To the Bitter End: The Dramatic Story of the Fall of John Howard and the Rise of Kevin Rudd

TO THE

BITTER

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For Norm Hartcher My first tutor in politics, and the man who taught me how to laugh.

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PETER HARTCHER

TO THE

BITTER

END

The dramatic story behind the fall of John Howard and the rise of Kevin Rudd

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First published in Australia in 2009 Copyright © Peter Hartcher 2009

All rights reserved. No part of this book may be reproduced or transmitted in any form or by any means, electronic or mechanical, including photocopying, recording or by any information storage and retrieval system, without prior permission in writing from the publisher. The Australian Copyright Act 1968 (the Act) allows a maximum of one chapter or 10 per cent of this book, whichever is the greater, to be photocopied by any educational institution for its educational purposes provided that the educational institution (or body that administers it) has given a remuneration notice to Copyright Agency Limited (CAL) under the Act. Allen & Unwin 83 Alexander Street Crows Nest NSW 2065 Australia Phone: (61 2) 8425 0100 Fax: (61 2) 9906 2218 Email: [email protected] Web: www.allenandunwin.com National Library of Australia Cataloguing-in-Publication entry: Hartcher, Peter To the bitter end: the dramatic story of the fall of John Howard and the rise of Kevin Rudd / Peter Hartcher 9781741756234 (pbk.) Includes index. Rudd, Kevin, 1957– Howard, John, 1939– Australia. Parliament—Elections—2007. Political campaigns—Australia. Political leadership—Australia. Australia—Politics and government—2001– 324.99407 Typeset in Adobe Garamond 12/15pt by Midland Typesetters, Australia Printed and bound in Australia by Griffin Press

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CONTENTS

Prologue The Last Supper

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PART ONE Shock 1 2 3 4

Don’t Punch the Old Man ‘We Are Stuffed’ A Night of Long Cigars Madness Maddened

1 5 20 36

PART TWO Awe 5 6 7 8 9 10 11 12 13

Man of Steel Overreaching Overheating Overruling Daddy Turns Nasty Pissed Against the Wall The Primate Model of Ruling ‘There Was No Way He Had the Numbers to Topple Me’ Beware of Thyself, Old Man

42 50 67 77 91 104 116 122 137

PART THREE Vengeance 14 A Very Determined Bastard 15 Exterminate 16 Brand Rudd

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PART FOUR Defeat 17 18 19 20 21 22 23

A New Model For Old Governments ‘Shit, We Have to Do Something’ The Wizard of Oz ‘A Profound Failure’ Don’t Think of an Elephant Splurging Into Oblivion The Victorious Principle of Similar Difference

Note on Sources Acknowledgments Index

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181 185 197 216 228 244 260 270 271 272

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PROLOGUE The Last Supper

Two days after losing the 2007 election, John Howard phoned Peter Costello. The outgoing Prime Minister wanted to invite his deputy to The Lodge for a final gathering of the Howard ministry. Wags quickly dubbed it the Last Supper. Improbably, John Howard’s social invitations to Peter Costello had become something of an issue in the affairs of the land. The 2007 biography of Howard by Wayne Errington and Peter van Onselen had disclosed that the Prime Minister had invited a number of his ministers and their spouses to dinner at The Lodge over the years, but never the Costellos. This detail, innocuous on the face of it, became news because it hinted at the subterranean strains between the two men who had been running Australia. ‘It doesn’t worry me,’ Costello said at the time the book was published. ‘I’m just as happy eating fish and chips on a beach.’ And an invitation to The Lodge carried a bitterly sardonic flavour for Costello. The official Canberra dwelling of prime ministers since Stanley Melbourne Bruce took up residence in 1927, Costello had been craving The Lodge for years. His ambition had been thwarted. Despite his pleas, public and private, Howard had refused to quit the prime ministership. vii

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Even now, Howard was not going to any special lengths to reconcile with his Treasurer. The Prime Minister was only observing proprieties—it was a lunch for the entire ministry. But Costello did not even go so far as observing the proprieties. ‘I’m not coming to lunch,’ Costello replied on the phone. ‘We have just been voted out. There’s no point going to The Lodge.’ Three months later, Costello’s successor as Treasurer, Wayne Swan, was able to report that he and his wife, Kim, had been invited to dine with Kevin Rudd and his wife, Therese Rein, at The Lodge and at Kirribilli House. The two Queenslanders had not always got along. But their relationship had been repaired and they were now working well together. Swan remarked: ‘So we have already exceeded the Peter Costello–John Howard benchmark.’

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PART ONE SHOCK

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1 Don’t Punch the Old Man

It was September 2007. The Federal election was to be called in a little over a month. John Howard and a handful of his top lieutenants sat down to a secret briefing in the genteel commonwealth offices in Melbourne’s Treasury Place. Joining them was the Liberals’ advertising campaign team. The meeting was to review the ad campaign for the election that loomed. The party’s pollster, Mark Textor, gave the gathering grim news. The Howard Government was facing a tough struggle for re-election. It looked terminal. The balding, blunt-talking Textor ran a presentation demonstrating why. His research with focus groups of voters found entrenched perceptions of the Howard Government. Certainly, the positive views of happier times persisted. Australians still regarded Howard as a man who had the courage of his convictions. But harsher attitudes had developed since the last election. Consistently now, Textor said, the Howard Government was seen as out of touch, too old and too tired. When participants turned to see how the Prime Minister was taking this news, they discovered that Howard had dozed off. Out of touch, too old, too tired. 1

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Asked about this incident some months after the election, Howard said in an interview, ‘In twelve years, the odd Cabinet minister would have closed his or her eyes for a minute, myself included. But no one ever went to sleep.’ He denied that he had dozed off in this particular meeting: ‘Absolute tripe,’ he called it. Another participant said that not only had it happened but it had made a big impression: ‘There were ad people in the room who hadn’t seen Howard for a couple of years, since the last campaign, and they were amazed. People went out after the meeting into the corridor and said to each other, “Wow, did you see that?”.’ Voters’ perceptions would be difficult to change because, it seemed, they were right.

... It was in this phase of the election that the previous Labor Prime Minister of Australia decided to offer some political advice to the next Labor Prime Minister. With the informal electoral contest well under way, yet with the formal commencement of hostilities still to come, Paul Keating phoned Kevin Rudd. His counsel? To get more aggressive. The tip was well meant. It was also rejected. ‘You’ve got to throw a few punches,’ Keating told Rudd in the course of a long phone conversation. He wanted to see Rudd hurt John Howard. That was in character. One of Keating’s many aphorisms was, ‘If you’re in politics, you’re in the conflict business’. It had always been his style to throw the most direct and damaging blows he could. Many years earlier, a livid Keating had sworn on the front steps of the old Parliament House in Canberra that he would make Howard wear his leadership of the Liberal Party ‘like a crown of thorns’. The then treasurer was enraged because he suspected that Howard had condoned a political attack on his private life. His anger then had been almost uncontainable. Kevin Rudd politely thanked Keating for his advice, but privately he counselled intimates to follow another course entirely. Rudd was much impressed by the wisdom he had heard years earlier from

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Tony Blair. As a fresh backbencher in the Federal Parliament, the Queenslander had been part of a delegation of Australian Labor politicians to meet the then Prime Minister of Britain. Blair explained that he had taken power amid considerable unease about British Labour—the party had been out of office for a long time, it was still associated with trade union radicalism, and it had been subjected to a Tory campaign of demonisation. So, the new British Prime Minister said, he had decided to be guided by the need to supply the British public with three vital commodities—reassurance, reassurance and reassurance. Rudd’s essential approach to taking power from John Howard was to let the sixty-eight-year-old expire gently of natural causes rather than try to beat him to a bloody pulp. Rudd’s campaign was certainly vigorous, but he would never openly savage Howard. Throughout, he respectfully called the older man ‘Mr Howard’. So did Labor’s TV ads. In the so-called Emma Jane ad, a mum in her suburban kitchen complained about the rising cost of living, concluding with the line: ‘You’ve lost touch, Mr Howard. No offence, but you’ve just been there too long.’ Labor’s focus groups of voters had evidently turned up precisely the same sentiment as Mark Textor’s had for the Liberal Party. Howard was still held in some popular regard, but he had been around too long and was now out of touch. Howard was shrivelling as a result of his own misjudgments and his sheer longevity. The Liberal Party’s confidential research showed that there were three principal reasons why the Howard Government was likely to lose the election. This proved to be accurate. The party’s findings were later made public by Howard’s successor as leader of the Liberal Party, Brendan Nelson, who had not seen them while he was a minister in the Howard Cabinet. Howard was secretive with party research and withheld the most sensitive work from all his colleagues, including his deputy. But five months after the election, Nelson said: ‘I’ve seen the research now. There were three reasons the Government lost. First was longevity. It was the longevity of Howard, Costello and Downer,

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but Howard in particular. Second was Work Choices. A significant number of people voted Labor for the first time, and Work Choices had a lot to do with that. Third was our approach to climate change.’ Each of these liabilities was self-inflicted—longevity of the leadership, Work Choices and climate change policy. The Howard Government was not demolished—it imploded. Rudd’s task was to position himself as the reassuringly competent alternative. When the Government fell, it would fall to him. The Labor Party’s campaign team summarised it succinctly in its mid-2007 strategy review: ‘Many people are ready to switch to Labor. Need to REMIND them of the benefits, then REASSURE voters who have switched to us that they have made the right choice.’ Rudd was confident that he was on course to win the 2007 election. He was chiefly concerned not to frighten voters with bellicosity, but to reassure them with his trademark calm. The biggest risk to Labor’s prospects, the party leadership concluded, was that Howard might do something dramatic to breathe new life into the fastfading Government. ‘My psyche after the 2004 election was that we couldn’t take anything for granted,’ said Labor’s campaign director and national secretary Tim Gartrell. ‘We were so battle-scarred, and John Howard was a tough old dog. He was a master.’ Would he once again take Labor by surprise with a dramatic manoeuvre? The Labor campaign had a Costello contingency plan, a team of officials on standby researching Costello and developing lines of attack against him. In the event that the Coalition suddenly changed its leader, Labor was determined not to be left surprised and naked. It had an alternative strategy for campaigning against a Prime Minister Costello.

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2 ‘We Are Stuffed’

When John Howard read the poll published on Tuesday, 4 September 2007, at the beginning of the week of the Sydney APEC summit, all the energy drained out of him and all his fight left him. For only the second time in his thirty-three-year career, he fell into profound despair. Howard was famously relentless. He once summed up his success in politics as a case of ‘persistence more than luck’. One of his nicknames was the Eveready Bunny. And he loved a fight. ‘We always took the view that you always act as if you’re in opposition and your back’s to the wall—and you fight accordingly,’ his long-time chief of staff, Arthur Sinodinos, recalled. Another of Howard’s nicknames, courtesy of US President George W. Bush, was the Man of Steel. He had been girding himself for the greatest fight of his life, his last election campaign. He was going to attempt something only one other prime minister had accomplished—a fifth consecutive victory. Only his hero, Sir Robert Menzies, the founder of the Liberal Party, had succeeded. But now Howard’s hopes turned to ash. He had expected the Australian public to rally around him as they approached the choice between their long-serving leader and the arriviste Kevin Rudd: ‘I didn’t contemplate retiring in early 2007,’ 5

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Howard told a political intimate. ‘I mean, it was obviously going to be tough, but I thought, We’ve still got six or seven months, and he’ll make mistakes and he’ll run out of puff. And, as we get closer to the election, people will say, Well, we don’t mind [Rudd], but not just yet. We’ll give him another run around the course, another run in the paddock, before we vote for him. ‘And that, in the end, they’d stay with us. I mean, that was my thinking right through until the end, towards the end.’ It was not until this day in early September—just eighty-two days before the Australian people sent him to electoral oblivion—that it struck Howard with full force that a majority would not stay with him after all. Howard had lived through terrible polling before and had always triumphed in the end. His Government had been lagging in the polls all year, yet his confidence in his own powers did not desert him until now. ‘I guess around September,’ he said, ‘I started to think that it was never going to shift.’ On that day, recalled his closest confidant in politics, Foreign Minister Alexander Downer, ‘he spoke to me on the phone on the Tuesday and he asked me to meet him’. With twenty foreign leaders arriving in Sydney for the Asia-Pacific Economic Conference (APEC) summit, it was a frenetic week for Downer. He was at his Sydney hotel, the Quay Grand in Macquarie Street, in a meeting with his Coalition colleague, Trade Minister Warren Truss and some APEC officials when he took the Prime Minister’s call. He finished the meeting and walked the few blocks to meet Howard at the Commonwealth Parliamentary Offices at 70 Phillip Street, the discreet office space provided for all Federal ministers when they are in Sydney. He found his leader in a state of despondency. Downer recalled: ‘On the Tuesday his thinking was, We are stuffed—we’re going to lose the election and I’m going to lose Bennelong.’ To lose his own seat would be a signal humiliation for any prime minister. So Howard had decided to retire. He wanted to canvass scenarios for doing so. He wanted to talk about the details of timing and succession. And perception management.

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The polls had been flashing an angry red for the Howard Government for over a year. But even from a desperately bad start, the Newspoll in The Australian that morning showed a breathtaking deterioration of support. A fortnight earlier, the same polling firm had given the Government just 45 per cent of the two-party preferred vote to Labor’s 55. But now the Government’s support had apparently shrunk to a shocking 41 per cent against Labor’s 59. Opinion polls do not pretend to be predictors. They are instant snapshots of sentiment, not crystal balls. Even if most polls were, this one would not have been a plausible indicator of the election result. There were two reasons for this. First, in the history of the modern two-party system, which took shape in 1949, no party had ever won more than 56.9 per cent of the two-party preferred vote—a record set in 1966. Further, this latest Newspoll result was well out of line with the findings of the other three major polling companies. Yet politicians, despite all their protestations to the contrary, live and die by the polls. Most receive them with the gravity of a judicial ruling. Especially in the run-up to an election, Howard’s moods from day to day depended on the opinion polls. Although he successfully concealed it from public view, Howard suffered intense mood swings. He frequently vented his frustrations on senior staff, yelling and shouting. The greatest single cause of Howard anger, according to several of those who worked intimately with him, was poor polling. The polls ruled Howard’s emotions. The oscillations of the Prime Minister’s moods were so punishing on those around him that they had persuaded Arthur Sinodinos to leave Howard’s employ the year before, after more than a decade as his most important aide. Sinodinos, the man some had called the real Deputy Prime Minister, later explained why he decided to make the 2004 election his last in the service of John Howard: ‘During a campaign, we would track seats overnight,’ he said. ‘We tracked about sixteen a night in the 2004 campaign. What would happen normally is you’d get these big deviations, and the PM’s mood reflected the deviations. So one day he’s up; the next day he’s down. So, behind the scenes it was a bit of a rollercoaster . . . This is just a personal thing,

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but I just felt: look, we’ve done four of these, and it’s all been very good and we’ve all had a great time but, emotionally, I didn’t think I could go through another campaign.’ Sinodinos told the other members of the Prime Minister’s staff of his decision on election night 2004, and acted on it in December 2006. Howard’s most valuable adviser left him just as his most dangerous adversary, Kevin Rudd, arrived as Labor leader. On that Tuesday morning, 4 September 2007, Howard was deeply depressed. He no longer had Sinodinos to counsel him. An Australian prime minister has a private office with some thirty staff; now that he was in a funk, Howard consulted two of them about the prospects. He spoke to Sinodinos’s replacement as chief of staff, Tony Nutt (formerly the Liberal Party’s director in South Australia), and to Aileen Wiessner, his longest-serving staff member, who normally provided a communication channel to Liberal Party backbenchers. Howard later summed up their responses to him in three words: ‘I said, “How are we going?” And they said, “Not good, boss.”’ Now Howard turned to Downer. But when the Foreign Minister arrived, he found that the Prime Minister’s mind was made up. As Howard put it after the election, ‘I was quite pessimistic. Yeah, I was.’ How did he decide to bring Downer in at this juncture? ‘Downer and I had talked very frankly about our position all through the year, because I communicated more directly with him than probably anybody else. But Alexander, until this period, remained very upbeat—he kept saying, I am very confident it’s going to turn. But after this poll, we had this meeting, and he was quite pessimistic: “Oh, I was speaking to people at the weekend, and there seems to have been a shift, and it was all very glum in Melbourne.” This was the sort of conversation we had. And I said: “Well, you know, I am quite pessimistic, and I think I am going to be struggling to hold my own seat.”’ If Bennelong was lost, so was the election. As Downer remembered the meeting: ‘We were talking about whether he should stand down at the end of APEC. Stephen Harper, the Canadian Prime Minister, was visiting Parliament the next Monday. The question was whether [Howard] should stand

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down on the Tuesday or the Wednesday—that was the basis for the conversation.’ Australia’s second-longest-serving prime minister thought he would be gone in a week, eight days at the most. Prime Minister Peter Costello would lead the Government to the election.

... The Prime Minister now embarked on an exquisite piece of role playing. At the very time when he was seeking to negotiate his way out of power, he was hosting a meeting that had brought to Sydney the greatest concentration of power ever seen in Australia. As he crafted a despairing exit from leadership, he was acting the part of a triumphant world leader. While he prepared to surrender all ambition for himself, he played a pantomime of being hugely ambitious for his country and the greater Asia–Pacific. Political leaders everywhere are accomplished at operating in parallel universes, with their public performances often at odds with their private machinations. In his classic exposition of the precepts of statecraft, the 16th century Florentine diplomat and political adviser Niccolo Machiavelli wrote: ‘For a long time I have not said what I believed, nor do I ever believe what I say, and if indeed sometimes I do happen to tell the truth, I hide it among so many lies that it is hard to find.’ Yet, even by the standards of political duality, John Howard in September 2007 set out on a breathtakingly grand example of subterfuge. Posing as the man leading the powers of the Asia–Pacific to a vibrant future, he secretly set out to arrange his retirement. Alexander Downer, reading from his own diary of that week, recounted how he and Howard worked furtively on the Prime Minister’s retirement plan in spare moments snatched from APEC’s grand summitry: ‘On the Wednesday we had a signing ceremony with George Bush, and Howard and I had a chat about it [Howard’s resignation] after the meeting with Bush. On Thursday, after the signing ceremony with Hu Jintao, and before the lunch with him, we spoke again.’ At

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that lunch, Rudd had stolen the show by speaking Mandarin to the Chinese President. ‘We decided,’ continued Downer, ‘that I should consult the Cabinet colleagues that night.’ Most of the ministers in Howard’s Cabinet would be at the APEC business summit in Sydney that night. Downer would take the opportunity to gather them together in secret to ask their views about Howard’s leadership. Although it was presented to them as a consultation, in reality the meeting was conceived as a device to begin Howard’s departure. Howard could not appear simply to lose heart and walk away, despondent, and leave his party in an impossible position. He needed a specific catalyst he could cite. He needed a justification. Or, as he explained after the election, he wanted the option of an exit: ‘My position essentially was that there was no way that I was going to unilaterally go. Because by then my departing would not have made any difference to the outcome. And it would just be seen as an act of cowardice. People would have said, John Howard thinks he’s going to lose. He can’t bear to be defeated, so he’s running away at the last minute and he’s going to give poor old Peter [Costello] the hospital pass and, gee, that’s a rotten thing to do. But, on the other hand, a lot of the colleagues, if they felt especially strongly and if they were willing to own a request for me to go—and the public would know that I was being asked to go—then I’d have gone. I’d have gone without any fuss. I mean, it gave me an exit.’ With the conditions he attached, he was seeking more than an exit. He wanted a blameless one. By asking his ministers to take responsibility for removing him, he was also asking them to take responsibility for the length of his tenure to date. Howard had been Prime Minister for four thousand days—four thousand opportunities to choose the date of his own retirement. Now his Cabinet was being asked to take responsibility for his failure to take up any of them. In the likely event that the Government should lose, Howard wanted his ministers not only to carry the full burden of blame but to grant him immunity from being called a coward. Now, at Howard’s suggestion, Downer was to canvass opinion among the members of Howard’s own Cabinet. The Prime Minister

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was asking the Cabinet—the national executive which he himself had appointed—to decide whether he should remain in the prime ministership. Downer had already taken the precaution of phoning Peter Costello on Wednesday. Before dispatching the king, he wanted to be certain that the crown prince was available. Costello had publicly coveted the prime ministership for almost as long as Howard had been in it. In 1999, he’d said he had only ‘another budget or two in me’. Still, it was five minutes to midnight and the black maw of political oblivion was frighteningly near. Downer needed to know whether Costello was prepared to lead the Coalition in this moment of despair. As Costello recalled, Downer ‘said he couldn’t be sure, but he thought Howard might stand down, that Howard had told him he couldn’t win the election and he couldn’t win Bennelong’. The Foreign Minister said something like, ‘He’s thinking of going—I can’t be sure, but I think he will. Are you prepared to be leader if he stands down?’ Costello’s reply: ‘Yes. It’s a hard ask, and it’s very late in the day, but yes.’ He later ruminated: ‘Downer sounded as if he was going to do it. Part of me said, We’ll believe it when we see it. Another part of me thought, Better get ready. I was absolutely determined to do it. Downer said he would be off in the next forty-eight hours.’ The Treasurer started making preparations to assume the prime ministership at short notice, to lead a Government that, according to every available indication, had come to the end of its life. It would demand an epic effort. ‘I began preparing a reshuffle, policies, speeches. I think I spoke to the federal director [of the Liberal Party, Brian Loughnane]. He was out of the loop, he didn’t know what was going on. I spoke to my staff and my colleagues. This was very much on, and the reason I thought it was on was that Howard went to Downer. You don’t go to Downer and say, “Find out if they want me to go.” Otherwise, why would you do that if you weren’t going to go? And you must know this would become public. If your intention

