out after much argument in 1966 and this provided that 149 Inside the Canberra Press Gallery membership was confined to members of the Australian Journalists’ Association (AJA—the journalists’ union) whose duties were restricted to the ‘collection and dissemination of parliamentary, government or political news’. A number of journalists (under the lap) carried out limited non-journalistic work such as sending reports to companies of developments in Canberra of direct interest to them and advising them on public relations matters (although not directly lobbying themselves). Fitchett directly challenged Newton’s right to be a member of the gallery and we all knew that this was inspired by McEwen. Fitchett was close to McEwen, who fed him with a regular flow of stories—most of them favourable to McEwen and hostile to McMahon. After a number of stormy special general meetings of the gallery, Newton agreed to resign on the condition the gallery would accept a journalist he nominated to represent him in his news service and Incentive newsletter.