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was to fight on, it would be highly damaging for this to become known . . . This had moved, it had got a huge head of steam, and the reason Downer was not concerned about leaking was that he thought it was going to happen.’ As Howard and Downer were seeking to build their political ejector seat for the Prime Minister, Tony Abbott happened to stumble upon them. On the day Downer phoned Costello, Health Minister Abbott was at a lunch organised by the Forestville branch of the Liberal Party in his seat of Warringah, in northern Sydney. The guest speaker was Janet Albrechtsen, a conservative partisan who had used her column in the Sydney Morning Herald and more recently The Australian to barrack tirelessly for Howard. The admiration seemed to be mutual. Howard had appointed her to the board of the Australian Broadcasting Corp. But, dispirited by the same Newspoll result that had crushed Howard, Albrechtsen had come to the same conclusion as her hero. ‘I sat next to her and she said she was thinking of urging Howard to retire,’ Abbott recalled. He tried to dissuade her. ‘Sure,’ he said. ‘We are in a difficult position, but why would you dump an incumbent for an inferior choice?’ But Albrechtsen was adamant. ‘Neither of us could convince the other.’ At the end of the event, Albrechtsen told Abbott that she wanted to do Howard the courtesy of telling him she would express this view in her next column. He offered to pass on the message, and phoned the PM later that afternoon: ‘I’m sorry to bother you, but I think I should tell you about a conversation I had with Albrechtsen.’ Abbott was surprised to find that the Prime Minister was considering the very course of action he had just been arguing against. ‘Then we had a very frank fifteen to twenty minute conversation.’ ‘Let’s shed ourselves of preconceptions and see what is best done in the circumstances,’ was the way Abbott characterised it. ‘And certainly he was open to the idea of going, provided it was really in the interests of the Government and provided it was the clear wish of the colleagues.’ After the election Howard recalled that, at this moment, Abbott momentarily lost his rock-like faith in his leader’s powers and

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concluded that Howard should, indeed, retire: ‘Tony Abbott, for a very brief period, thought I should go.’ Howard then asked Abbott to open up a process parallel with the one Downer was running. ‘He said to me, “I have asked Alexander Downer to take soundings and I would be happy for you to take soundings.”’ The two men felt a genuine affection for each other and shared a close ideological alignment. In the election’s aftermath Abbott would be one of the very few members of Howard’s Cabinet who continued to see him and lunch with him. Howard was Abbott’s hero; Abbott was the Prime Minister’s protégé. So, as with Downer, Abbott was a man the PM felt he could trust. Howard evidently wanted to leave no stone unturned in seeking the approval—or, perhaps, the permission—of his colleagues for his resignation. He was prepared for some confusion and some duplication, it seems, in the process. And what would be the benefit? It would confirm to Cabinet members the seriousness with which he was considering his future. It would inevitably generate more activity, more speculation, more angst and, therefore, more momentum. Abbott would also create a second channel by which Howard might be able to gauge the accuracy of what he heard through the first. He could not have predicted, however, that Downer and Abbott would take their soundings in different oceans. Downer and Abbott, although given the same mission, approached it with wildly different methods. Abbott’s was idiosyncratic; Downer’s was methodical. Abbott spoke to selected individuals one-on-one; Downer organised a meeting. Abbott consulted only three Cabinet colleagues; Downer sought the views of practically all. Most strikingly, Abbott chose whom to consult quite randomly—he cheerfully approached people outside the Cabinet and the party, and even consulted strangers at a barbecue for recovering drug and alcohol addicts. Downer limited his circle to Cabinet ministers. Abbott started by phoning Nick Minchin, a force on the conservative end of Liberal politics and a former state secretary of the party in South Australia. ‘In my view we are headed for defeat,’

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Abbott recalled Minchin saying, ‘in my view we should have changed leader a year ago, but it’s too late now. And, besides, I don’t think Peter Costello would do it.’ Abbott decided he’d better phone Costello to check, as Downer did on the very same day, to ask whether he was prepared to lead the party in such straitened times. He got from the Deputy Leader the same message that Downer did. According to Abbott, ‘He said it should have happened twelve months ago, and it would be a poisoned chalice. But obviously, if he vacated the position, I would do it.’ Abbott next called Downer, one Howard-appointed canvasser now canvassing the other. ‘Downer said to me, “It’s a fine judgment. But I think, on balance, it’s better that we make the change.”’ Then Abbott took the project out of the Cabinet, out of the Liberal Party and off the reservation. He took it all the way to Gorman House, a detoxification unit for alcohol and drug abusers in innercity Darlinghurst, Sydney. The centre is run by St Vincent’s Hospital. Friends of Abbott connected with Gorman House were pressing the Health Minister for funding for its vital work in rehabilitating desperate cases, and he had agreed to a visit. ‘There was a barbecue there and I was helping,’ Abbott said. ‘There were some semirecovering alcoholics and worthy helpers. So I canvassed their views: Should we keep John Howard or change to Peter Costello? What do you guys think?’ Politicians rely heavily on the opinions of voters convened in focus groups by market researchers. Abbott’s ad-hoc focus group was not a scientific exercise in political polling, but he certainly could not be accused of restricting himself to elite circles. Their consensus, in Abbott’s words: ‘Yes, you guys are in trouble, but we like John Howard and we’re not keen on Peter Costello.’ On his way home from the barbecue, Abbott phoned two longstanding friends, one Labor-inclined and the other a conservative; both thought a switch to Costello would be a change for the worse. Next, he asked the opinion of his wife, Margaret. ‘She said it would be so unfair to John Howard, and Peter Costello is just not well liked.’ That sealed it for Abbott. ‘I phoned Howard and told him

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I’d discussed it with Downer, Minchin, Costello and some random people, plus three people whose judgment I value. I said, I’ve come to the firm view that it would be lunacy to make a change.’ Heartfelt as this opinion may have been, it was quite useless to Howard. All it told him was something he already knew—that Tony Abbott was the staunchest of his allies. Months later, after the election, Abbott would be punished by the Parliamentary Liberal Party for his loyalty. One of the reasons he decided not to stand against Brendan Nelson and Malcolm Turnbull for the leadership was that Liberal MPs told him they could not vote for him because he was ‘Howard’s mate’. What Howard did not learn from Abbott was the state of sentiment in the wider party. Nor did this assessment provide him with a mechanism he could use to trigger his resignation. It gave him a warm feeling, but not much else. Abbott intended to phone Downer back to tell him his view, but the line was busy and then he got sidetracked: ‘It was on my mind to call Downer, but of course I never bloody-well did.’ Downer worked more methodically. As soon as the official lunch for Chinese President Hu Jintao was finished, he drew aside the Deputy Prime Minister. According to the power-sharing conventions of the Coalition, this post automatically went to the leader of the National Party who, at that moment, was Mark Vaile. ‘I said to him the PM was interested in knowing people’s thoughts [about the leadership],’ Downer recalled. ‘Vaile said the situation was dire and that we were probably not going to win. He said, We will leave it up to you Liberals, and we’ll go along with your decision.’ Next, Downer phoned those Liberal Party members of the Cabinet who were not planning to be at the dinner that night. Even though he personally was convinced that Howard was at the end of his run and should go, he still wanted to invite them all to the meeting he was convening. He wanted to get the broadest possible authority to begin Howard’s removal. Diminished though he may have been, Howard was still the greatest living figure in conservative politics—second only to the Liberals’ founder, Robert Menzies, in the pantheon. Downer did not want to be seen as a lone assassin.

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He called Abbott, Communications Minister Helen Coonan, Mal Brough, the Minister for Families, Community Services and Indigenous Affairs, and the Leader of the Government in the Senate, Nick Minchin, who was simultaneously the Finance Minister. ‘Coonan said we were doomed,’ Downer remembered. She could not make it to the meeting in Sydney because of a commitment in northern New South Wales. She asked for time to consider Howard’s situation and promised to call back. Mal Brough couldn’t make it to the meeting either, but made plain his view that Howard should go. When Downer rang to invite Minchin, the Finance Minster’s first reaction was to oppose the exercise. ‘I told Downer it was a bad idea because it would leak,’ Minchin recalled. ‘But he said, Howard wants me to get the view of others and the best way to do that is when we are all together in Sydney.’ Minchin said he would not be in Sydney and would not be at the meeting. He explained his attitude to changing the leadership, just as he had put it to Abbott: Howard should have gone a year earlier, but it was too late now. And, ‘I stressed to Downer that, if you have this meeting, if you have this resolution, it must be of Howard’s own volition—it must not be seen as Howard being pushed. I asked Downer to convey to the meeting my view that it was far too late to change. And if there was any change, it had to be on the basis that John was acting of his own volition.’ While Abbott had neglected to phone Downer back, Downer now phoned Abbott to invite him to the meeting in Sydney. But the Health Minister had his phone switched off while he gave two speeches in Brisbane and then repaired to a bar. He missed the call. Downer approached all the Cabinet ministers who were going to the APEC dinner. ‘He tapped everyone on the shoulder and said, Come to this meeting about the leadership,’ recalled the then Environment Minister, Malcolm Turnbull. It was to be immediately after the APEC business summit dinner, in Downer’s hotel room at the Quay Grand Suites, on the other side of Circular Quay from where they were dining. ‘I was astonished that we’d be having this meeting,’ said Turnbull. ‘I thought it was a bad idea, that we would be door-stopped’ by

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inquisitive journalists wanting to know why an ad-hoc after-dinner Cabinet meeting was being held in the Foreign Minister’s hotel room. But no reporters noticed the convergence of ministers that night. ‘I told Downer that I felt that events were being put in train that had a certain inevitability about them. Downer said, No, no, the PM wants us to have this meeting.’ The PM himself, however, would not be there. Now Howard carried off one of the most theatrical parts of his double life as the despairing leader looking for an exit and simultaneously the exuberant host of the Asia–Pacific powers. At the APEC business leaders’ dinner, John the Janus-faced addressed about 400 of the world’s leading corporate chiefs. A vast hall at the Overseas Passenger Terminal at Sydney’s Circular Quay had been decorated with swathes of pastel draperies for the event. Massed candles cast golden light. A string quartet played. It was the crowning event of the so-called Business Summit of APEC, itself a sideshow to the main event. This was the closest members of the private sector were allowed to come to the twenty-one APEC leaders, a privilege for which they’d paid $5000 each (spouses were not invited). The Prime Minister’s office had pressed his Cabinet ministers to attend, and nine of them were strategically seated, one to a table, to give the business leaders the best possible access to the executive arm of the Australian Government. The guests on that cool and cloudy Thursday, 6 September 2007, believed the dinner was bringing a busy day to an elegant end. But that evening was not notable so much for what happened at the dinner but for the extraordinary political proceedings that followed. Still, even to those unaware of the approaching weirdness, the dinner was an event pregnant with political meaning. ‘It was a fascinating moment,’ recalled Geoff Brennan, a Canberra lobbyist, ‘because here was a very successful prime minister now suffering badly in the polls, heading into an election, and in four days the big landmark event of APEC would be behind him. What would he do?’ Brennan, who was also executive director of the APEC Business Advisory Committee,

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went on: ‘Howard gave a fighting speech. A couple of senior business people said to me afterwards that it was a good, rousing speech, like a coach at half time.’ The fight in his speech consisted in urging APEC to uphold free trade and lead the way towards a solution to climate change. This was the standard APEC host’s embrace of the agenda items du jour. But was there any fight left in Howard himself? At the beginning and end of his speech he spoke of his excitement. ‘It is,’ he began, ‘with a sense of excitement—if somebody who has been in politics for thirty-three years can continue to use that expression, and I do with great enthusiasm—it is with a sense of real excitement that I welcome all of you here.’ He concluded, some fifteen minutes later: ‘It’s an enormously exciting opportunity for anybody in a leadership position to be playing a role in shaping the future of what is the economic epicentre of the world.’ As Howard publicly enthused about his excitement in the leadership position, privately he had been setting out the terms for relinquishing it. Howard was posing as rampant in public, yet in private he was acknowledging that he was politically flaccid. And he was one of only ten people in the room who knew that Downer, while physically present, was focused on alerting the remaining ministers to the imminent meeting where they would consider whether to keep Howard as leader. After the dinner, the ministers made their way to Downer’s hotel while trying hard not to advertise the fact. Joe Hockey, the Minister for Employment and Workplace Relations, chanced to walk out with John Denton, chief executive of the law firm Corrs. The two men had worked together at Corrs years earlier. Denton took the opportunity to tell Hockey how unimpressed he was that the Prime Minister had recently taken a shot at his wife’s TV show. Denton is married to Jane Turner, the actor who plays Kath in the hit TV comedy Kath and Kim. The most recent episode of the show had made play with the Federal Government’s unpopular industrial relations policy, Work Choices. Kath’s son-in-law, Brett, came home from work and broke the news that he had been sacked for taking an unscheduled toilet break. But his employer later took him back:

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BRETT: They’ve rehired me. Little less money, much worse conditions. KATH: Oh bloody Howard! I’d like to take away his toot breaks and see how he feels in his jolly lower house. This was exactly the sort of tactic some employers had been using to cut staff entitlements, although it was illegal under Work Choices to fire workers so as to rehire them on poorer terms. But Howard hadn’t appreciated the political commentary. ‘It probably just reflects the prejudices of the scriptwriter and perhaps the actors,’ he had said. Denton thought it was precious and paranoid of the Prime Minister to complain about a comedy that merely reflected current social attitudes. He remembers Hockey saying, ‘Don’t worry about it, mate, don’t worry. What I didn’t realise at the time was that he was clearly on his way to the Quay Grand.’ Joe Hockey was about to immerse himself in discussions about Howard’s tenuous future as leader. The Prime Minister had a great deal more to worry about than Kath did. Kath’s popularity, after all, was assured.

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3 A Night of Long Cigars

It was around 10.30 p.m. by the time all nine ministers arrived and found a seat in Downer’s suite. The Foreign Minister lit a cigar, a habit of his for decades. As he remembers it, he propped open the door to the balcony in an effort to spare his colleagues from choking on the smoke. Ranged around the room were Joe Hockey, Malcolm Turnbull, Philip Ruddock (Attorney-General), Brendan Nelson (Defence), Julie Bishop (Education, Science and Training), Chris Ellison (Human Services), Ian Macfarlane (Industry, Tourism and Resources) and Kevin Andrews (Immigration). There were brief preliminaries. Downer thanked everyone for coming and reported that he had made phone contact with the absent Liberal Party members of the Cabinet—Abbott, Minchin, Coonan, Brough and Costello—about the matter he wanted to raise. Costello had not been at APEC and, in any case, Downer already knew his views about the leadership. The Foreign Minister said he’d had some conversations with Howard over the last two days at the Prime Minister’s instigation. Downer then came to the point. His next remark hit the group with the force of an incoming howitzer shell: ‘The Prime Minister thinks we will lose the election and he thinks he will lose Bennelong.’ 20

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Downer explained that Howard had asked him to gather the ministers’ views. According to participants, he said Howard wanted the matter resolved as soon as possible. Here was their leader—the man who had taken them to four election victories and appointed them to their high posts, the man to whom they owed everything—sending a signal of despair. Most telling was his doubt that he could hold Bennelong. Howard had held his seat since 1974. At the last election, his winning margin had been 4.1 per cent. This made Bennelong a bellwether seat. With a uniform swing against it of 4.8 per cent, the Government would fall. It was likely that, as Bennelong went, so would go the country. If Australia’s second-longest-serving prime minister—the political magician of the era, the man who had dispatched four Labor leaders— wasn’t confident of holding his own seat, then how could anyone in his government have any confidence about anything? Those present also gave weight to Downer’s use of one word in particular—‘resolved’. If the Prime Minister wanted the matter resolved, this strongly implied a decision or action. That could only mean that Howard was looking to be endorsed, or replaced. The group realised that, whatever the Government’s objective chances of winning, their leader was suffering a crisis of confidence. What followed was an unusually open and honest discussion about their leader, their party and their prospects. But underlying the entire session was the shocking revelation that their leader was in some kind of funk. One participant mused aloud: Is the PM asking for permission to retire? Is he asking us to save him from himself? ‘Overall, it comes down to the Prime Minister’s state of mind—you want a leader who thinks he can win,’ another minister remarked later. The discussion ran for two hours. Downer drank wine, Turnbull beer, and the teetotaller Ruddock took soda water. At one point, Downer and Hockey excused themselves and stood on the balcony smoking cigars. After the meeting, Kevin Andrews walked back to his hotel and wrote notes ‘because I didn’t think that kind of meeting would happen very often’. A summary he later made of those notes reads, in part: ‘The discussion was broad ranging. Philip Ruddock

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was against any change. Downer reported that Tony Abbott was of a similar mind. On the other hand, Joe Hockey and Malcolm Turnbull were in favour of immediate change. Hockey argued that the Bennelong campaign would be a distraction throughout the campaign for the PM. Hockey was pessimistic about the PM’s chances of retaining the seat.’ Any discussion of Howard’s retirement axiomatically involved a debate about his successor. ‘There were very mixed views’ about the alternative to Howard, namely Peter Costello, according to Andrews’ notes. No other alternatives were suggested. ‘Some were of the view that [Costello] would be the best bet, while others were more sceptical. Some recounted negative experiences of dealing with the Treasurer.’ Kevin Andrews himself was one of these, Downer said in a later interview. There were, plainly, deep reservations about Costello from the people who knew him best. Some were confident they could win under Costello; others were dubious. Some thought they would lose the election regardless, and they would only have damaged their nextgeneration leader for no good purpose. If the Newspoll that had so shaken Howard had also shown a marked deterioration in support for him personally, there would have been an irresistible case for removing the leader. But there was a complication. Even as the polls showed the Government lacked enough support to be re-elected, Howard’s personal approval rating was holding up. While the Coalition’s primary vote was a poor 37 per cent in that poll and its share of the two-party vote a record low 41 per cent, Howard’s approval sat at a respectable 46 per cent. He seemed to be the reasonably well-regarded leader of an unpopular government. In the Nielsen poll, published by the Sydney Morning Herald and The Age, Howard’s approval rating was 50 per cent. Malcolm Fraser, Bob Hawke, Paul Keating and Kim Beazley had all rated much lower than that in the terminal phases of their leadership terms. ‘Howard’s problem is that he’s popular, but he’s not as popular as the other guy [Kevin Rudd],’ John Stirton, the Nielsen pollster, said at the time. The further complication for the party was that the polls also

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showed Peter Costello to be less popular than his leader. And this was the nub of the Liberals’ problem. There was not one scintilla of polling evidence that the Australian electorate liked Costello any better than it liked Howard. True, a Nielsen poll had scored Costello’s approval at an extraordinarily high 70 per cent; but this was his rating as Treasurer, not as alternative Prime Minister. In another Nielsen poll, taken in April 2007, the suggestion of a hypothetical leadership change from Howard to Costello caused primary support for the Coalition to fall from 37 per cent to 35 per cent. The case for Costello depended on what Malcolm Turnbull called ‘a leap of faith’—that his freshness as Prime Minister would revive voter interest and create a sense of renewal for the Government. This had worked elsewhere—Labor State governments had won new leases of life by changing leaders. So had the British Labor Government, very briefly, when Tony Blair handed power to Gordon Brown. This was precisely Peter Costello’s argument for why he should be made leader. Ageing Labor governments in New South Wales, Victoria and Queensland had all managed to reinvigorate themselves by the simple expedient of changing leaders. ‘The only chance to save the Government was to say, This is a new, fresh, government looking for a mandate,’ Costello later said. ‘Look at Carr and Iemma, Bracks and Brumby, Beattie and Bligh. When Brumby runs, he won’t say he’s running for Labor’s fourth term. It will be, I am a new Premier seeking a mandate. Labor has figured this out. This is the new model for Australian politics. Howard didn’t understand. He was still operating with the rules of the 1970s and ’80s—you fight like buggery to get the leadership, and then you hang on to it like grim death.’ But just now, Howard was seriously considering relaxing his deathlock on the leadership. And his future was, for a fleeting moment, in the hands of his Cabinet ministers. There was a lot of affection for Howard on display in the meeting of the crisis Cabinet, and a lot of concern that his dignity should be protected. The last thing we want, ministers told each other, is for Howard to become another Stanley Melbourne Bruce, the only prime minister in Australia’s history to lose his own seat in an election.

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But, strikingly, participants reported that only one of the people in the room took a firm and consistent position that Howard should stay on as leader. This was Philip Ruddock. Indeed, after stating his position firmly, Ruddock told the meeting that his view would not change and that there was no point in him staying. So he moved to leave about midway through the proceedings. Joe Hockey recalled that, as Ruddock headed for the door, Downer told the meeting about one of Howard’s stipulations—that if minsters thought he should stand down, he wanted them to call him and tell him so. He was actually asking for them to pressure him to resign. As if this confirmed the pointlessness of his remaining in the room, Ruddock declared an emphatic, ‘Well, that’s it then,’ and walked out, according to Hockey. Ruddock does not recall making this remark. But there was irony in his singular loyalty to John Howard. The two men had been rivals for decades. Howard was a dry, from the conservative wing of the party; Ruddock was a wet, or moderate. They had competed often and remained wary of each other to the end. Downer’s view? The former leader of the Federal Liberal Party gave the group the very strong impression that, so long as Howard thought he couldn’t win the election or win Bennelong, he should go. This was consistent with what he had already told Abbott by phone. Helen Coonan phoned Downer back, as promised, the day after the meeting and told him her conclusion: Howard should go. Overall, of the fourteen Liberal Party Cabinet members excluding Howard himself, only one—Ruddock—was unwaveringly and consistently in favour of keeping Howard as leader until the election. One other, Tony Abbott, lost his confidence in Howard briefly before recovering it. Another, Nick Minchin, thought Howard should have gone earlier but that at this point he should stay. If, at the end of all the consultations, a formal vote had been taken, allowing the most generous interpretation of support for Howard, it would have resolved 11 to 3 in favour of his immediate resignation as leader and Prime Minister. It was a stunning collapse of confidence, in direct response to Howard’s own crisis of confidence.

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As the discussion in the cigar-reeking suite at the Quay Grand Hotel progressed, it became clearer that the majority favoured taking a chance on Costello. ‘On balance, and very reluctantly, they came to the view that they were definitely not going to win with Howard,’ Downer said later. ‘No one at that meeting had any enthusiasm for Costello at all. The majority thought maybe we would have a better chance with Costello. Everyone knew the dilemma was that the public had stopped listening to Howard but they couldn’t stand Peter Costello. It was very clear.’ But now a critical obstacle emerged. According to Kevin Andrews’ summary of proceedings: Downer also indicated that Nick Minchin was of the view that unless the PM was prepared to go voluntarily, a change would not be workable. There was much discussion about this issue. Downer summarised the PM’s view: Howard was prepared to stay and fight, but if the majority of Cabinet said he should go, then he would—but on the clear understanding that Cabinet had taken that position, and he had been requested by his senior colleagues to stand aside. There was a strong consensus among the group that there could be no plot or putsch or party-room vote. There could be no delegation sent to tell Howard to go. It had to be his decision. This was not just to protect his dignity: the ministers feared an electoral backlash should they be seen to be conducting political euthanasia on Australia’s greatest living conservative. The voters who comprised the Liberal base would react angrily. The Government’s electoral standing, already dire, would only grow more dismal if Howard were forced into this humiliation. ‘This was the sticking point,’ according to Andrews. ‘In the end, we decided that unless the PM would say that he had decided to stand down, there would be no change. In my shorthand notes: “Unless PM says he has decided to go, not on.” The meeting broke up about 12.30 a.m. Downer indicated that he would talk to the PM that day and report back to us.’

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At the end of the night, the group discussed how Downer should report their deliberations. He was to tell Howard there would be no move against him but that, if he were of a mind to go, the group would support a smooth transition to Costello. If it had been purely a matter of ministers’ confidence in their leader, it would have been a night of long knives. Instead, because Howard demanded that they publicly demand his resignation, it became merely a night of long cigars. A potential political killing party became merely a harmless political discussion group. Downer met Howard the next evening at Kirribilli House, the Prime Minister’s official residence in Sydney (it was originally built as servants’ quarters for the much grander Admiralty House next door, which now serves as the Sydney base for the Governor-General). Howard’s wife, Janette, was present as Downer reported the results of his consultation. The then Prime Minister subsequently recollected these discussions: ‘He reported that the great majority of them were pessimistic. He reported that a lot of them were unhappy with the prospect of an alternative because they had all had—some of them had—difficulties with Peter. And I asked him whether they were prepared to request me to go, and he said, Oh, no, they are not willing to do that; they couldn’t live with that. ‘If Cabinet were prepared, not to every last man, but if the great bulk of them were to say, Look, we really do, John, think, in the interests of the Party you should stand down, and we want you to do that, and [if they had] been prepared to own—to publicly own—that request, I’d have gone. I think that would have been the right thing to have done.’ But that is not what Howard now heard. The Cabinet had not met his condition. ‘Downer said that they were depressed,’ he recalled, ‘and the great bulk of them didn’t think we could win. And I then said, Are they prepared to request me to go? And he said, No. The implication of that was that a number of them hoped I might go; but they weren’t, as a group, prepared to ask me to go. Now, he knew all along that I wasn’t going to go without a public request. That’s the key thing . . . When I said to Downer, Well, are they prepared to? he said, No, there is no

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way they are going to accept the responsibility for asking you to go. He was quite strong on that. He said, Oh, they felt they’d get murdered in their electorates—how could they possibly do that? How could they possibly ask somebody who has been Prime Minister for almost twelve years to go? On the eve of an election? That was the wording he actually used, or words to that effect. Maybe not murdered, but there would be a savage reaction in the electorate if they did that.’ Howard now fully understood that he no longer had the confidence of most of his own Cabinet. This is a devastating realisation for any prime minister that should lead him or her to resign forthwith. Cabinet government is collective government. In a presidential system, legal and constitutional authority resides in the person of the president. But in the Westminster system of government it is the ministers, not the prime minister, who have the statutory power to make decisions. When a Cabinet loses confidence in its leader, he or she can no longer represent or direct the collective. But it is also true that a Cabinet is conducted according to convention. The Cabinet is not mentioned in the Australian Constitution. Its proceedings are not governed by any immutable law but by the character and practice and even the whims of its members, especially the prime minister. But though his Cabinet’s loss of confidence should have been the tombstone for Howard’s prime ministership, he chose to make it merely a milestone and kept on going. To enable him to ignore the collective will of his Cabinet, he invented a proviso. He declared, unilaterally, that a lack of confidence in the prime minister was not a sufficient condition for his resignation. Instead of accepting the responsibility to act on the Cabinet’s loss of confidence, he put a new responsibility on to his colleagues. Ministers, Howard said, have to ‘accept the responsibility for these sorts of things. I mean, I think some of them wanted a situation where I would just disappear. They would not be held in any way responsible for it, and then, if it all blew up, well, then, We didn’t ask John to go. I mean, I don’t know, but you can’t operate that way.’ But why would Howard set up this process to begin his own retirement and then, at the denouement, recoil from it? Alexander

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Downer understood it this way: ‘On the Tuesday his thinking was, We are stuffed—we’re going to lose the election and I’m going to lose Bennelong. By Thursday, his frame of mind was, If we come up with the right strategy, maybe we can win. It was very Howard—he became more robust about it.’ The Howard rollercoaster, it seems, had plummeted to its nadir on the Tuesday and then started to zoom back upwards by the Friday. Tuesday’s despair turned to Friday’s determination. Downer phoned Peter Costello after the meeting. According to Costello, ‘He came back from Kirribilli House and he said, Howard’s changed his mind—he’s not going. When he got out there, he found that Howard had changed his mind. He was highly critical of Howard changing his mind. He said that in the circumstances he couldn’t do anything about it. Howard had asked Downer for a view; Downer had given him the view and Howard ignored it.’ Janette Howard was not a passive listener at the climactic meeting but an active contributor to the discussion. ‘Oh, why not? She’s my wife,’ Howard said. She had her own opinion, but he declined to discuss it. He invoked ‘spouse privilege’. Interviewed for this book, Howard would neither confirm nor deny that he had changed his mind about retiring. But he did complicate the picture by suggesting that he took into account wider party opinion—‘I was getting phone calls from junior ministers, and whatever, saying, Under no circumstances go.’ Some suggested to him that Downer might have been angling for his own advancement in encouraging Howard to leave: ‘One of the ministers thought—he told me subsequently he thought—that part of it was that Alexander wanted to become deputy—there was a little bit of that there.’ Downer reported back to each of the Cabinet ministers separately by phone: Howard was staying on to fight. Yet three of Howard’s ministers did not accept that this was the end of the matter. Two of the Cabinet did indeed follow Howard’s request to tell him if they thought he should retire. Mal Brough said later, ‘I did go to the PM and I did tell him he should go. I was convinced there was

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nothing he could do, or the Government could do, with the current leadership that would actually change people’s minds. Regardless of the rights or wrongs of that, my duty of care was to make sure the country remained in good hands. And that the best chance of that was to have had a change. So I put it to him personally.’ Joe Hockey did the same. The third minister, Andrew Robb, also thought the leadership should change, but as a member of the outer ministry he did not know about Downer’s secret soundings. He would soon launch a concerted, covert, last-ditch effort to force Howard out. To this point, all of these machinations had occurred in private. Some in the media had suspicions, but nothing specific. There was media speculation about Howard’s tenure, fuelled by the dire position of the Government and by hand-wringing in the Liberal Party. And the issue did intrude into Howard’s public role as APEC host. When he appeared with Russian President Vladimir Putin at a press conference on Friday, 7 September, to announce the historic decision that Australia would start exporting uranium to Russia, a reporter asked Howard whether he would resign before the election. Howard tersely refused to answer. Putin, standing at an adjoining lectern, looked confused as the translation made its way into his headset. Howard took him aside after the press conference to explain. The first suggestion of any serious activity in the ranks of the Cabinet came in a garbled story on Sky News on Tuesday, 11 September, five days after the Downer meeting. The first accurate characterisations of the Downer consultations appeared in the Sydney Morning Herald and The Australian the next day. Under the scenarios Howard and Downer had discussed a week earlier, Howard should have been gone by now. When the news broke, it was every bit as bad as ministers had expected it might be. The public disclosure that Howard had sought the views of his Cabinet about his leadership, and the news that the majority favoured his immediate retirement, was explosive. Howard’s ministers were incredulous at the debacle the Prime Minister had made for himself. Peter Costello later called it ‘the week of madness’. In Nick Minchin’s definitive assessment, it was ‘a horrible mess’.

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Howard’s leadership, already under duress, was now untenable. He had long asserted that he would remain leader under a formula—‘for as long as the party wants me to, and as long as it’s in the best interests of the party that I do so’. Now neither of those conditions was being met. He could no longer claim the confidence of his Cabinet and, on all evidence, he was leading the party to defeat. Howard’s response was not to fulfil his implicit pledge to stand down but to change the formula. He would not relinquish the prime ministership. Instead, he would promise to relinquish it later. He told a meeting of the Coalition parliamentary party on 12 September that he would retire some time in the next term, after winning the next election. Unbelievably, most in the gathering of all MPs and senators missed his announcement completely. It was not only the electorate that was no longer listening to him, it seemed. Howard appeared on ABC-TV’s The 7.30 Report that night to announce on the airwaves what his colleagues had missed in the party room. He did three things in this interview. First, he deflected the questioning by the host, Kerry O’Brien, about the Downer meeting. O’Brien put it to him, accurately, that ‘the majority or dominant view was they’re not going to force you to go. They’re not going to . . . The decision was purely yours, but that in that context, it would be better for the Liberal Party if you stood down as leader before the election.’ The Prime Minister responded, disingenuously, that the opinion of the Cabinet was ‘more equivocal’ than that. He described the Downer meeting as ‘trivia’. Second, he claimed, with breathtaking chutzpah, the support of his party: ‘What matters is, the party has decided that they want me to stay.’ Finally, he pronounced his new formula: ‘If the Australian people are good enough and kind enough to re-elect me again, there are a lot of things I want to do, and I would want to approach those things with enormous energy. But I would expect well into my term, and after those things have been implemented and battened down, I would probably, certainly, form the view well into my term that it makes sense for me to retire.’

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The interview was notable in one further respect. After years of public hedging and temporising, of ducking and weaving, of prevaricating and postulating about the leadership, Howard showed Australians the raw truth for the first time. With an agonised expression, drained of his customary bravado, he said: ‘I have been Prime Minister of this country now for eleven and a half years. I am the second-longest-serving prime minister in Australia’s history. Frankly, I love the job. It still stimulates and energises me. There’s a lot of things I want to do for the Australian people. And that’s why I would hope that they might be kind enough to re-elect me, because I want to serve them. And I won’t find it easy, if I am re-elected, to retire. I won’t find it the least bit easy, because I am very committed to this job, and I will not like leaving it.’ There it was. Simple, unvarnished, raw, human: ‘I love the job . . . and I will not like leaving it.’ He was a man who simply didn’t want to stop doing something he loved. Why hadn’t he said so earlier? Because it was all about him. Andrew Robb, the Minister for Vocational and Further Education, was not a member of Cabinet, but he was a former Federal director of the Liberal Party. He had managed Howard’s victorious 1996 election campaign. Robb was experienced, smart and well regarded as a strategist. He was incredulous at Howard’s behaviour and he was not prepared to let it go at that. He now swung into action to unseat the Prime Minister he had helped enthrone eleven years earlier. As Robb explained: ‘Oh, it was the bloody poll, of course. The poll was on the Monday or something, and by the Friday I had . . . I rang Alex [Downer] and said, You know, I think we’re stuffed, and I think the PM should go, and I don’t think it’s too late. You know, I’ve thought a lot about what can we do. And Alex said, Well, that’s a coincidence. And then he told me about the meeting the night before—that he’s about to see the PM in a couple of hours’ time. I asked him to pass on my views, and he said, Certainly. I had several conversations with Alex, but I wasn’t a key player. And then what happened, happened. I was urging, and I thought [Howard was going to go.] But they put the rider on it that it was his decision. I didn’t

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know about that. And anyway, then it all fell over. On the Monday, he said he’s not for moving. But then on the Wednesday night, Howard went on The 7.30 Report after all that, and said, I’m going in eighteen months, no matter what.’ Robb thought that pronouncement fundamentally changed the situation in the Liberal Party. He now decided that he had to galvanise the Cabinet into urgent action to dump Howard. He sought to become a one-man leadership change team. Amid the flurry of speculation during APEC, he explained, ‘I had a lot of calls from my [Liberal] branch members. It was a very pro-Howard electorate [Goldstein]. A lot of them rang me up and said, This is outrageous—any suggestion of the PM being forced out. So the Cabinet were right, I think, in their expectation that any move against the PM could precipitate a meltdown in the party.’ But then the situation in the party changed, and changed dramatically in Robb’s judgment. ‘What I observed was Howard goes on Wednesday night, on The 7.30 Report, and says, The leadership issue’s been resolved for this election. I am going to let you know I am going to go in eighteen months’ time. If I win the election, I’ll hand over to Peter Costello in eighteen months’ time. Well, I got back to my electorate on the Friday night and, coincidentally, I had some functions, I would have seen a hundred members of my electorate on the Friday and Saturday. And some of the same people who had rung me on the weekend before in high dudgeon were saying things like, You know, I think Peter Costello will do really well against Rudd in the debates. I mean, I couldn’t believe it. They had just moved on. Just like, if you are heading a bank and you say I am retiring in nine months, I know what I would think. I would think, You have moved on. You automatically focus on the successor, and you accept the successor. And I thought: Well, if all my members, who are so pro-Howard . . . I think they were saying Well, you’ve been a great man. But he has now clearly, in his own mind, moved on. Some of them were saying, Well, you’ve got to get Peter up now.’ Robb decided to confront Howard directly. On Saturday night, 15 September, he rang Howard’s office to ask for a meeting. He flew

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to Canberra the next day and met the Prime Minister at The Lodge. ‘I couldn’t live with myself unless I did this,’ he recalled. He feared the party’s four million core supporters would no longer be able to support Howard unconditionally. ‘And it’s very important that your base are a hundred and ten per cent committed.’ He told Howard, ‘We are now really gone. We’re going to lose big time. ‘And he said to me, So, you’re asking me to resign? And I said, No, I wouldn’t do that because, if I were you, I wouldn’t do it either. Well, you look like you are running away from a fight. At that stage, no, he had to be asked by his colleagues to go. Without any qualification about, It’s your call. So I said: I’m just here to tell you that’s what I think should happen, and I am going to talk to all your colleagues in the Cabinet. ‘So are you going to work against me? asked the PM. Yes, if you want to put it that way, Robb replied. All right. He did then spend a considerable amount of time explaining why we had more prospect of winning with him leading the party than with Peter Costello. It was twenty minutes. I wanted to hear what he thought. But I didn’t find anything compelling—nothing that I hadn’t thought of, nothing that I hadn’t considered. Nothing was said that at all changed my view of it. But my sense was they had stopped listening to him, so it didn’t matter what he said or did, even more so because he had said he was going. So that’s really what steeled me. We had a decent conversation. He kind of got that look in his eye—I think he thought that he had the upper hand. I think he thought, quite rightly, a lot of the contest had happened a week before . . . Well, we had a cup of tea. He made it.’ The following day, Monday, Robb phoned most of the members of the Cabinet. ‘And I told them what I had observed, and what I’d told Howard.’ He urged the ministers to demand Howard’s resignation. And for some hours, he believed they would—that Howard would be forced out within days. ‘Then came Tuesday—and a fresh Newspoll.’ Just as the previous Newspoll had precipitated the crisis, this one ended it. The Coalition’s share of the two-party vote rose from

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41 per cent to 45 per cent. It was still badly behind, but the increase in support dulled the sense of alarm. So did a decline in Labor’s support, from 59 per cent to 55. ‘It was like, Oh, well. We are making up ground,’ said Robb. His argument for removing Howard now lost all traction. Howard had been right—he did have the upper hand. This episode presented three other interesting peculiarities. First, the poll that galvanised these death throes of the Howard era was an aberration, a polling wrinkle that was soon ironed out. But all the polling, before and after, nevertheless showed a landslide defeat for the Howard Government. The prospect of losing in a landslide was not enough to move Howard or his ministers to even consider taking action on the leadership. It required a poll suggesting an avalanche on a scale without precedent since World War Two to move the party to rethink. And, even then, that was all it did—think, not act. Second, the ministers who most actively agitated for Howard’s resignation—Turnbull, Brough, Hockey and Robb—were all relative newcomers to the Howard ministry. The longer politicians had spent in his ministry the more quiescent they became, apparently. Third, the most senior of Howard’s ministers—the heir apparent and the man with most to gain from a Howard resignation, Peter Costello— was entirely passive in this process. He made quiet preparations in case Howard left, but took no action to help tip the balance. It was a party led by a man who was never able to find the right time to leave, and also a party unable to act independently of its leader. The episode opened the Cabinet to ridicule. The Sydney Morning Herald’s political sketch writer, Annabel Crabb, conjured the best metaphor for the situation. ‘The past few days of leadership destabilisation in the Liberal Party has exposed an obvious complication: none of the Libs are any good at it,’ she wrote. ‘Every time a tiny public jab is made against the Prime Minister, a great squeal goes up and everybody dashes for cover, and shooshes each other until the next poke of the stick occurs. Honestly, it’s like watching a pack of seven-year-old girls going at a brown snake.’ Alan Ramsey, in his regular column in the Saturday Herald, turned to satire. He likened the situation to a scene from the Monty Python

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spoof on the life of Jesus, Life of Brian, in which a group of Judaean citizens stands before Brian on the cross, reads a proclamation lauding his martyrdom in the struggle against the Romans, then salutes him and sings For He’s a Jolly Good Fellow. Brian, having expected them to rescue him, can only cry, as they march off: ‘You bastards!’ Ramsey imagined Janette Howard uttering ‘pretty much the same curse, however delicately. Those of us around at the time well remember Janette Howard’s bitterness when Liberal MPs engineered the May 1989 coup that ousted her husband as Opposition Leader in a party-room vote and reinstalled Andrew Peacock. She never forgave them.’ That party ‘coup’ was the only other time in his long political career that Howard had despaired. Howard’s inner circle took him to a Canberra restaurant, the Bacchus Tavern, to console him on his loss of the leadership. Bacchanalian the evening was not. It was a wake disguised as a dinner. John Howard, the leader US President George W. Bush would later describe as a ‘man of steel’, broke down. ‘He got a bit emotional, there were a few tears,’ said Arthur Sinodinos. ‘He wasn’t sure what the future held. Was history going to pass him by?’ Howard had come back from that moment of despair and gone on to become the second-longest-serving Australian prime minister and the greatest figure in its conservative politics. Now, in 2007, he had again despaired. This time he recovered his pluck and his fight, but there was to be no political recovery. It was Howard’s last chance to let his nominated successor try to rescue the party from certain defeat. He went to the very brink of taking it. Resurgent determination changed his mind. This time, however, his famous relentlessness would lead to humiliation. He had written history for almost a dozen years. Now history was about to pass him by. Reflecting on that final paroxysm of the Howard Government, Alexander Downer said that it was enough to put him off one of the favourite habits of his adult life: ‘I have gone off cigars since then, for some reason.’

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4 Madness Maddened

One of the most famous novels of the 19th century is Moby-Dick. It’s about a whaling ship, the Pequod, which pursues a mighty white whale across the oceans of the world. The captain puts all else aside in his obsession with catching the beast. The quest ends in disaster when the whale rams and sinks the Pequod. Although Herman Melville’s 1851 book is named after it, the whale is not the central character. The central figure is Captain Ahab. The whalers were the water-borne equivalent of today’s drillers and riggers, harpooning whales for oil much as today’s oilmen bore beneath the earth and oceans. Theirs was a vast and vital business, fuelling lighting and heating for the burgeoning cities of the industrial revolution until the technological breakthrough of kerosene, and the discovery of the great American oilfields, brought the whaling fisheries to an end. And not before time; some studies suggest that only about fifty female right whales, for instance, remained in the oceans. Extinction for some species was only a season or two away. Whaling was practised around the world, including in the fisheries of Australia; it was, indeed, Australia’s first great agricultural success story. The price of whale oil in the 1850s was around $US1.70 a gallon, about the same price, at face value, as petrol in the early years of 36

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the 21st century. However, after adjusting for inflation, it was the equivalent of $US8.50 a gallon or $US2.25 a litre, so whale oil was a much more valuable commodity to the economy of Victor Hugo and Karl Marx than petrochemical oil is in our time. And the waxy ambergris, the prized ingredient for perfume that the sailors pulled by the handful from the gut of the sperm whale, was more valuable than gold is today. A whaler with a crew of forty typically headed out of port for three to four years. To turn a profit in that time, they needed to catch about forty whales. But Ahab neglects to attend to business. In his single-minded pursuit of Moby-Dick, he passes up opportunities to catch other whales. When a lad is lost overboard, he callously refuses to delay his mission by even an hour to search for him. He recklessly endangers his ship and his crew to pursue his fixation, and ultimately he loses everything to it. Neither profit nor a sense of responsibility can restrain his single-minded mania. Ahab is a study in the power of self-destructive obsessiveness. Physically, John Howard bears not the faintest resemblance to Ahab. The Australian leader was once memorably described by the journalist Michelle Grattan as ‘awesomely ordinary’. Ahab, by contrast, is a striking figure: ‘His whole high, broad form, seemed made of solid bronze, and shaped in an unalterable mould, like Cellini’s cast Perseus. And he bore an epic scar: Ahab had lost a leg in an earlier skirmish with the white whale, and now he stumped the deck with a false leg fashioned from the polished bone from a sperm whale’s jaw.’ The contrast with the balding, bespectacled Howard in his green-andgold Aussie tracksuit, arms akimbo, on his frantic morning march or dressed in a respectably nondescript suit is stark. But are they so different? Ahab is a skilled navigator and a renowned whaler, yet he chooses to use his powers not for the safe delivery of his vessel and crew but for the pursuit of his personal compulsion. Did John Howard not do as much? When Ahab is confronted by his first mate, Starbuck—yes, the US coffee franchise did take its name from this character—he stares him down. Starbuck foresees their terrible fate yet lacks the resolve to mutiny. Ahab is fully self-aware.

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He watches a sunset across the endless ocean and feels a weariness in his soul. ‘Is, then, the crown too heavy that I wear? This Iron Crown of Lombardy. Yet is it bright with many a gem; I, the wearer, see not its far flashings; but darkly feel that I wear that, that dazzlingly confounds. ’Tis iron—that I know—not gold. ’Tis split, too—that I feel; the jagged edge galls me so, my brain seems to beat against the solid metal; aye, steel skull, mine; the sort that needs no helmet in the most brain-battering fight!’ He reflects on his own mental state, the force of his will: ‘What I’ve dared, I’ve willed; and what I’ve willed, I’ll do! They think me mad—Starbuck does; but I’m demoniac, I am madness maddened!’ And on his determination: ‘Swerve me? The path to my fixed purpose is laid with iron rails, whereon my soul is grooved to run. Over unsounded gorges, through the rifled hearts of mountains, under torrents’ beds, unerringly I rush! Naught’s an obstacle, naught’s an angle to the iron way!’ We know Ahab’s obsession: ‘The white whale swam before him as the monomaniac incarnation of all those malicious agencies which some deep men feel eating in them, till they are left living on with half a heart and half a lung.’ But what was Howard’s? What were the ‘malicious agencies’ that he felt eating in him? Was it his sheer power lust, his addiction to the job he loved so much? Was it some need to prove to his party—the party that had so woundingly rejected him in 1989—that he was indomitable? Was it his lifelong passion for fundamental reform of the industrial relations system? Or a bloody-minded determination not to yield to pressure from his first mate, Peter Costello? Or was it, perhaps, all four? As the author, Melville, says of the great whale’s domed forehead: ‘I but put that brow before you. Read it if you can.’

... Paul Keating ridiculed John Howard as ‘a dead carcass swinging in the breeze’, ‘brain-dead’ and ‘like a lizard on a rock—alive but looking dead’. Mark Latham insulted him as an ‘arselicker’ leading a ‘conga-

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line of suckholes on the conservative side of Australian politics’. A library of books had been devoted to denouncing him, including John Howard’s Little Book of Truth, published in 2003 for the sole purpose of calling him a liar. The Bulletin magazine wrote him off in a celebrated 1988 cover story that mocked his low popularity rating. ‘Mr 18 Percent’, ran the headline: ‘Why on earth does this man bother?’ But perhaps the most extreme example of gratuitous derision and sheer unreasoned loathing was the 2003 song by Darwin hip-hop group Toekeo titled John Howard Is a Filthy Slut. More damaging to Howard than insults, though, were political defeats: losing the 1987 election to Bob Hawke, and losing the Liberal leadership in 1989 to Andrew Peacock. So it was only human for Howard to take satisfaction from the fact that he had by now outlived, confounded and overpowered all his rivals and tormentors. After Peacock and then John Hewson failed, in 1995 the Liberals, desperate, once again turned to Howard. And he delivered. He defeated Paul Keating at the 1996 election and brought to a decisive end thirteen years of Labor rule. This was, surely, the best possible rejoinder to Keating’s insults. As Prime Minister, Howard had the power and the magnanimity to appoint Peacock, his archrival for a decade, Ambassador to Washington. He must have found some satisfaction in having the man who had once unseated him now serving him. The books that railed against him gathered dust as he wrote history. Howard’s longevity in power confronted the Little Book of Truth with a startling fact: on several of the most controversial issues of the time—the ‘children overboard’ affair, the 2003 Iraq War and the Australian Wheat Board bribery scandal—polls showed that a plurality or a majority of voters thought Howard was not being truthful. Yet they reelected him by ever-increasing margins. He had somehow transcended the binding requirement on lesser leaders that they be seen to tell the truth. Howard never had the opportunity to face Hawke again at the ballot box, but he did have the gratification of displacing him as Australia’s second-longest-serving prime minister; Howard’s eleven

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years and nine months easily eclipsed Hawke’s eight years and nine months. And Howard again upheld the power of Disraeli’s dictum that ‘a majority is the best repartee’ by defeating Mark Latham at the 2004 election. In 2005 the hip-hoppers of Toekeo disbanded. As often as he had been written off, Howard had recovered and triumphed. When he lost the leadership in 1989, he said he would never bid for it again: that would be ‘like Lazarus with a triple bypass’. But no matter how many times he was pronounced dead, Howard somehow fought his way back to life. Seventeen years after ‘Mr 18 Percent’ came The Bulletin’s mea culpa, a cover story titled ‘Mr 57 Percent’. And the subhead: ‘Why on earth does this man still bother?’ It couldn’t get any better for him. Why persist? wondered The Bulletin. What was his driving obsession? What was his white whale? But of all the satisfactions, accomplishments and accolades, there must have been two supreme triumphs for Howard. One was the close personal embrace he received from the world’s most powerful man, the US President. The other was the 2004 election victory. At this election he won his fourth term. He won it with a second successive increase in his winning margin, the first prime minister to do so since the 1960s. He also won control of the Senate, the first prime minister in a generation to control both houses of the Australian Parliament. These were irrefutable indicators of power and achievement. One abroad and the other at home; one a measure of the trust of a great ally, the other a sign of the great confidence reposed in him by his people; one acknowledged his place in the world, the other assured his place in Australian history. And both of these triumphs were to become important elements in his downfall.

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PART TWO AWE

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5 Man of Steel

It was 10 February 2003. George W. Bush had just finished an eightminute media appearance with John Howard in the Oval Office and was about to host him at dinner in the President’s private dining room. The US President drew the Australian Prime Minister aside and bestowed a calculated mark of special favour. Opening the doors from the Yellow Room in the private area of the White House onto the balcony overlooking the South Lawn, Bush ushered Howard into the bracing Washington evening and offered him a cigar. Bush did not allow himself to be seen in public with a cigar. Apart from the Clintonian associations, it could lend credence to the unfortunate Democrat characterisation of him as a rich patrician rather than his own preferred image as a plain-speaking, God-fearing Texan everyman. But with Howard, the man he had just called ‘my close, personal friend’, Bush flattered him with this demonstration of his ease and intimacy as he lit a cigar and shared the private nightscape of the city’s most famous monuments. In this very building just a few years earlier, Bill Clinton had given Howard the bum’s rush. His treatment of the Australian leader verged on rudeness. He kept him sitting in his car, in the rain, for over a quarter of an hour before he was allowed to approach the White House. He gave Howard a bare twenty minutes and declined to make 42

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the customary joint appearance for the media. This time, Howard and his officials would have a luxurious three hours of Bush’s time, including a private dinner. More hurtful than Clinton’s discourtesy had been the shock of his indifference to the US’s Australian ally when it asked for help. In 1999 Howard had proposed the formation of an international force to stop Indonesians killing East Timorese, but when he turned expectantly to the US Administration for support, he was initially rebuffed. The President’s National Security Adviser, Sandy Berger, thought the issue so trifling that he compared it with the state of his daughter’s apartment. When a reporter asked him why the US would not intervene, Berger replied: ‘My daughter has a very messy apartment up in college. Maybe I shouldn’t intervene to have that cleaned up.’ The message was clear—it was Australia’s problem; the US was not interested. It was a case of alliance shock. Half a century of Australian trust suddenly seemed foolishly naive. Past alliance rhetoric had been exposed as hollow, it seemed. Even though the Administration later changed its mind and lent logistical and political support to the Australian-led mission to chase Indonesian troops and militias from East Timor, former Defence Department deputy secretary Paul Dibb observed: ‘We are now more alone than we have been probably at any time since the 1930s.’ Howard set out to repair the political will that is needed to animate any treaty. When Bush’s election created a new opportunity and a conservative political alignment, Howard took it. He invested himself wholeheartedly in the relationship. As with all of Howard’s successes, its effect can be understood only in light of his failures. Only by knowing how Clinton had given him, and the alliance, the cold shoulder can we understand how much he must have savoured Bush’s warm embrace. Yet Howard’s relationship with Bush had not started well. Their initial contact was by phone and Howard made a poor first impression on the American leader. ‘Bush had difficulty getting a word in, because Howard kept cutting across him,’ recalled a former White House aide who was present in the Oval Office: ‘It was not a very satisfactory

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call. When he hung up the phone, the President was frustrated. He said, He kept interrupting me!’ the official reported in an interview, imitating Bush’s gesture of irritation directed at the phone. The reason for this problem is not clear. It might have been the delay that often plagues intercontinental phone calls. Even after years in the presidency, Bush was never entirely comfortable with the mechanics of international calls. The same aide said he would always be surprised afresh by differences in time zones: he’d be taken aback, for instance, to learn that the leader on the other end of the line was speaking in his night time when it was morning in America. Or it might have been Howard’s difficulty with hearing—a lifelong problem, the subject of an operation in his earlier life and the cause of twin hearing aids in his later life. Or perhaps they were simply two men impatient to have their say. A few years later the leaders were obviously close, but even that public appearance did not convey the full extent of the private intimacy they and their families had developed. Howard and Bush spoke regularly and included their wives in social contacts wherever possible. Bush favoured Howard with an invitation to his ranch at Crawford, Texas. But the contacts between the families broadened to include some of the kids partying together. John Howard recalled that when his son Richard went to work for the Republican Party, ‘he got to know both of the daughters, particularly Jenna Bush, and Jenna’s future husband, Henry Hager’. As Howard stood on that balcony with the leader of the Free World—the darkened ellipse and the bright-stabbing Washington Monument before them; the inviting warmth of the family dining room and its prospect of an informal dinner of crusted lamb and Californian wine a few paces behind them—all must have seemed right with the world. Howard would not smoke a cigar with Bush, and Bush, a reformed alcoholic, would not touch the wine he was supplying to the Howards, but they shared a great deal in common nonetheless. They shared a political ideology that made Howard in some ways closer to Bush than to Labor-voting Australians. A former Administration official recalled that the men routinely discussed the

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domestic politics of both their countries. Howard, surely breaking the conventions of diplomacy, disparaged then Opposition Leader Mark Latham in private conversation with Bush. The White House aide believed the pair were exceptionally close: ‘I think the President sees Howard as being more like him than any other leader.’ In part, this personal alliance was forged on what Bush called ‘the day of fire’, 11 September 2001. Howard was visiting Washington during the attacks on the World Trade Center and the Pentagon and immediately pledged unswerving support, formally invoking the ANZUS treaty for the first time. According to Mike Green, the former Senior Director for Asia on Bush’s National Security Council, they drew closer still after the Bali nightclub attacks in 2005: ‘The President phoned Howard after the Bali bombing—it made a big impression on him because it conjured so many of the difficult feelings that we had here on 9/11.’ Simple politics too played a role, said the former presidential aide: ‘In terms of market research, Australia is about the best test market you can have for US politics, even more than Canada or the UK— how is the Iraq war playing, or how is the war on terror playing? What Howard faces in domestic politics is very similar to what the President faces. So when the Australian election happened in 2004, there was a really keen interest here.’ Green cited yet another factor—the bonds formed by going to war together in Iraq: ‘It’s the easy relationship and trust and credibility you earn by being willing to take risks at the pointy end of the spear.’ And now they were about to share a war, the most controversial since Vietnam. As the two leaders stood on the balcony that night in early February 2003, the first bombing in the benighted invasion of Iraq was just thirty-seven days away. Howard had been summoned to Washington as part of a parade of supportive foreign leaders, and he duly played his part. ‘The Administration is trying to show that there are lots of countries in support of the US on Iraq, and Howard was an important part of that,’ said President Clinton’s former Deputy National Security Adviser, Jim Steinberg, at the time. ‘The doughty Australian Prime Minister is a welcome visitor.’

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Only nine countries had offered military support for a USled war; only two had deployed troops. Part ally, part stage prop, Howard was only too happy to be there when Bush needed him. It was particularly timely that he was in the White House, on display, just as NATO was convulsed by disagreement among the US’s European allies over the Iraq war. Howard had purchased at least some of his newfound welcome in Washington by committing his country to support an invasion that the UN would not condone and which polls showed the Australian electorate would never endorse. From the moment the invasion was in prospect to the moment Howard lost power, a steady 60 to 70 per cent of Australians opposed the entire Iraq venture. This put Australia squarely in the mainstream of international opinion on the invasion. The US was the exception— at first the invasion was hugely popular there. The historian Arthur Schlesinger once said, ‘All wars are popular for the first thirty days.’ And the Bush Administration, supported by big Republican and Democratic majorities in the Congress and, for the most part, the national media, at the start persuaded Americans that the Iraq invasion was somehow connected to the so-called War on Terror. It would take the intrusion of reality into the American consciousness to bring US public opinion into line with the global majority. Howard’s unwavering support for the invasion successfully promoted the Australian alliance in Washington. But paradoxically, it sapped support for the US alliance in Australia. Thanks to its political support (the troop commitment was small), Australia was now taken more seriously in the US, but the US alliance was taken less seriously by Australians. A poll commissioned by the Lowy Institute for International Policy published three months before the 2007 election found that 76 per cent of Australians liked Americans, but a smaller 60 per cent said they had a ‘favourable’ view of the US as a country. Why did four out of ten Australians not have such a view? Offered a list of possible reasons, 69 per cent of this group named George W. Bush, and 63 per cent cited US foreign policy. The poll ranked the US equal in popularity with Vietnam and behind New Zealand, Britain, Singapore and Japan.

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Asked whether they regarded the ANZUS alliance as very important for Australia’s security, 45 per cent of respondents to a 2005 poll said yes. In 2007, only 36 per cent did. Howard had managed to animate support for ANZUS in the US, yet inadvertently engineered a loss of support for it in Australia. He had strengthened the compact at one end but weakened it at the other. Howard’s personal and political relationship with Bush was one of the reasons for his unwavering commitment to the invasion of Iraq and its long and bloody occupation. Howard’s Cabinet colleagues suspected his closeness to Bush was also the reason he found it impossible to ratify the Kyoto Protocol, the early and ineffectual effort of the world’s governments to begin addressing climate change. Like Bush, Howard was unbending in his opposition to this agreement. Even after he had abandoned his public scepticism about global warming, even after he had designed an emissions trading system, even after he had committed Australia to participating in the postKyoto negotiations for a Bali Protocol, Howard still found himself unable to agree to the proposal by his Minister for the Environment, Malcolm Turnbull, in the last weeks before the 2007 election that his government ratify Kyoto. Howard, though he was a strong and relentless politician, was not entirely deaf to the counsels of pragmatic accommodation. He had made many reversals over the years when he thought it was electorally essential. He was opposed to Medicare before he was in favour of it; he was opposed to the GST before he was in favour of it; he was a sceptic on global warming until he became a convert. He made the big concession of amending his unpopular Work Choices laws by adding the so-called ‘fairness test’. He even made a deathbed conversion to the cause of Aboriginal reconciliation in 2007. And, tellingly, Howard initially supported Kyoto—his Government took part in negotiating the protocol and signed it when it was first agreed in 1997. Indeed, he championed it on 19 December of that year as ‘a win for the environment and a win for Australian jobs’. It was only after Bush opposed Kyoto that Howard switched and refused to ratify a treaty he had already signed. For Bush, Howard

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changed Australia’s position on Kyoto, and for Bush he declined to change it back. Unswerving loyalty to Bush was the constant in Howard’s recalcitrance. He was prepared to change tack on a range of key policies in the interests of winning votes, but he would not budge on Iraq or Kyoto because he had pledged himself to Bush on these. It eventuated that Howard would never abandon any position he had taken in support of the American President, who dubbed him the ‘Man of Steel’. Commitments to the Australian electorate were negotiable, but commitments to George W. Bush were not. For this loyalty, Howard paid a heavy price. Iraq was unpopular, but Kyoto was the really costly policy. As Brendan Nelson said, the Howard Government’s approach to climate change was one of the three principal reasons it lost the 2007 election. Along with the Bush partnership, the other zenith in Howard’s political life was his victory in 2004. John Howard had said the election was about trust, and Australians responded by giving him more trust than they’d extended to any politician in a generation. By granting his government control of the Senate as well as the House of Representatives, they bestowed on him the first unchecked mandate any leader had enjoyed since Malcolm Fraser in 1976–81. By winning a fourth successive term, Howard was on track to become another Menzies. In retrospect, many have downgraded the scale of Howard’s 2004 victory by dismissing it as an easy win facing Mark Latham as his opponent, on the basis that Latham was a deranged loser headed to inevitable defeat. But this is revisionism—it reflects the reassessment of Latham since the election. Latham was not obviously deranged until after he lost, and he was only obviously a loser when he published what some have called ‘the world’s longest suicide note to public life’, The Latham Diaries, a spiteful, egotistical tract of bile. The oil billionaire J. Paul Getty once said that ‘a man may fail many times but he isn’t a failure until he begins to blame somebody else’. It was only after he blamed everyone but himself for his defeat that Latham acquired his post-election status as an unmitigated political disaster. True, Latham’s defeat was the worst electoral

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performance by Federal Labor in seventy years. Yet until that point Latham had done a reasonably creditable job as party leader. He was also a popular politician. The Nielsen poll gave him an approval rating of 53 per cent, historically high for an Opposition Leader and not far behind Howard’s 57 per cent. And a Newspoll put Latham’s approval rating at 54 per cent, higher than the Prime Minister’s 53. The fact is that Howard won the 2004 election in the face of a creditable Labor leader and a strong Labor campaign. His victory was truly a landmark event. Howard was not given to flights of grand rhetoric. There was no Keatingesque moment, no savouring of a ‘sweetest victory of all’. Howard described the result more prosaically, as an ‘extraordinary expression of confidence’. The accolades came from elsewhere. ‘Howard is the most successful Western statesman in the world for the last fifteen years,’ said the American political philosopher Francis Fukuyama. Yet like his other great zenith experience, his embrace by President Bush, this election triumph also played a part in Howard’s downfall. His control of both houses of parliament was to free him to pursue his own preoccupations, tempting him to put his personal political obsessions ahead of his wider duties. As he surveyed the term ahead, he also glimpsed on the horizon the shape of a great white whale in the brilliant sunshine of that unlimited vista.

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6 Overreaching

John Howard was always careful to avoid any public hint of hubris. In fact he specifically warned his Government against this after the 2004 election. ‘We’re not going to allow this position to go to our heads,’ he said. ‘We’re not going to use this somewhat better position in a capricous or disruptive fashion.’ Would the Coalition now win yet another term? he was asked. ‘You won’t be hearing any of that hubris from me.’ As the ancient Greeks knew, hubris was always followed by savage Nemesis, the goddess of retribution. Yet Howard used his new-found control of the Senate to commit an act of plain arrogance that was a foretaste of the overreaching to come. He broke a promise made law in his previous term, a ‘rocksolid, iron-clad commitment’. In the Medicare system, once patients have spent a fixed threshold amount on health care in any one year, they pay a maximum of only twenty per cent of subsequent out-of-pocket medical expenses. This is known as the Medicare safety net. In early 2004 the Howard Government had proposed that this threshold sum should be $500 for low-income families and $1000 for other families. But in order to get this proposal through the Senate, where the Australian Democrats 50

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and Independents held the balance of power, in March that year it had been forced to compromise. The newly agreed level was more lenient—low-income families would need to pay only $300, and other families $700, before the safety net would start to apply. The value of the difference was a saving of about $200 a year to an average family. Suspecting that the Government might try to revisit this issue to get its way if it won the October 2004 election, reporters asked the Health Minister, Tony Abbott, whether these lowered thresholds would remain in place after the election. ‘That is an absolutely rock solid, iron-clad commitment,’ Abbott replied a month before the election. Peter Costello was also firm: ‘The parameters of the Medicare safety net will not change.’ But once he had won control of the Senate, Howard changed course. In the Cabinet subcommittee that dealt with spending and taxing measures, the Expenditure Review Committee, Howard confronted his Health Minister with a decision to abandon the existing safety-net thresholds and impose the ones the Government had initially wanted. Abbott later recalled how he was forced to eat a ‘shit sandwich’, as he put it. ‘Obviously, changing the Medicare safety-net thresholds was very politically difficult, and Howard made a point of coming into the ERC and leading that discussion. Out of respect for his colleagues, he didn’t want them to think that tough decisions had been imposed by Costello, as opposed to being shared by him and Costello. He made it crystal-clear that it was his judgement, his considered judgement, that the safety-net thresholds should be adjusted, notwithstanding the commitment that I’d made during the campaign.’ Did Abbott point out to Howard that the Government had made firm public promises to maintain the existing thresholds? ‘Yeah, yeah, yeah, yeah.’ And the response? ‘The PM said that sometimes the national interest requires commitments given in good faith nevertheless to be adjusted. This was a savings measure that [he and Costello] were adamant should happen.’ The safety net was originally estimated by the Government to cost $440 million over four years but take-up of the entitlement

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proved more popular than expected, and its cost was now projected to total almost $1.4 billion by 2008. The Government knew before the election that the cost was blowing out. The Sydney Morning Herald’s Mark Metherell reported a month before the election that it now estimated the cost at over $1 billion. Abbott now took time off and considered his future, leaving Howard to announce the decision himself on 14 April 2005. Howard denied that the rise in the safetynet thresholds was a broken election promise. ‘We certainly did not say we were going to increase the threshold, no. But at the time of the last election we did not believe that it was going to blow out quite to the extent that we believe that it is now.’ The Government’s about-face was greeted with widespread anger. The president of the Australian Medical Association, Bill Glasson, said families would ‘now feel as though they have been cheated’. Kim Beazley, now re-elected as Leader of the Opposition, said that rather than an ‘iron-clad commitment’, the safety net had turned out to be ‘rolled-gold deceit’. After careful consideration, Abbott decided to remain in the Cabinet, but it was not the last time he would seek to oppose his Prime Minister in Cabinet debate on an important measure. Reflecting ruefully in 2008, he observed: ‘That only came about because we controlled the Senate. If we hadn’t controlled the Senate, I would never have had to eat that particular shit sandwich. Getting control of the Senate was a curse. It allowed us to do things that we would not normally have been able to get away with, and I think it tempted us to chance our arm in ways which ultimately did us significant political damage.’ Six weeks later, Howard announced the policy that would come to be known as Work Choices.

... Even before John Howard had the plan, Greg Combet had the premonition. Even before the Prime Minister decided to use his once-in-a-generation control of both houses of Parliament to impose an aggressive new industrial-relations reform, the secretary of the

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Australian Council of Trade Unions feared that he would. At the ACTU’s first staff meeting after the Federal election, on 9 October 2004, Combet announced that he had ‘no doubt Howard will run on industrial relations, and we are in for a helluva fight’, staff recalled. ‘It was depressing,’ an ACTU official said. Combet told them not to lose hope, but ‘when the swing is on, the swing is on’. The trouble was that at that moment it seemed improbable that there could be any big swing against a leader who had just won such an emphatic victory. ‘There was a lot of talk in the media after the election that it would take at least two terms for Labor to defeat Howard,’ the official said. ‘We were pretty down.’ ‘It was quite depressing for people in the Labor movement,’ Combet recalled, ‘but we immediately got down to business.’ The ACTU secretary had been aloof from Federal Labor in the 2004 election, chiefly, according to an aide and ally of his, ‘because he couldn’t stand Mark Latham’. But now, as he planned the fight of his life, he started to think about conscripting the Federal Labor Party to the cause. Many believed that, for the unions, it was to be an existential struggle. Unions in Australia predated either of the major political parties; they predated the Australian Federation itself. But now Combet feared that their survival would be in the balance. Combet did not need to be a seer to know that Howard would act on industrial relations. It had been the lodestar of his political life. And he had said during the 2004 election campaign that he would ‘push the boundaries on industrial relations reform’ if re-elected. The question was what specific measures he would legislate. ‘It was pretty obvious’ that Howard was planning a major initiative, Combet said, because ‘Well, we knew John Howard, and his history, and the Libs couldn’t help themselves; they were blabbing about it all the time. We knew they’d attack the unfair-dismissal laws; we knew they’d attack the award system; we knew they’d go for broke on [Australian Workplace Agreements]. This is all longstanding form. And all that we had predicted turned out to be accurate.’ It was not until the new year that Howard decided that this was indeed what he would do. It didn’t yet have a name, but Work Choices

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was first conceived in a conversation between John Howard and his chief of staff adviser Arthur Sinodinos, in the Prime Minister’s office in Parliament House as best either man could recall. ‘I don’t think there was a dark night where people sat down and conspired on how to break the union movement,’ Sinodinos said. ‘It was a straightforward reaction to the change in the political landscape. Certainly, we were surprised that we’d won control of the Senate. We said, OK, how do we use our majority in the Senate?’ It was January or February 2005, he reckoned. Ironically, when Howard committed his fatal overreach, he was actually trying to avoid under-reaching. ‘The zeitgeist was: we don’t want to fritter away our mandate à la Malcolm Fraser,’ explained Sinodinos. Fraser had been the last prime minister to control both houses of parliament, doing so from 1976 to 1981. ‘So it was conditioned by that view. Then we started to look around for things.’ Howard was vague when asked about the origin of Work Choices. He said he thought Sinodinos’s recollection was ‘broadly right; I can’t be certain, but I think that’s probably right’. The Fraser experience was certainly on his mind at the time. He told the Sydney Morning Herald in December 2005: ‘I do not want it ever said of this Government that it wasted the opportunity of a majority in the Senate to implement things that were important.’ The deep source of Howard’s Work Choices was indeed to be found in the Fraser years. That was the time when Howard—then Treasurer—decided what was politically important to him and formed his view on how governments should use the historical rarity of a Senate majority. As he explained in an interview after 2007, when the Coalition returned after three years in Opposition—first as caretakers, after Gough Whitlam was sacked in November 1975, then in their own right after winning the election a month later— they did not grasp how the world had changed: ‘The economic setting had changed, and what worked in the 1960s no longer worked. I think there was a tendency, when the Fraser Government got back into office—because so many of the people in it then had been in government before—to say, Well, we’ll just go back to how

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we did things before. But in that three-year period, which was quite short, the world had changed forever. We’d finally gone off the fi xed exchange rate, broken free of the Bretton Woods world. You’d had the oil shock; you’d had the impact of equal pay in Australia; you’d had a wages explosion; and you’d had a massive, foolishly brought-about increase in government spending by the Whitlam Government. I mean, in two years a 46 per cent increase in government spending—pretty savage. So we really had to adopt a different setting.’ Margaret Thatcher won the leadership of the British Conservative Party in 1975 and, as Opposition Leader, offered exactly the sort of policies that Howard thought necessary. She started to implement them when she was elected Prime Minister in 1979. Ronald Reagan took power in the US in 1981 and started to impose the same solutions. But in Australia, it was not the conservatives under Fraser who embraced economic rationalism. In Australia it was the Labor Party that first introduced the Thatcher–Reagan revolution when Bob Hawke and his Treasurer, Paul Keating, took power in 1983. Howard has always given Labor credit for this. The liberalisation of the Australian economy along pro-market lines was a bipartisan project. The two political parties only ever differed on detail, never on the broad objective. And when Howard took office in 1996, he intended to finish the job. The aim was to give markets greater play in the economy and to give governments less. Howard believed there had been just five key economic reforms in Australia: ‘That’s the story of the last twenty-five years—the story of our march through that last quarter of a century. Two were reforms carried out by the Labor Party, with our help; the other three carried out by us in the face of their opposition.’ And the reforms? Deregulating the financial system, phasing out tariffs and quotas on imports, privatising government-owned businesses, reforming the tax system to impose a smaller tax on incomes and a bigger tax on consumption, and deregulating the labour market. Howard credits Labor under Hawke–Keating with the first two and takes credit himself for the latter three, but this is hotly contested

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by Labor. And, in truth, Labor did begin the privatisation agenda when it sold Qantas and the Commonwealth Bank; Howard only finished the job. Labor also carried out the first big deregulation of the labour market with the 1992 introduction of enterprise bargaining. This was the job that Howard now wanted to finish. Labor believed it was unnecessary to go any further. Keating put it best: ‘The wages system is running like a Swiss watch,’ he said in May 2005. ‘The key point is the labour market fundamentally does not need reforming. The move to enterprise bargaining was completely successful. We’ve had rising real wages and falling unit labour costs ever since and, of course, low inflation. The proof of the pudding is in the eating. In the fourteenth year of the expansion, with high levels of employment growth and real supply constraints, we’re still turning out moderate wage increases—3.3 per cent last year—without industrial disputation.’ But for Howard, the job of industrial relations reform was only half done. ‘The PM, as much as anyone, thought IR [industrial relations] was unfinished business,’ Sinodinos said. ‘It’s a matter of making continuous improvement. The guiding idea was to forge a single national system—out of the existing multi-layered, multi-jurisdictional structure in which Federal law vies with separate State systems. ‘Howard had changed his thinking on this. And he said we should seek to do more, through a national system, then tidy up areas like unfair dismissals [and] simplify awards. I think the philosophy underpinning it was clear—it was pioneered by Rio Tinto and it was about getting closer relations between employers and employees.’ In other words, cutting out the union’s role in bargaining on behalf of workers. Sinodinos didn’t want to give any impression that he was trying to distance himself from what turned out to be a politically disastrous choice: ‘I was a willing participant and accomplice.’ As a former economist with the Federal Treasury, his personal approach to economic reform, as he explained it, was to be opportunistic in pursuing it: ‘You take your reform opportunities where you find them.’ But for Howard the IR project was about more than economic reform, more than the future of the labour market, more than

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unfinished business, more than weakening the Labor movement, and more than making good use of his unfettered control of Parliament. It was about history. And it was about Howard’s personal journey— his own sense of purpose, his comprehension of how he had managed to triumph against the odds so often and for so long. He explained his thinking about the historical opportunity: ‘I can remember thinking very clearly, and I thought to myself, Well, in the early part of 2005, this is a big reform. I can either be very cautious and not introduce it, in which event it will never be introduced and we will lose for all time the possibility of having a breakthrough reform on IR. Do I err on the side of caution at a time of high prosperity? Or do I use the high prosperity when it is the right time to introduce reforms that obviously are going to be attacked? So I decided on the latter.’ He had entered politics in the first place, he said, out of ‘a desire to be a participant and a fixer and a change agent, rather than just a spectator or an academic. And, I suppose, a pretty uncluttered philosophical view that life was about individual effort and self-help and free enterprise. I mean, I had a small-business upbringing. Not in the sense that I was encouraged from day one to try to go into small business—it’s just that the idea of working for myself, and working hard, were part and parcel of my upbringing. And they fitted like a glove with the Liberal Party of the 1960s, and still with the Liberal Party today.’ The Liberal leader’s father had been proprietor of service stations at Earlwood and Dulwich Hill, in Sydney’s inner western suburbs. As Howard’s brother Bob explained: ‘My father was a classic small businessman. Union activity was perceived as being a nuisance. And John imbibed all that. He believes unions are a problem for the Australian economy. It’s a view he grew up with.’ Howard’s early work experiences confirmed the lessons of his upbringing. At nineteen, he was an articled clerk for his mother’s solicitor, Myer Rosenblum, at £3 a week. It was an experience he enjoyed. Many years later he lamented the passing of the articles system: ‘Do honourable members know what destroyed the articled clerk system? It was the introduction of an

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award.’ In his twenties, he went on holiday with a mate on a Russian cruise ship. In New Zealand, it was forced to dock without the help of tug boats because unionised stevedores refused to aid a Russian craft. It was validation for Howard of the trouble that could be caused by unions withholding labour. As it was in his younger years, so it was in politics for Howard. When, as Treasurer, he tried to deal with rising inflation by imposing a national freeze on wages and prices in 1977, he was frustrated by the unions and the Arbitration Commission, which ignored the Government’s wishes and granted a 2 per cent national wage rise. His freeze ended in humiliation after just six weeks. ‘My experience between 1975 and 1983 was that whenever we had anything difficult to do, the union movement made it as hard as possible.’ When he became Liberal leader in September 1985, Howard knew what he was going to do about that movement. ‘If we are to maintain levels of economic growth in the post-resources surge era,’ he said at the time, ‘we must do everything we can to unleash the small business sector . . . Involved in that will be some winding back of trade union power.’ Modern unions, he wrote in the Sydney Morning Herald the same year, ‘prevent employees from doing what they want to do. The removal of some of the legislation that props up union power would enhance the civil liberties of many ordinary workers.’ He said he saw ‘a soft end to union power’ that ‘provides a significant opportunity for those who want to bring about radical reforms’. At the time, 55 per cent of workers were members of a union. If Howard perceived a ‘soft end’ to union power, then how much more vulnerable must it have seemed to him in 2005, with union coverage of the workforce at half that level? In his mind, industrial relations reform was the grand theme of his career and the talisman of his success, the engine of his endless political regeneration: ‘The day that I was chucked out as leader—on the 9th of May 1989—I never thought I’d come back to the leadership,’ he said in February 2004. ‘I suppose one of the reasons eventually I did come back was I’d had experience. I kept arguing ideas. In some ways, from a policy point of view, one of the most productive periods I’ve had in

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politics was from 1990 to 1993 as the Opposition industrial relations spokesman.’ IR had animated his political life and powered his career. And that made him utterly determined to achieve his historic ‘breakthrough reform’. Each side—the resolute Prime Minister and the alarmed trade union secretary; the conservative government rampant and the collectivist labour movement battlemented—now set about making preparations. Howard briefed his Minister for Workplace Relations, Kevin Andrews, on what he wanted. He instructed him to consult Treasurer Costello and start drafting proposals. And he led the Cabinet in some preliminary, general discussions.

... Greg Combet was as determined as John Howard. He would do his utmost to prevent the fatal weakening of the union movement. He huddled with ACTU president Sharan Burrow and his right-hand man, George Wright, to work up a counter-plan. They decided to engage Essential Media Communications, a market research and public-relations firm. Combet’s next step was to craft a war plan to defeat Howard. Combet made a twenty-five-point PowerPoint presentation for a meeting of the ACTU’s national executive in March 2005. It was the first iteration of the plan that would destroy Howard’s reform and play a crucial part in the downfall of his Government. The executive of the ACTU is like a vast board of directors. With some fifty union leaders representing the country’s biggest unions, it is so big and unwieldy that it typically meets only three times a year. Combet wanted to galvanise the executive and unify it behind his twenty-five-point plan. He failed to get everything he wanted from the meeting, or to secure an endorsement for his preferred option. But he got enough to wage war. Combet predicted, accurately, that Howard would seek to establish a national system of industrial relations. The Prime Minister would

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be able to present this as a sensible simplification of a very messy structure. For any company that operated in more than one State, it was an attractive idea to streamline its industrial dealings into a single, unitary system. On this point, Combet agreed with Howard. ‘It is a hugely important economic reform for the country, if we can put in place decent rights for working people to accompany it,’ he said. He believed the unions needed to modernise. Most predated Federation, and their structures had been developed when Australia had five or six separate colonial governments. Their assets were usually held at State level, and their affiliation was to State branches of the Labor Party. Some had modernised and centralised their operations; the union Combet himself started with, the Waterside Workers’ Federation, had done this in the 1960s and ’70s. But that change had been very controversial. In Combet’s view, Howard knew that by overriding the states and relying on the Federal Government’s constitutional power to legislate on industrial relations, he would be attacking the institutional base for union organisation and the Labor movement more broadly. He believed it was more than an economic reform measure: ‘Howard was clever. He hoped and anticipated that that proposal would generate such division in the Labor movement that we’d be distracted.’ The unions would fall to bickering over jurisdictional issues, sideline themselves in the public debate, and allow Howard to roll right over them. The ACTU secretary wanted to deprive Howard of this issue by agreeing to it. This would achieve several things. Instead of the unions appearing to be industrial relics and Luddite obstacles to good policy, it would put them on the side of economic reform. It would make the unions modernisers, not barnacles. It would also help reduce the unions’ argument with the Howard Government to one about workers’ conditions. And it would give the ACTU a bargaining chip with which to extract concessions in negotiations with the Government. Meanwhile, he wanted the ACTU executive to endorse his presentation’s Point 6: that the union movement support the Government’s move to create a unitary system.

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Combet argued that the Government’s constitutional case was strong—the ACTU already had legal advice that if it challenged the proposed legislation in the High Court it would probably fail. He also believed change was probably inevitable. Victoria had already handed over its industrial relations powers to the Commonwealth in 1996. That had been done by a Liberal Premier, Jeff Kennett, but Labor Governments since then had made no attempt to take the powers back. This was a one-way traffic. Combet thought ‘we should bite the bullet’. The ACTU should accept that there should be a national industrial relations system. It should discuss the change with the States, get their support ‘and use that as an economic reform that we would be prepared to advocate provided the Federal Government legislated an appropriate safety net, collective bargaining rights, all of the key things that are rights for working people’. But when he put the idea to his executive committee, ‘Of course, it was like a bomb going off,’ as he described it. So he dropped the idea. He had come to the meeting with two ‘broad strategic campaign options’. Option Two was to ‘clearly set out to improve the legislation’. That would require engaging with the Howard Government, negotiating, compromising. That was his first preference, but it was now out of reach. So he was left with Option One: ‘Grind out opposition to the changes.’ This entailed six key elements, according to the PowerPoint: ‘Focus on negative impact of changes on workers’; ‘Defend State systems’; ‘Work closely with NSW, Qld, SA, WA and Tas Governments’; ‘Maximise political damage for Howard Government’; ‘Explore possible High Court challenges’; ‘Prepare for reality of unitary system’. These steps became the template for what was to evolve as the ACTU plan. It did not allow for compromise: ‘Maximise political damage for Howard Government.’ It was to be all-out war. But, regardless of the outcome, it still anticipated the inevitability of a unitary, or national, industrial relations system. The secretary was not entirely happy. ‘I don’t like going into a fight without a bargaining position,’ he recalled. ‘I didn’t get the authority

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to go and take that stance up with the Howard Government, but [the presentation] was a useful exercise in that it really focused people’s minds on what’s happening here. And it wasn’t a dis-unifying thing; ultimately it was a unifying thing because we settled on a position on how to deal with the issue that people were comfortable with. But it didn’t deliver to me the kind of bargaining position that I would’ve preferred to have been able to run out.’ Combet told the meeting not to bet that they would be able to succeed in one term—that Howard could defy their campaign and win another three years in office. ‘I said, Well, Howard’s gonna bring these laws in. The goal here’s to defeat the laws, and we’ll either do that by stopping it in Parliament, through political pressure in Parliament, or we’ll do it through the ballot box. To get rid of the laws, you gotta get rid of the Government, so it’s either going to be 2007 or 2010. Unless we could persuade Howard that it was not a good idea, by turning political sentiment around.’ For Combet, it was imperative that everyone present grasp ‘what was at stake for working people’s rights and the organisation of the Labor movement. And we all accepted how serious it was and that we needed to act . . . not act in a rhetorical way, but in a completely practical, hard-headed, thorough, disciplined, long-term strategy. You know, to tough it right through.’ Two of the remaining ‘interim conclusions’ from that watershed meeting also bear noting. One was: ‘Objectives and strategy best determined independent of ALP.’ In other words, the unions were in charge. The ACTU should form its own plan, and then persuade the Labor Party to support it. The other conclusion: ‘Unions and peak councils will need to commit massive resources—potentially unprecedented.’ That is exactly what happened. At that very meeting, the ACTU executive voted to impose a new annual levy of $3.85 on every union member in the country to finance its war on Howard. The commitment to immediately raise a war chest acknowledged the seriousness of the fight. Even the detail of the payment attested to the power of the foe—from each $3.85, the ACTU would take $3.50 for its campaign. The other 35c went to pay Howard’s Goods and Services Tax.

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... Now Greg Combet wanted to meet John Howard in person. Like boxers shaking hands before a bout, each man was eyeing the other and trying to gauge his enemy’s determination. Combet wanted to make his case to Howard personally and also to assess his rival’s intentions and test his own assumptions. But he did not approach the Prime Minister directly; he asked a former prime minister to set up the meeting. Bob Hawke made the approach at the Boao Economic Forum in China; Howard readily agreed. They met in Howard’s office in Sydney in May 2005. Each man came to the meeting with a second: Howard brought Arthur Sinodinos; Combet brought his closest aide and communications strategist George Wright who, after the election, joined Kevin Rudd’s press office. ‘We had quite a pleasant chat,’ Howard recalled. ‘He was amused by the fact that I knew he’d been a metallurgist. It was a perfectly civil discussion. He just generally wanted to talk to me about things and put his view that there was no need for change. I think he just wanted to be able to say he put his case to me.’ Combet had expected Howard to ‘put me in a box as a union boss and say, You don’t have a legitimate voice’. That was the reason for the indirect approach through Hawke. He needn’t have bothered— Howard would have seen him if he’d simply walked through the front door, as Combet discovered: ‘He recognised, I think, in his own kind of odd way, that unions had a role. He said, I’m pleased to have the discussion with you and I recognise that you’ve got views about things—but here’s mine. We went through it, and it was a really informed discussion, sort of dispassionate. He knew what he was doing, what he wanted to do. I went through my stuff.’ Combet explained to Howard that individuals have neither the bargaining power nor the market knowledge to be able to negotiate with employers on an equal footing. And that ‘individual contracts are unilateral documents, delivered by an employer, and under his laws people were disadvantaged by them. They would be more

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disadvantaged if he allowed employers to cut the award safety net, which he did. And that [contracts] were used to destroy people’s collective bargaining rights; they were used to destroy union representation. And that these were universal rights.’ Combet outlined the nature of the bargaining systems in North America and the United Kingdom, which he regarded as having cultures and industrial structures most akin to ours. In the US, Canada and Britain, if a majority of employees vote for a collective agreement, employers are compelled to negotiate. During the Depression workers did it tough, but President Franklin Roosevelt legislated in the US, as part of the New Deal, that people should have collective bargaining rights, and that principle has survived until today. Combet concluded that Howard ‘was unimpressed by that argument’. Howard’s account of this discussion was much more succinct: ‘He just wanted to sort of put to me the fact that he didn’t want any change. But the main thing he talked about was the need to have a change to the law where, if 51 per cent of people voted for collective agreement, that collective agreement would bind everybody in the workplace.’ Combet felt that he wasn’t going to change Howard’s thinking. ‘He just doesn’t listen to alternative positions, Howard, I found. It’s that small-business, petit-bourgeois mentality that he has—that if you’re out there, trying to run your dad’s petrol station or whatever, and they’re going to put someone on, then you’ve got to be able to put them on the terms that you want. And people are free to accept it or reject it. Well, he didn’t refer to his dad, but that was his rationale.’ The union official gauged that his opponent was not making a pragmatic political assessment. He had met Howard before, and studied him from afar during Howard’s entire prime ministership. His assessment from that encounter: ‘He’s just a very ideological person on this issue. You don’t see any of the pragmatism that he displayed when confronted with political realities in other policy areas. It really was interesting. He saw it in a hugely historic way. I was struck by how much the change in the Senate affected his political judgment. Because he really underestimated us and our capacity to resist it.’

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On the face of it, the balance of power between the two opponents was hugely lopsided. Howard was the Prime Minister, freshly reelected, with untrammelled control of both houses of parliament and a strong standing in the opinion polls. He had on his side the full apparatus of lawmaking, the support of the Australian community, the vast resources of the Federal Government and a formidable political acumen. He was unmatched in Australia as a political strategist, and was recognised internationally as a leader of considerable standing. Combet was a respected figure in the union movement; his successful campaigning for the victims of the James Hardie asbestos outrage had won him respect in the community. But where Howard was custodian of the national interest, Combet was still only the representative of a sectional interest, and a fast-shrinking section at that. During Howard’s term, the Australian workforce passed a telling statistical threshold—the moment when self-employed people outnumbered union members. The union movement still possessed considerable resources of people and money but it was vastly overshadowed by the Federal Government, which controlled a quarter-trillion dollar annual budget and the armed forces among its many assets. Yet, in the contest to come, the ACTU Secretary was to outmanoeuvre the Prime Minister. In the ancient martial art of sumo fighting, a smaller rishiki, or wrestler, can turn the bulk of a bigger opponent to his advantage. If the rishiki is agile and clever he can contrive to allow momentum to carry his heavy adversary half a step too far, so that a lunge becomes an overreach. It is no coincidence that the greatest sumo wrestler of all time, Chiyonofuji—nicknamed The Wolf—was one of the lightest and leanest. He demonstrated that victory was less about size than about tactics. For Combet, the meeting confirmed his worst fears about the plans being hatched against the unions and about Howard’s implacable determination: ‘There was total ideological commitment on his part. I walked away from there knowing what he was going to do. It consolidated, in my mind, the fact that we really faced a significant turning-point in industrial relations history and that the unions had

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to stop whingeing and piss-farting around. We had to campaign seriously.’ He immediately set about devising his campaign. Little did Combet know, however, that some of his reservations about Howard’s plan were being voiced inside the Prime Minister’s Cabinet room. Though it was then a well-kept secret—and remained so after the election—Howard’s great play for his place in history was meeting resistance from his own Cabinet.

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7 Overheating

Ian Campbell was John Howard’s Minister for the Environment from 2004 until early 2007. In his first couple of years in the job, whenever he spoke out in favour of acting on climate change he could count on getting a phone call from the Prime Minister’s office. It was inevitably a reprimand. It came, unfailingly, from Hellen Georgopoulos, Howard’s senior adviser on resources. And it was usually phrased in the same way: ‘What are you doing, Ian? You know that’s not policy.’ It got to the point where Senator Campbell would say to some of his staff, ‘If I don’t get the call, it means I’m not doing my job.’ The Howard Government’s perceived indifference to the problem of global warming was one of the three principal reasons that it lost power in 2007. It did not have to be this way. In 1997 the Government had negotiated Australia’s entry into the Kyoto Protocol to limit carbon emissions. The Prime Minister had proudly announced the deal on 11 December as a ‘splendid result, particularly gratifying for Australia’. And why not? Even though the point of the global agreement was to cut the output of greenhouse gases, Howard had insisted that Australia be allowed to continue increasing its emissions. 67

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As a big energy exporter, Australia was an especially carbondependent economy. The Kyoto negotiators had offered a target that would allow it to boost its greenhouse emissions by 5 per cent over 1990 levels by 2012. But Howard had instructed his ministers to walk out of the negotiations unless Australia was allowed an 8 per cent increase. That was broadly a business-as-usual scenario, envisaging no real change. Howard prevailed. Or, as the European Commissioner for the Environment, Ritt Bjerregaard, put it, Australia ‘got away with it’. This made Australia one of only three developed nations permitted by Kyoto to continue pumping out more greenhouse gases than previously: Norway was permitted to increase emissions by 1 per cent; Iceland by 10 per cent. The European Union agreed to a target to cut its greenhouse output by 8 per cent, the US by 7 per cent, Japan by 6. The net effect should all of Kyoto’s signatories meet their targets would be a global cut of 5.2 per cent. The international negotiators were so anxious to keep all the developed countries in the system that they were prepared to tolerate Australia’s waywardness. The executive director of the Kyoto conference, Michael Zammit-Cutajar, said, ‘There is a great value in having everybody on board in a thing like this. Everybody wants to have everybody else on the boat, and that’s what these numbers reflect.’ So Australia got to be part of the global treaty. It could claim to be doing its part with the blessing of the international community, yet avoid any actual constraints on its domestic economy. It was freeriding, but it was free-riding with the consent of the ridden. It was environmentally reckless but politically brilliant. A chuffed Howard, eight days after the agreement was sealed in Kyoto, called it ‘a win for the environment and a win for Australian jobs’. Australia signed the protocol on 29 April 1998. International treaty-making is a two-step business, however. Signing a treaty indicates only a willingness to abide by it; it is ratification that gives legal force to the commitment. In the time between signing and ratifying, in the hesitation between the intention and the action, in the pause between the promise and the fact, the Howard Government

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changed its mind. The Kyoto protocol went from being ‘a splendid result’ to being ‘next to useless and, indeed, harmful’, according to Howard. It was not the treaty itself that changed. It was the Government’s position on it. The reassessment in Cabinet’s thinking came almost as soon as Australia signed the protocol. The prompt? Hardening opinion in the US, and a campaign by the energy and minerals industries at home. US President Bill Clinton and Vice-President Al Gore signed up for a 7 per cent cut in greenhouse gases, but the Senate wanted to signal its strong opposition. Even as the Kyoto negotiations were still underway, the Senate voted by 95 votes to nil to put two conditions on any such treaty. One was that the US should not commit to any binding limits that did not also bind developing countries. The other was that it should not agree to anything that would cause ‘serious harm’ to its economy. The resolution that set down these two conditions—named Byrd–Hagel, after its sponsors—was a non-binding ‘sense of the Senate’ motion, but it was carried so overwhelmingly that it flashed a giant red warning sign for any president who might want the Senate to ratify the treaty. The US Constitution demands that a two-thirds majority of the Senate must approve of any treaty before it can be considered ratified. The Kyoto Protocol certainly did not satisfy the first condition in the Byrd–Hagel resolution. The second condition might have been a matter for debate but it never became one, because the Clinton–Gore Administration did not bother to put the treaty before the Senate. For all Gore’s later campaigning about climate change, he was part of an Administration that did not even try to seek ratification. It was becoming increasingly clear that the US was unlikely to ratify Kyoto. The Howard Cabinet decided that it would not move any further unless the US did. ‘Australia will ratify the treaty when we are satisfied that it has broad international support and commitment to its implementation,’ the Australian Minister for Resources and Energy, Senator Warwick Parer, said in a statement in September 1998, announcing a decision of the Cabinet. ‘We would not expect to ratify before the major players, including the US, because we are responsible for only 1.5 per cent of global emissions.’

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As the US Presidential election approached and Republican sentiment grew ever more hostile to Kyoto, Howard too grew more truculent. Al Gore advocated ratifying Kyoto, but his Republican opponent, George W. Bush, did not. When Bush entered the White House in March 2001, he unceremoniously repudiated Clinton’s signature on the Kyoto Protocol. Just as Australia used Washington’s intransigence to justify its reluctance to ratify Kyoto, the Bush Administration now used China and India to justify its refusal. The US would not put itself at a competitive disadvantage to these fast-growing developing countries, Bush argued. It was a principle of Kyoto that the rich countries would act first and the poorer states would follow later. But Bush was not prepared to wait. In this way, the Kyoto Protocol turned into the Dutch auction of international treaties. Kyoto signatories were due to ratify the treaty in 2002. Now two Australian ministers prepared to take a submission to the Howard Cabinet. They were the Minister for the Environment, David Kemp, and the Minister for Foreign Affairs, Alexander Downer. Kemp’s predecessor Robert Hill and Downer had done all of Australia’s negotiating on Kyoto. ‘We had gone through a lot to get the target we got—108 per cent.’ Downer recalled. ‘It seemed all right to me. I was happy enough with it. My recommendation was that we ratify [the treaty]. I didn’t really reflect on it very much. The departments, on auto-pilot, produced the Cabinet submission. I signed it; Kemp signed it; there was no criticism in the co-ordinating comments.’ Co-ordinating comments are the views from other Commonwealth departments besides the ones that write the submission, and they are appended to a Cabinet submission in a process that is designed to lend a sense of coherence to the many-layered, multi-armed, Hydraheaded business of government. But on the proposal to ratify the Kyoto Protocol there was no challenge from the other parts of the bureaucracy. Around the Cabinet table it was quite another matter: ‘When we considered it in the Cabinet there was quite a lot of hostility,’ Downer said. ‘The feeling was that there was no practical value to it.

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Certainly that was John Howard’s view, but quite a lot of ministers thought so too.’ How important an influence was Bush’s position? ‘I think Howard’s instinct—that the whole thing was a dreadful stunt—was reinforced by the Bush Administration. Bush gave him more confidence in his own opinion.’ And Downer’s view on having his submission rejected? ‘I was relaxed about it. I thought, People won’t be interested in it. I was wrong. People got interested in it when the drought came.’

... This was the state of play that confronted Ian Campbell when John Howard appointed him to replace Kemp as Environment Minister in July 2004. Campbell judged the Government’s stance on climate change to be politically untenable: ‘By us refusing to ratify Kyoto, it meant that you always had to give a twenty-minute explanation of our policy. And I said so in Cabinet.’ One of Campbell’s main aims in his new portfolio was to ensure that the Government was taken seriously on climate change. In his first media interview, just six days into his new job, he was asked about policies for preserving biodiversity. He said the Government could spend a billion dollars on this but that it would all be wasted if climate change continued unchecked because it would wipe out habitats and render scores of species extinct. ‘I made it very clear from the beginning that climate change was a very serious environmental issue.’ But Campbell found the situation endlessly frustrating. Howard’s principal criticism of the Kyoto Protocol was that it would not address the problem of greenhouse emissions. He has been proved correct. The members that were loudest in their criticism of Australia and the US—the fifteen original members of the European Union, so-called ‘Old Europe’—have fallen far short of their promised 8 per cent emissions cut. By the end of 2006, they had collectively managed a reduction of only 2.2 per cent.

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Australia, ironically, is one of the few nations on track to meet their Kyoto targets. So if Kyoto is so ineffectual, and Australia is effortlessly meeting its obligations in any case, why did it become such a big issue in the 2007 election? ‘The question of whether to ratify Kyoto wasn’t the main game, but we made it the main game,’ Ian Campbell said later. Whenever the Labor Party would chide the Government for its failure to ratify Kyoto, Howard and his ministers would launch increasingly angry denunciations of the protocol. Because signing it was such a reasonable and harmless thing to do, Howard had to go to increasing lengths to demonise it. Standing at the dispatch box in the House of Representatives during Question Time, he would become red-faced. ‘It amazes me,’ said Howard on 5 June 2002, World Environment Day, ‘that a Labor Party that claims, from time to time, to represent the interests of the working men and women of this country would sign up to an arrangement that would hurt this country. As with so many things—indeed as with all things—this government will continue above everything else to assert the Australian national interest. The Australian national interest does not lie in ratifying Kyoto; that is why we are opposed to it.’ In this atmosphere of partisan machismo, perhaps it did not seem so unreasonable to some of his ministers to say publicly what some of them believed privately—that it was not just the Kyoto Protocol, but climate change itself that was the hoax. For Labor, this was a gift. The Opposition could simply point to the words from Howard’s own ministers’ mouths and the case was made—this was a Government of climate change deniers! In one cartoon by Paul Zanetti in Sydney’s Daily Telegraph, three ghastly skeletal horsemen carrying scythes are riding out under a scorching sun labelled ‘global warming’. One of the horses is branded ‘Drought’, another ‘Flood’, a third ‘Depression’. Coming up behind them, mounted on a donkey tagged ‘Australia’, rides a hopeful-looking fourth horseman of the apocalypse, John Howard, hailing the skeletons: ‘Wait up, guys!’ Ian Campbell tried to change this. He found that, so long as he had to explain the Government’s position on Kyoto to constituents, he was unable to make a positive impression on any subject. It was

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the great blocker on the Howard Government’s environmental messaging: ‘At that stage we were spending billions of dollars on solar cells for people’s roofs, clean coal technologies and other good things, like setting up the world’s leading carbon forest sink system, and I would go around and explain what we were doing. But the question I was always asked was, “If you’re taking climate change so seriously, why not sign Kyoto?” It became the totemic issue. I think the Government fundamentally misunderstood it.’ Campbell tried the frontal approach in the Cabinet: ‘We had a couple of serious conversations in Cabinet about climate change and the issue of ratifying Kyoto. I always made the point,’ Campbell recalls, ‘that it’s very, very hard for the Government to get ahead on climate change when you have a couple of members of the Cabinet always going out and arguing as hard as they could that climate change is a figment of the imagination.’ The main offenders were the Finance Minister Nick Minchin and Industry Minister Ian Macfarlane, with help from Mark Vaile, the Trade Minister and later Deputy Prime Minister. The Prime Minister, according to Campbell, supported his plea for a single message: ‘Howard backed me up on that. He said, We all have to sing off the same song sheet.’ ‘I certainly would have asked Cabinet ministers to support government policy,’ Howard said in an interview in 2008. And that policy ‘was to accept that climate change was occurring. I suppose there are varying degrees of zeal. I certainly wouldn’t encourage Cabinet ministers to sort of stamp on the idea. We accepted climate change was an issue, and just how much of an issue still is a little bit in doubt. Nonetheless, I certainly would have encouraged ministers to support the government’s policy.’ Yet ministers who personally rejected the idea of global warming continued to speak against it publicly despite Howard’s admonitions? ‘Well, I mean, I think on occasions they may have done that, yes.’ But because ministers didn’t publicly challenge the specifics of his emissions trading scheme, he rationalised that they were not violating cabinet solidarity. Most of the time, the Howard Cabinet was extraordinarily disciplined. The contrast with the Hawke and Keating Governments

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was striking. Howard’s ministers, on every conceivable issue, observed Cabinet solidarity. Leaks were rare. Yet this issue was the exception. There was a similar ambiguity in the messages Campbell got from the staff in the Prime Minister’s Office. On the one hand he would receive phone calls from Hellen Georgopolous asking him to rein in his public comments on climate change. On the other hand, he received encouragement from Chief of Staff Arthur Sinodinos to forge ahead within the councils of government: ‘Arthur was quite supportive of me pushing along the debate within government—I dropped in from time to time to chat with Arthur, as any sensible minister would.’ This ambiguity, or perhaps schizophrenia, within the Government seemed to reflect Howard’s personal position on climate change. Campbell described his leader as ‘a constructive sceptic’. Campbell tried the indirect route to changing the Government’s thinking on Kyoto. He was acutely aware that there was a wellorganised industry lobby working against him: ‘You had the big miners and energy producers fighting very, very hard against any movement on climate change policy.’ He worked to try to bring them on side: ‘I softened them. Privately, I kept saying to them, One day you are going to get hit with a carbon price; one day you’re going to get hit with carbon emissions trading. It’s better that we design it than someone else.’ The someone else, of course, being Labor. Campbell simultaneously worked to bring his ministerial colleagues on side. ‘I realised we had a job to shift the Cabinet position on climate change. I had a good relationship with Peter Costello and I took opportunities to give Peter briefings. He didn’t need a lot of convincing.’ He worked on Alexander Downer, too, with the assistance of Greg Hunt, a former member of Downer’s staff who was now a parliamentary secretary. Campbell soon came to count Downer, who had earlier been prepared to ratify Kyoto, as a supporter. Campbell counted as a ‘mate’ one of the Government’s principal sceptics on global warming, Senator Nick Minchin. He tried to change Minchin’s mind, clipping press articles about the advance of climate change and sending them around to Minchin’s office. Minchin would

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return the serve by sending back articles that challenged the scientific basis of the phenomenon. On 16 February 2005, only five months into Howard’s fourth and final term, the Kyoto Protocol came into force. The United Nations Secretary-General, Kofi Annan, marked the moment by saying: ‘I call on the world community to be bold, to adhere to the Kyoto Protocol, and to act quickly in taking the next steps.’ Howard greeted the occasion by restating his post-2002 position: ‘We take decisions not based on ideology or prejudice; we take decisions that are based overwhelmingly on a consideration of the national interest. Any but the most cursory examination of this issue will tell you that, until such time as the major polluters of the world, including the United States and China, are made part of the Kyoto regime, it is next to useless and, indeed, harmful for a country such as Australia to sign up to the Kyoto Protocol.’ Howard’s position made it very easy for Labor to appear environmentally responsible. All it had to do was express support for the business-as-usual carbon target that the Howard Government had negotiated eight years earlier. And that is exactly what the party’s leader, Kim Beazley, did. Beazley told Parliament that he recognised the agreement was ‘far from perfect’, because the immediate targets for greenhouse emissions were not strong enough and developing countries were not yet bound by targets. ‘But we have to be realistic,’ he continued. ‘Regardless of its shortcomings, Kyoto is the only show in town. While it is not perfect, there is no viable alternative. While it is not perfect, it gives us a foundation on which to set targets for emissions beyond 2012 and bring in the developing economies.’ Ten months later, the United Nations convened its biggest international conference on climate change since the Kyoto meeting. All 189 countries that were members of the United Nations Framework Convention on Climate Change sent representatives to the meeting in Montréal, Canada. Senator Campbell represented Australia, travelling with the chief executive of the Australian Greenhouse Office, Howard Bamsey.

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At this meeting—held amid a great milling crowd of 10,000 officials, lobbyists and journalists—it was agreed, among other things, that carbon-emissions trading schemes should play a central role in curbing greenhouse-gas outputs. This was a mechanism in which Campbell believed. Governments had to set limits on carbon emissions, and to achieve them they needed to set a price for the right to emit a tonne of carbon into the atmosphere. Campbell believed that if carbon pricing were introduced in Australia, the Liberals, as the party of the free market, could leave the market to decide how the economy could most efficiently adapt. A market for the trading of emissions permits would quickly allocate the national quota of carbon output to the most efficient way. ‘I started saying clearly, on the record, from December 2004–January 2005, that we needed a price on carbon, and we needed a market mechanism.’ At Montréal in December 2005, after an exhausting forty-eight hours of debate and negotiations, Campbell shared his morning meal with Bamsey. His resolve had hardened, he said: ‘I made a private pledge to Howard Bamsey over breakfast that we would have, as a matter of government policy, a carbon trading scheme by the end of 2006.’ Campbell was determined to bring the Government as close as he possibly could to taking action on climate change. The public servant listening to him on that Canadian winter’s morning could have been forgiven for being, if not a denier, then certainly a sceptic.

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8 Overruling

In the Cabinet meetings that bolted together Work Choices, John Howard had two consistent allies in wanting a radical deregulation of Australia’s labour market. And he had two ministers who consistently sought to limit the extent of the changes. With Howard on the extreme edge were his Treasurer, Peter Costello, and his Finance Minister, Nick Minchin. This was predictable enough: both men were from the flinty rationalist end of the Liberal Party spectrum, both were long-time crusaders against the unions, and both were critics of the ‘umpire’ of the industrial relations system, the Australian Industrial Relations Commission. Costello and Minchin carried political weight beyond their ministerial rank. Of the 110 parliamentary members of the Coalition, Costello, the Deputy Leader of the Liberal Party, could count anywhere between twenty and forty as personal supporters. The exact number varied according to the month and year, and who was doing the counting: Costello claimed about one-third. It will never be a settled figure because it was never tested in the only tally that matters, a leadership ballot. Minchin, part of the Government’s fourperson leadership group in his post as Leader of the Government in the Senate, was also a significant organisational figure in the party 77

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through his time as the Liberals’ South Australian director and had ideological weight as a leader at the economically dry, or pro-market, end of Liberal opinion. In that fourth and final Howard term, Costello and Minchin both took the view that Howard’s best chance for saving the Government was for him to leave it. Yet on industrial relations they were as one with him. The two men came together naturally to form an advancing praetorian guard around the leader who, twenty years earlier, had promised to upend a century of Australian labour law. Yet by helping Howard achieve Work Choices, they helped destroy him. By supporting him enthusiastically in one of the three most electorally damaging decisions his Government would make, they helped wire him into one of the three political suicide-bomb vests that he was determined to wear, ticking quietly under his well-tailored suits, into the election. Like Howard, they wanted a structural change in the labour market that would take bargaining power from workers, unions and the Industrial Relations Commission and hand it over to business and the open market. The two ministers who consistently sought to restrain Howard’s reforming zeal were Tony Abbott and Kevin Andrews. This is at odds with the public impression of the pair. Abbott, the former Oxford boxing champion, carried the habits of a pugilist into the Parliament. He was always at the forefront of any political aggression. He called himself one of the three ‘warriors’ of the Howard Government, and that’s exactly how he looked and acted. He seemed to relish baiting Kevin Rudd with claims that his wife’s business had been dodgy in its dealings on staff entitlements. Abbott had politically unfashionable views: he took a hard line against abortion, for example, and was always prepared to argue his view forcefully. He appeared to be the hardest and least sympathetic of the hard men in the Howard Government. And he was personally committed to supporting Howard in what Abbott himself described as something like a father-and-son relationship. He was a Howard loyalist. And Andrews? He was Howard’s own choice as Minister for Workplace Relations. He was the public face of the policy, Mr

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Work Choices himself. His cold, forbidding manner lent credence to opponents’ claim that the policy was an uncaring one. Greg Combet described listening to Andrews explain Work Choices as ‘like being lectured by an undertaker’. He seemed remote from the concerns of ordinary voters: ‘You never saw Andrews with working people,’ Combet remarked. And his performance in other ministerial portfolios—such as Immigration—seemed to confirm the public impression of heartlessness. But in the secrecy of the Cabinet room, it was Abbott and Andrews who worked to temper the Prime Minister’s zealotry. It’s true that none of the Howard Cabinet ministers advocated doing nothing at all in the way of reforming the labour market. As Howard put it: ‘I don’t think either of them [Abbott or Andrews] argued that there should be no change. I don’t think anybody argued that.’ It’s also true that Kevin Andrews assembled the main elements of the policy, refined the detail and then implemented and administered the new law. And it’s true that, under the convention of Cabinet solidarity, all of Howard’s Cabinet accepted the implementation that was agreed upon, defended it publicly, and took collective responsibility for it. How many in Cabinet found Work Choices to be unconscionable and resigned their commissions? None. But Abbott and Andrews resisted nonetheless. ‘We did have strong reservations, yeah, but the strong view of the Cabinet and the PM and the Treasurer was that this had to be done,’ recalled Abbott. ‘Whatever reservations I had about aspects of Work Choices, whatever reservations Kevin had about Work Choices, we were unable to prevail over our colleagues.’ Why did these two alone seek to restrain their Prime Minister? Abbott had been much troubled by his experience with Howard’s decision to overturn the Medicare safety net, and that earlier episode had persuaded him that the Government’s control of the Senate was ‘a curse’. Abbott, presumably, saw the Medicare incident as a cautionary experience. He now sought to stop the spread of ‘the curse’ into industrial relations policy. And Andrews, as the IR minister, no doubt felt a keen sense of responsibility for the laws that he would take

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charge of enacting and defending. Another factor was that Abbott and Andrews are both conservative Catholics. And their faith informed their political values. Abbott had publicly argued in favour of restricting the availability of abortion. Andrews had moved a private member’s Bill rescinding the Northern Territory’s law to permit euthanasia—only the fifteenth private member’s Bill to be passed into law in the history of the Commonwealth. Catholic teachings on social justice also coloured both men’s thinking on Work Choices. The deregulation of the labour market transferred power from the worker to the boss. Some workers would be left in exposed positions and some would be exploited. This played on Abbott’s and Andrews’s minds as they helped craft Work Choices. The Catholic Church in Australia, together with the other major churches, opposed Work Choices as an offence against family life and social equity. Abbott and Andrews raised contrary arguments on three grounds— that the Government had no mandate for most of the policy measures in Work Choices; that the measures were unjustifiably harsh on workers; and that the policy was politically dangerous to the Government. ‘My view was that we should bowl back to the Senate all the things that we had had knocked back [in previous terms], but go no further,’ Abbott said later. ‘We couldn’t claim a mandate for further measures. That was my view, and it was Kevin’s; but it wasn’t the view of the Cabinet. It was good counsel, but the counsellors weren’t able to prevail.’ On Abbott’s criterion, the Government would have proceeded with only one of the five so-called pillars of Work Choices. Howard had long wanted to give small businesses the freedom to fire staff without fear that they might sue for unfair dismissal. Larger companies had the resources to engage in such litigation, but smaller ones did not. Howard argued that, rather than risk lawsuits from sacked workers, small businesses simply avoided hiring in the first place. He had been arguing this case for decades, he had campaigned on it, and his Government had tried repeatedly to pass a Bill exempting companies with fewer than twenty staff from the unfair dismissal laws. It had been rejected by the Senate about forty times. Now that Howard

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had control of the Senate, he could pass that measure into law. And nobody in Cabinet was prepared to quibble about it. Beyond the argument that the Government did not have a mandate for the changes, Abbott and Kevin Andrews opposed some specifics. Until Work Choices, the accepted test for whether a new employment deal was fair had been that it should leave a worker no worse off and under no disadvantage. This was the ‘no disadvantage test’. Howard was now adamant that this be abolished. If it were, then workers could lose entitlements in a new pay deal. Tony Abbott objected. ‘Taking away the no disadvantage test was always going to be problematic,’ he said. ‘It was always going to look as though we were exposing vulnerable people to danger.’ He lost this argument. Kevin Andrews had more success in resisting another proposal. ‘There were some sticking points,’ he said. ‘One was about the minimum wage. My proposition was that there should be a series of minimum wages. One of the key points was to replace the Arbitration Commission with the Fair Pay Commission. But one of the sticking points was whether or not we have one minimum wage, or you have a minimum wage at each of the increment levels through the award system. And some of my colleagues were in favour of one minimum wage. I thought that was political suicide.’ In other words, employers could demand that workers higher on the pay scale accept being reduced to the same legislated minimum pay as the most junior worker. So a forty-five-year-old fitter and turner could be pressed to accept the same wage as an eighteen-year-old novice. Or, in another scenario, staff paid more than the minimum wage could be held on their existing pay for years until the minimum eventually rose to match it. Only then would the slow rise of the minimum wage, the floor under the pay system, force their employer to give them an increase. Andrews decided to resist, but he was resisting the will of the Prime Minister, the Treasurer and the Leader of the Government in the Senate, all of whom favoured a single minimum wage. ‘They didn’t seem to see that what that meant was basically a wage freeze.’ Andrews said he tried to argue his case in a number of ways over

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the course of months before hitting on a persuasive way to frame it: as a news headline. ‘I said, PM, the headline out of this will be HOWARD’S WAGE FREEZE. That registered.’ It was around May 2005, said Andrews. ‘So I just hung out on that for a few months until they finally saw reason.’ This conversation took place not in a Cabinet debate but in one of the many more detailed discussions between Howard and Andrews as they developed the finer points of the policy. The Cabinet decided the main elements—the pillars—of the policy and then left the Prime Minister and his Workplace Relations Minister to work out the rest. It was a large-scale reform, undertaken in a huge hurry, and Howard and Andrews developed the policy in a just-in-time approach. ‘About May 2005, basically what happened was we got to a point where Cabinet signed off on the pillars that underpinned Work Choices. So it was a national system, a Fair Pay Commission, the uncoupling of awards from agreements, and a couple of other things that they signed off on. And then, after that, there was still a huge amount of policy development that took the next two or three months, which I and my department did. I would write long letters every week or two to Howard outlining another section of the policies and decisions and my recommendations and going down to sometimes quite fine detail about it. And he would write back and agree with that, or more often than not he would say we need to have a talk about these things. And so I came around and had a talk about it and we’d come to a conclusion about that and gradually over a period of about three or four months we put together a policy. And as the policy was being settled, the legislative drafting process was occurring. There was a huge drafting process. When I was first told, they said it would take about a year to draft the legislation. I said, Well that can’t occur, it has to be done in about three or four months. Virtually all Commonwealth drafting resources were involved and we got outside help from various others.’ These ‘others’ were law firms, the use of which to draft legislation was almost unheard-of in the Commonwealth Parliament. In normal circumstances it is Parliamentary counsel alone who translate political decisions into laws.

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As the policy came together, Andrews would consult the Government’s backbench committee on industrial relations to keep the broader parliamentary party abreast of developments. Their reaction? ‘Overall quite positive, despite what everyone says now,’ Andrews said. ‘There weren’t any dissidents that I can remember.’ And the Cabinet? ‘Most were happy enough.’ Andrews named only Abbott as a dissenter. ‘It’s probably fair to say that this was possibly a radical course. But initially people like Costello and Minchin, in some areas, possibly wanted to go further—for example, in them wanting things like the single minimum wage—than we did.’ After the 2007 election, Joe Hockey claimed that most of the Cabinet failed to understand that workers could be disadvantaged by Work Choices. Hockey, who replaced Andrews as Minister for Workplace Relations in 2006, told ABC-TV’s Four Corners: ‘Quite frankly, when I took over the job I don’t think many ministers in Cabinet were aware that you could be worse off under Work Choices and that you could actually have certain conditions taken away without compensation.’ Howard and Andrews emphatically disagreed. ‘That’s just not right,’ said Howard. Interviewed separately, they gave the same three reasons. For a start, as Andrews put it, ‘Joe wasn’t there when we discussed Work Choices.’ Howard said, ‘He didn’t become a member of Cabinet, I think, until almost a year later.’ Second they were fully aware that Work Choices posed a risk to the wages and conditions of some workers. ‘How many times was the Prime Minister or myself asked to guarantee that no worker could be worse off?’ said Andrews. ‘And we never answered the question.’ Howard’s stock reply had been to say that ‘my guarantee is my record’. As Andrews put it: ‘But we never answered that question. With any change like this,’ Andrews went on, ‘some people are going to be better off, some people are going to be worse off—that is the reality of any change.’ The point of deregulating the labour market was to allow market forces greater play. And markets move down as well as up. Work Choices was deliberately constructed to allow the wages and conditions of the Australian workforce to rise or fall according to the market.

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Andrews said the Howard Cabinet understood this but gambled that, because the economy was growing and the labour market was booming, wages were unlikely to go down. ‘We were in a situation where we had very low unemployment,’ said Andrews. ‘As I went around the country, the common comment I got from employers was, We just can’t find enough workers. And any decent worker we’ve got, we’re hanging on to and we’re paying more. So, given the climate, I suppose we took a calculated risk that workers weren’t going to be ripped off.’ Howard emphasised that, by removing the ‘no disadvantage’ test, he was knowingly exposing workers to the possibility of suffering some erosion of their conditions: ‘The big change was really getting rid of the no disadvantage test. And, I mean, I was conscious that we had to make a choice there, and I recognised that there was some risk in that. But I also saw opportunities. There was the opportunity of greater flexibility and lower unemployment, versus some risk.’ Howard pointed out the case of Billy, who appeared in one of the Government’s brochures as a cameo promoting Work Choices. Billy was an unemployed young man who was offered a job at the minimum wage, but a job stripped of the entitlements that had previously come with the job. ‘Billy had been out of work for two years,’ Howard said, ‘and he got offered a job without penalty rates or overtime, and he got to choose between staying on the dole and taking that job. Now, our argument was that that was a better outcome for Billy.’ The Government believed the strength of the economy ‘would mean that there wouldn’t be all that many Billies; and, if there were, well, Billy would be better off than being on the dole. And I think, by and large, that’s what happened.’ Andrews said he braced for ugly stories of rogue bosses exploiting workers and was pleasantly surprised: ‘Despite all the rhetoric to the contrary, there aren’t really many cases of that having happened.’ Rogue employers are always around, he said, but when you’re having trouble finding enough workers ‘you’re going to be chopping your own head off if you fight with them [just] because you don’t like them’. But Andrews was keenly aware of the broader political risk. This was his third point: that the Government knew it was also gambling

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that its political fortunes would remain aloft. ‘We knew there was a political risk—there’s no doubt about that,’ he said. ‘When you make any change of that sort of magnitude, there’s a political risk.’ Howard said emphatically that he recognised all the risks and took responsibility for the result: ‘In the end it was my call, and in the end I accept responsibility for it. And in the end I took the view that the economy was strong, we had this opportunity and that then was the time to do it with minimum potential damage to people and a long benefit. This was the time.’ Howard and Andrews were clearly not taking the Sergeant Schultz defence: ‘I know nothing!’ They acted in full awareness of the risks to the Australian workforce and to the Government. Howard confronted the dissent in his Cabinet and made some amendments to his plan so as to remove some of the risks; but he forged ahead in the knowledge of the others. It was a fully informed and thoroughly wilful case of prime ministerial determination. Indeed, Howard was so determined that he did not ask for the normal political testing of such a dramatic policy change—that the Liberal Party convene focus groups to test reactions to the proposed Work Choices laws. Howard was not interested in allowing political nervousness to intrude on his plans. At 11.41 a.m. on 26 May 2005, John Howard rose to deliver a ministerial statement to the House of Representatives. ‘For the benefit of the house, I wish to outline the Government’s plans for a historic modernisation of Australia’s workplace relations system.’ In a phrase he repeated at the end of his nine-page statement, Howard said: ‘This Government trusts the employers and employees of Australia to make the right decisions in their interests and in the interests of the nation.’ The changes were to take wage-setting power from the unions and the collectivised system operated by the Australian Arbitration and Conciliation Commission and atomise it, putting these decisions into the hands of employers and employees in the thousands of workplaces across the country. The reform ‘embodies one of the great pieces of unfinished business in the structural transformation of the Australian economy’, Howard

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continued, then set out some recent history: ‘We have seen real wages grow by 14 per cent since March 1996 [when Howard first took power] in contrast with the miserable 1.2 per cent growth over the entire 13 years of the previous Labor government.’ This was true— Hawke and Keating, with the cooperation of the ACTU through their Accord process, had deliberately suppressed the real wages of Australian workers to contain inflation, restore the profitability of Australian companies, and stimulate new investment. The tradeoff was that, in return for accepting no meaningful wages growth, workers won a deal under which employers were mandated to pay the equivalent of 9 per cent of wages as superannuation. By the time Howard took power, inflation had been contained, profitability restored, and a long economic boom was underway. Under Howard real wages started to grow again, but this time the growth was non-inflationary, sustainable and affordable. When the Prime Minister was asked repeatedly to guarantee that no worker would be worse off under Work Choices, it was this record he was alluding to when he invariably replied, ‘my guarantee is my record’. But he knew the future of wages and conditions under his policy was not guaranteed to improve. The concluding line of his statement was to pronounce dead the so-called industrial relations club—the Arbitration Commission and the industrial judges, employer advocates and unionists who inhabited it. ‘Mr Speaker,’ Howard finished, in a line that must have given him immense satisfaction, ‘the era of the select few making decisions for the many in the industrial relations system is now over.’ It was the culmination of his political career, and also the beginning of its end. Buddha once likened the human mind to an elephant and its trainer. The elephant is the will, and the trainer is the intellect. In modern psychology, the elephant would be called the subconscious mind, the trainer the conscious. The trainer generally guides and directs the elephant, Buddha said. But if the elephant really decides to do something, there is nothing the trainer can do to stop it. In a discussion of this concept with Tony Abbott after the 2007 election, Abbott volunteered this thought: ‘And maybe Work Choices was

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the elephant, the elephant taking flight. Given that the elephant and the trainer coexist inside the one head, maybe the elephant just sort of ran amok.’ In this metaphor, Howard’s political will took over from his political intellect and took the Government with it.

... Labor, too, had argument and internal dissent in deciding its industrial relations campaign. For the ACTU it was not quite as simple as activating the union movement’s political arm, the Labor Party. ACTU Secretary Greg Combet needed to perform a delicate twostep. First, he had to create an ACTU campaign entirely independent of Labor. Why? To begin with, he needed to make sure that the campaign would satisfy the union movement’s institutional needs, which are not identical to that of the Labor Party—the unions are an interest group with a narrow and specific set of needs, whereas Labor must appeal to the country as a whole. Second, Combet had to defer to the fact that not all of the ACTU’s member unions are affiliated with Labor. ‘It wasn’t, at any point, a Labor Party campaign,’ he recalled. ‘Quite a lot of the unions were not affiliated to the Labor Party. There’s a lot of sympathy among some of the public sector unions for the Greens, and even the construction union was donating to the Greens in 2004. So, you know, you’ve got quite a deal of political diversity there, and it’s important that it not be a Labor Party campaign. It was about defeating these laws by getting people to vote against the government. But, obviously, many of us were Labor people and we would vote Labor and encourage people to vote Labor, particularly if we turned into candidates.’ That was exactly what Combet did. In the event he was elected the Labor member for Charlton and became Parliamentary Secretary for Defence Procurement in the Rudd Government. Having established an independent ACTU campaign, Combet and ACTU president Sharan Burrow carried out subterranean diplomacy to convince the Federal Parliamentary Labor Party to support it. But there was considerable hesitation at the top. ‘There was real reluctance

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by Labor under Beazley to support us on Work Choices,’ said an ACTU official. ‘There was heavy lobbying.’ Beazley had a close relationship with Combet and the unions, but they differed on policy. Their key disagreement was on how to deal with AWAs—Australian Workplace Agreements—in the event that Labor won power. AWAs are individual contracts between a worker and an employer; they override the conditions stipulated in industrial awards and, unlike any other type of agreement, they can legally involve a deal that cuts pay or conditions. One of the main reasons the unions opposed them was that they were commonly used to exclude unions from negotiations. In the mining industry, where AWAs are most widely used, they are not used to cut pay and conditions—on the contrary—but to accommodate a wide range of working arrangements. The ACTU position on AWAs was simple—it wanted them outlawed. The Labor Party’s leadership had various views. ‘There were two courses you could take on them,’ said Beazley. ‘One, you could abolish them. Or, two, you could impose a tough “no disadvantage” test but still keep some form of individual statutory contract [similar to AWAs].’ Beazley favoured the ACTU’s position and ruled accordingly: ‘In the end I determined that we had to abolish them. It was not broadly supported in the show [the Parliamentary Labor Party].’ Stephen Smith, representing mining-heavy Western Australia, where AWAs were in wide use, argued against outlawing AWAs. And, said Beazley, ‘I don’t think Kevin Rudd was very happy.’ Beazley argued that Labor needed to support the ACTU on this because ‘to do anything else would create the impression in the public mind that we were fighting with the union movement’. And why was this a big problem? ‘I was not anxious to have a fight with the union movement. The public trusted unions on this, and thought they had the correct position. The only doubt in the public mind was, Will Labor really get rid of Work Choices if we vote for them?’ Beazley’s account puts Rudd on the wrong side of the union movement’s agenda, something Rudd later emphatically denied.

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‘I fully supported the party’s position on Work Choices and AWAs before Kim Beazley announced the policy at the New South Wales Labor state conference and afterwards,’ he said. Beazley’s decision to abolish AWAs was based on his experience. He was keen to avoid the problems he had encountered in opposing two other Howard reforms, the privatisation of Telstra and the introduction of the GST. Beazley explained that voters had been fatalistic about the GST because, once it was in place, they believed that there was no point throwing Howard out in an act of retribution or anger. They felt the new tax system was there to stay. Beazley was determined to avoid giving the same impression this time: ‘We needed to make people see that this was not like the GST, [where] once it was in, it couldn’t be changed. It’s not like shifting the structure of Commonwealth finances; industrial relations legislation is changed all the time.’ So there would be a real point to voting Labor. Beazley also wanted to avoid the perception that Labor would offer an industrial relations system similar to Howard’s: ‘We discovered in 1996, in opposing the privatisation of Telstra, that by a ratio of 9 to 1 people were opposed to it. Yet, by a ratio of 2 to 1, they thought that we were even more likely than the Liberals were to do it.’ Because it was Labor under Hawke and Keating that had begun the privatisation of Australian state-owned assets, the electorate presumed that Labor would continue it. The conclusion was that there was no point voting Labor. ‘They were the two big threats to our campaign,’ Beazley recalled. ‘I had to demonstrate emphatically that we were opposed to Work Choices. There were two things I could do to demonstrate our opposition. One was to dramatise the point by tearing up Work Choices. The other was to knock off all statutory contracts,’ including AWAs. And so he did, despite Rudd’s reservations. Beazley was also unabashed about wanting Labor to cash in on the ACTU campaign: ‘They had the money—they were the people with the dough. It was easier for them to run their own campaign but make sure that we were included—that I had plenty of offers to speak at union rallies. I went down to talk to the ACTU executive a

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couple of times. I went out to Warwick Farm racecourse with Bernie Riordan [general secretary of the Electrical Trades Union in NSW] and 3000 or 4000 of his members. I went to CFMEU [Construction, Forestry, Mining, Energy Union] rallies and union picnic days. They made dead certain that I was included in all their big events.’ Still, the ACTU suspected that Labor only swung behind its campaign with real conviction after polling demonstrated that it was a popular cause. In a survey it commissioned in May 2005, just after the Government had announced Work Choices, 38 per cent of respondents said they knew a lot or something about Government plans to change the workplace laws, and 36 per cent said they thought those changes would be bad for the average worker. When the ACTU launched its Your Rights at Work campaign shortly afterwards, the perception of Work Choices changed dramatically and immediately. By August 2005, awareness among voters in marginal seats had risen to 77 per cent, and 64 per cent thought the changes would be bad for ordinary people. The laws were not yet drafted but the electorate’s mind, it seemed, was already made up. When Beazley stood in front of a union rally in November and finally declared that he would ‘tear up Work Choices’, one of Greg Combet’s staff, impressed, turned to the ACTU secretary and declared that this was a fantastic moment. Replied Combet: ‘That’s what I’ve been working on for the last six months.’

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Everything about the event was designed to be ordinary—as deliberately and carefully ordinary as the science of market research could make it. The thirty-five participants were chosen for their ordinariness—men and women earning between $5000 and $80,000 a year, living in the outer suburbs of Brisbane and Sydney. They were paid a fee to spend an evening in ordinary-looking meeting rooms in ordinary suburbs. It was the ordinariness of these people that made them so extraordinarily valuable. In a system where politics, governance and public relations are conducted by highly paid professionals, the rarest commodity is an understanding of ordinary people. Australia, like most nations, is run by elites. Elites are, by their nature, removed from common folk. In autocratic societies this is not necessarily a handicap. But in democracies, an understanding of the great mass of people is an essential tool in the contest for power. It does not need to be a perfect grasp of public opinion but, in a twoparty political system, it should ideally be better than the other side’s. The focus group is a collective analyst’s couch on which the national psyche is invited to recline and divulge its secrets. So here, under laboratory conditions—in meeting rooms tricked up with one-way mirrors, video cameras and microphones, 91

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under the guidance of specialist facilitators and the expert gaze of strategic communicators—the proletariat was studied for the benefit of the elites—in this particular case, the elite that ran the union movement. Essential Media Communications, the consultancy the ACTU had contracted to design its campaign against Work Choices, is in the business of what’s commonly known as spin. Rather than advising companies on how best to sell commercial products, it advises political organisations on how to sell ideas. The firm had worked for the ACTU during the waterfront dispute, but its other clients included the AFL, the Climate Institute and even the Australian Council of Psychologists. EMC, which had a staff of some twenty-five people, already took credit for helping to change the government in Victoria. When the Kennett Liberal Government, on its re-election in 1997, initiated a school rationalisation program in which 8000 teachers were sacked and 360 schools closed, the Australian Education Union commissioned EMC to design what it called its Class Sizes campaign. This campaign, according to EMC, was a ‘resource claim inside a quality of education message’ and ‘played a major role in ousting the Kennett Government’. It promised parents a better quality of education, but the real interest of the union paying for the campaign, of course, was to pressure the State to hire more teachers and thus generate more potential members. When the Victorian Labor Government in 2006 promised a big increase in funding for state schools and 6000 new teaching positions, EMC took the credit. Now the firm was about to enlarge the scale of its boast—from helping to bring down a conservative State government to helping to topple a conservative Federal one. EMC’s directors began to craft the ACTU’s anti–Work Choices campaign in these four focus groups— two in Brisbane and two in western Sydney, on the evenings of 29 and 31 March 2005. The participants in this research were ordinary, but not randomly ordinary. They were selected to be typical representatives of the middle-to-lower income outer-suburban voters who were known as

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Howard’s battlers. It was conventional political wisdom that these voters, who had once been counted as likely Labor voters, in 1996 had deserted Labor for Howard. And it was certainly true that the 1996 election that installed Howard was the first at which more blue-collar males had said they voted for the Coalition than for Labor. In a later interview with ABC-TV’s Barrie Cassidy, the Liberal Party’s federal director at the time, Andrew Robb, noted the big movement of bluecollar voters to the Coalition in that election. Cassidy put it to him that these were ‘Howard’s battlers’. Robb concurred. A new political constituency, and a new political orthodoxy, was born. The orthodoxy proclaimed that Howard’s battlers had put him in power and kept him there through the elections of 1998, 2001 and 2004. Detailed analysis challenges this assumption. A study by Murray Goot and Ian Watson—respectively the professor and visiting senior research fellow in the Politics and International Relations Department at Macquarie University—argued that the battlers had indeed swung critical support behind Howard in 1996, but that they had largely withdrawn their support in the next two elections, returning decisively to vote for Howard only in 2004. The implication of Goot and Watson’s analysis is that Howard had not permanently won over this group but only attracted their votes on a casual election-by-election basis. Howard borrowed them; he didn’t own them. Now EMC director Tony Douglas decided it was time to try to take the battlers back. The ACTU executive had already resolved, as Combet put it, to defeat Work Choices ‘by turning sentiment around’; failing that, ‘you gotta get rid of the Government’. Either way, Douglas decided, the critical pressure point would be the hearts and minds of the battlers. The unions needed to prise them away from Howard, and to study how to do this Douglas now assembled his scientific sample of them in the four focus groups. All thirty-five participants were employed. Most held white-collar jobs; fifteen were union members. They were ‘fairly evenly split between Liberal and Labor voters’, according to EMC’s report. Titled ‘Industrial Relations Reforms: Community Group Discussions’ and

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dated March 2005, it set out the battlers’ anxieties under its first heading, ‘Workers’ Expectations of the Future’: The most common concern was to maintain their income. The most important factor in maintaining their income was job security. There was a general feeling that jobs were becoming less secure. Some felt that business had become more competitive and companies had to cut costs to remain profitable. A number were concerned about the difficulty in finding a permanent job. They observed a trend to casual and contract work which had a negative impact on families in particular. The second section, under the heading ‘Election Issues’, contained this central point: ‘Stability was probably the key issue. They tended to believe the economy was performing well. Interest rates and inflation was [sic] low. Some thought changing government may be a risk—because they were unsure how Labor would perform.’ But Work Choices was about to shift the balance of risks. Until now, Howard had represented stability and Labor had represented uncertainty. Howard’s industrial relations changes were about to make him the risk, on one proviso—Labor needed to present itself as the party of stability. EMC developed three fundamental elements of its anti–Work Choices campaign from these focus groups. First was its re-badging of the battlers. If the ACTU was going to make a claim on their vote, it couldn’t address them as Howard’s battlers. Kim Beazley, influenced by ALP research, had so far been pitching to them publicly as ‘Middle Australia’. But now EMC’s market researchers tried out four alternative labels. Seeking the way these voters thought of themselves, the facilitators in the focus groups held up a series of cards. Each card bore a descriptor printed in large type— WORKERS, WORKING PEOPLE, WORKING FAMILIES and MIDDLE CLASS. These cards were shown one by one and participants were directed to choose one as the best description of themselves.

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How had EMC arrived at these four descriptors? ‘I just sat down and wrote them, actually,’ Tony Douglas said later. As for the results: ‘What was amazing was how strongly the responses to Working Families and Working People came back.’ EMC later conducted eight other focus groups in research funded by the Australian Manufacturing Workers’ Union, and found the earlier results confirmed by this larger sample. ‘Everybody earning under $60,000 pointed to Working Families or Working People. And, interestingly enough, three-quarters of those earning between $50,000 and $80,000 and tertiary educated pointed to the same ones.’ A few people pointed to Middle Class. It did not have wide appeal with this stratum of the electorate. Douglas didn’t much like Beazley’s favoured descriptor, Middle Australia. He explained why: ‘I tested this with subsequent groups and most people didn’t relate to it. Some people thought you were talking about Ayers Rock. Literally, one or two people in each group thought that when you said Middle Australia, you were talking about Ayers Rock. And some people under $60,000 a year thought, when you say Middle Australia, you’re talking about doctors and lawyers. So the language is important.’ How to choose between these two tags? Douglas explained: ‘Working Families talks about the situation of people with children and not earning a huge amount of money. Working People is slightly broader—it includes people without kids, obviously, and single people—so we tended to advise the ACTU to use Working People, because it covered a wider group.’ The ACTU’s then communications director, George Wright, said it accepted this recommendation: ‘We in the unions try to be more inclusive.’ With Combet’s endorsement, Douglas pitched it directly to a meeting of the ACTU executive in April 2005. It has been claimed that EMC crafted the phrase ‘working families’—an expression Kevin Rudd would later make ubiquitous— and inserted it into Labor usage. But, in truth, EMC had advised the ACTU to go with the alternative, Working People. EMC’s focus-group research made the discovery, troubling to the campaign planners at the time, that few people had any idea of the industrial relations changes looming. This was no real surprise:

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Howard would not outline even the general framework of his reforms for another two months. But the finding nonetheless led to an important ACTU decision—that the first wave of campaign ads needed to give information about the Government’s likely reforms. And the consultants from EMC were heartened by the initial reactions of the battlers once they were told of the likely changes: almost entirely negative. Participants’ remarks included: ‘It sounds like doomsday for the worker’, ‘This wasn’t part of the election’, and ‘It is shifting to a world where there is no weekend’. Battlers were asked to describe their own financial circumstances. The choices they were presented with were: ‘Managing’; ‘Prospering’; ‘Just keeping my head above water’; ‘Achieving my life expectations’; and ‘Reducing my life expectations’. Most described themselves as ‘Managing’. Some in Sydney identified with ‘Achieving my life expectations’, and in Brisbane some described themselves as ‘Just keeping my head above water’. In another, separate exercise later in Dandenong, ‘One bloke said to me, I’m just keeping my head above water with a snorkel,’ recalled Douglas. ‘This all told us that a large percentage of voters were, if not doing it hard, having to count the pennies from the fortnightly pay cheque, despite all the talk about how great the economy was. Even a slight change in their circumstances could have a significant impact on them.’ The findings reinforced the point that security and stability were key to voters. Douglas wanted to probe his laboratory battlers to see if they found it credible that Howard would impose drastic reforms. The facilitators outlined to their groups the elements of the changes they expected Howard to pursue. Did people believe Howard would actually act so drastically, Douglas wondered—‘If not, you’re pushing shit uphill with a wet tram ticket.’ But everybody, when asked, said yes. As the report put it: ‘It was completely believable that the Government would have no qualms about introducing legislation which would make workers worse off.’ This led Douglas to a clear conclusion: ‘This is where thirty years of anti-union rhetoric came home to roost for Howard. I told George Wright at the ACTU, You’ve got a live campaign on your hands.’

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Other centrally important elements emerged from this initial research. When the focus groups were asked what they expected the union movement to do about the putative Howard agenda, the unequivocal answer was ‘Fight it’. EMC also wanted to know which principle they wanted to see protected; this would guide the framing of the debate to come and set the prism through which it would be viewed. The groups were asked what most needed defending— fairness, rights, or the industrial relations system. Douglas discovered that participants didn’t feel strongly about the argument that the industrial relations system should be protected, probably because the system was a technical and remote thing. The ACTU was inclined towards waging its campaign in defence of fairness. But Douglas thought the notion of fairness emerged as being too subjective and vague to be the centrepiece of a campaign, since many workers, particularly women, thought there was not enough fairness in the system as it was. The idea of rights, however, struck a nerve. Douglas explained: ‘People couldn’t list all their rights but they could name some of them, and their idea of living in Australia was that [it] meant you did have these rights. It’s just part of the Australian culture. You go to work, and people can’t walk over the top of you because you have rights. Once we had this idea that rights were the issue, it was the strongest possible issue. When we framed it as your rights at work, it suddenly tapped a nerve.’ And so the ‘Your Rights at Work’ campaign was born. Finally, these earliest focus groups tested some concepts for the TV ads that were to be the battering rams on public opinion. Participants were shown proposed ads, or the scripts for ads, and asked for their reactions. One was so comically overdone that it was rejected immediately for its sensationalism. It showed a family of four smiling into the camera while a voice-over explained that keeping a family together takes a lot of work. ‘Having a job that gives you rights to parental leave, public holidays and fair pay is something many of us take for granted . . . But not for long.’ The script continued: As we hear the

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last piece of information we hear a crunch, the family are jolted around like they are in an earthquake, the camera pulls back and we see the family is standing on a giant platform on top of a huge pillar. The family are now frightened—we hear the kids and mum scream. Voice-over: ‘But Australian work is being changed forever.’ Script: As we hear the final words, we see a huge wrecking ball being released and heading for the pillar, which is now cracking and crumbling. Voice-over: ‘Soon the Federal Government will have unrestrained power to kill off the Australian system of Federal awards. It means the end of our way of life.’ A man in a Brisbane focus group found this ad to be ‘pretty out there’. Indeed. But two of the ads tested on these groups were to open the campaign. They first aired on Australian TV in July 2005. One, the ‘Tracy Ad’, became one of the most memorable contributions to public debate in the entire fourth term of the Howard Government. Tracy is tickling her two cute primary-school aged kids at home. The fun is interrupted when the phone rings. It’s the woman’s boss. Voice-over: ‘The Federal Government is scrapping unfair dismissal laws for 3.6 million workers.’ The mum to her boss: ‘No, sorry, I can’t—I’m rostered on for tomorrow night’s shift.’ Voice-over: ‘So if you think that you and your family are safe . . .’ A troubled-looking Tracy to her boss: ‘Who’s going to look after my kids?’ Voice-over: ‘Think again.’ The mum: ‘You can’t sack me.’ The children’s faces cloud with concern as their mother twists her hair in her fingers and listens to her boss with evident distress: ‘Really,’ she says neutrally, signalling surrender. EMC’s Peter Lewis, in an internal report written after the election, commented on this ad: ‘What was striking at the time was the resonance of this advertisement, particularly amongst women. It was realistic; they felt an emotional connection with Tracy. Richard Keddie—a mainstream director who had assisted EMC for many years—consciously filmed the advertisement to reflect a ‘Neighbours style’ family drama. It worked. In years to come, Tracy would be the single most recalled ad of the Rights at Work campaign. Many people believed the mother was a real person.

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The other ad that won support among the focus groups was the so-called ‘George ad’. An unsympathetic-looking manager in his thirties taps his pen deliberately and rhythmically on his desk as he stares at the middle-aged man sitting opposite him. The older man, a worker in a blue shirt, is silently reading a document titled ‘Individual Contract’. He looks up, concerned: ‘Casual? This can’t be right.’ The boss leans across to put the pen in front of the worker and tells him: ‘We’ve all got to be a little more flexible.’ Voice-over: ‘The Federal Government has changed the laws to give employers more power over workers.’ As George reluctantly picks up the pen he remarks ruefully: ‘I’ve been here fifteen years.’ Voice-over: ‘So you can be asked to sign an individual contract that cuts your take-home pay.’ An unhappy George leaves the office in silence and the next blue-shirted middleaged worker enters, looking apprehensive. This ad, also directed by Keddie, was actually seven years old. ‘The unions had this ad made for the first wave of Howard’s IR reforms under Peter Reith seven years earlier,’ said Douglas. ‘But they decided not to run it because, after negotiations in the Senate, they decided the laws were not so bad.’ For as long as Howard had been planning labour-market deregulation, the unions had been planning their resistance. The ACTU’s Combet, Wright and Burrow embraced the EMC research and their recommendations for a campaign. They asked Douglas to present some of his findings to an ACTU executive meeting in April 2005. After some searching questions and discussion with the union leaders around the table, the plan was adopted without dissent. The Tracy and George ads went to air in July 2005 and ran for six weeks. The cost of the TV airtime, according to Douglas, was the modest sum of a little over $2 million. The ads had a remarkable effect. To track the impact of the campaign for the ACTU public opinion was sampled in May 2005, before the ads ran, and then again in August. At first, awareness was low and so was the level of community concern. Thirty-eight per cent of people polled said that they knew a lot or something about Government plans to change the workplace

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laws, and 36 per cent said they thought those changes would be bad for the average worker. Three months later, awareness had doubled and opinion on Work Choices had turned decisively negative. In August, the ACTU’s polling showed that awareness among voters in marginal seats had risen to 77 per cent. The proportion saying those changes would be bad for ordinary people was now 62 per cent. EMC and the ACTU were surprised and delighted. ‘We thought we’d put enough on to move some numbers,’ said Douglas, ‘but we didn’t expect to move them by 25 points.’ At this point, the Government was still immersed in developing the detail of Work Choices and drafting the legislation. The Bills were passed by the House of Representatives on 10 November 2005, and by the Senate on 2 December. Five days later, the House agreed to amendments made by the Senate. The Bills became law on 14 December 2005. Two months earlier, while the Bills were still in gestation, the Government launched its first promotional campaign of TV, radio and newspaper ads, at an initial cost of $20 million. The ads—the work of a Liberal Party–favoured ad firm, Dewey Horton— featured pictures of smiling workers and a smiling boss. The message was that the new laws would bring more choice and more cooperation in the workplace. But it was already too late. The public’s first impression, via the ACTU campaign, was a lasting one, especially among Howard’s battlers, who were now in the process of becoming Kevin Rudd’s ‘working families’. Both sides would escalate and intensify their campaigns over the next two years. But voters’ image of Work Choices was essentially set. When Howard finally launched his promotional campaign in October 2005, the political reporter Mark Davis noted in the Australian Financial Review that the Howard Government had pioneered in Australia the strategy of the ‘permanent campaign’. Instead of the traditional approach of mounting a political campaign for office only in the final weeks and months of a government’s term, in a permanent campaign ‘incumbent governments increasingly use the personnel, tactics and tools of the election campaign to win public

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approval for new policy measures’ throughout their terms. He noted that the permanent-campaign approach to selling policy ‘has not been in evidence so far on the industrial relations issue’. Between the May announcement of Work Choices and the October launch of its promotion, the unions had spent four months using the Government as a ‘punching bag’. Davis observed that the time taken up in developing the laws in detail had ‘hampered the Coalition’s ability to engage in public debate over the reforms, as did a High Court challenge by the ACTU against [Government] plans to spend taxpayer funds on advertising the changes. It left the field open for the trade unions and the Labor opposition to put their spin on the plans. Government ministers and backbenchers were unable to respond effectively because the details were still being worked out.’ Nor could they call on much public support: ‘Third party interest groups in the debate who might favour the government, such as financial market economists and employer associations, had little incentive or ability to enter the fray. That left those third parties suspicious of the changes, like the churches and industrial relations academics, backing the labour movement.’ Davis was exactly right. This error of timing proved fatal. Worse, the Liberal Party did not begin its own testing of public opinion until after Work Choices was announced in May, three months after EMC had already drawn the key conclusions from its initial work. As EMC’s Tony Douglas put it: ‘It’s important to get in first and frame the debate. Because then the other side has to unpick your frame before they can put their view across.’ One of John Howard’s most valuable traits as a politician was his knack for understanding ordinary people. He had spent his entire career conducting politics, an activity remote from most people’s daily lives—two decades’ worth of attending meetings and parliamentary sittings and debates, giving speeches and riding in chauffeured cars. Yet he did not need a focus group to tell him the views of average Australians. His colleagues, his staff and his rivals admired his gift for intuiting public sentiment. He was never a captive of mass opinion—the GST, for instance, was not a popular

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idea—instead, he showed a remarkable ability to bend it to his will. His grasp of mass opinion made him not so much a slave of it as a master of it. On Work Choices, however, his usual mastery deserted him. By the end of its fourth term, his Government had spent $150 million of taxpayers’ money to promote Work Choices. Howard himself argued for it and promoted it to the best of his ability. He even made a final amendment to his laws in a concession to public opinion. Yet he still lost the debate and the power struggle. If EMC’s Victorian ‘Class Sizes’ campaign was a ‘resource claim inside a quality of education message’, its anti-Work Choices campaign might best be described as a power struggle inside a workers’ rights message. On one level, the campaign sought to alarm workers about the potential of the new laws to damage their working conditions. On another level, it was a titanic contest of will between the unions and the government. Once the union movement set about trying to force the Government out, workers’ rights became almost incidental to the larger struggle. After Howard’s defeat EMC’s prestige soared, and it garnered half a dozen new clients. But there was also a moment where its commitment to workers’ rights was in question. The Australian reported that some former EMC employees bore grievances against the firm. Unnamed people claimed to have been bullied. A former staff member, Phil Doyle, was quoted as saying: ‘Yeah, it is ironic.’ Tony Douglas said the claims were baseless. His denial supported by the fact that no one subsequently pressed their case against the consultancy. The Labor Party’s national secretary, Tim Gartrell, argued after the 2007 election that Work Choices was the issue that cost Howard the support of his onetime Howard battlers. Said Gartrell in an interview: ‘When you look at the group that did the best for us, it’s working families in outer metro and regional seats. It’s what we needed, the big uncoupling of the battlers in those seats from Howard . . . Loyalty can bend quite a way before it’s broken—people give the incumbent leader quite a bit of leeway, and then something snaps. Work Choices may have been the breaking point.’

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Beyond its specifics, Work Choices stood as a larger symbol of Howard’s political identity. According to Michael Cooney, a former Labor Party adviser and now policy director of the progressive think tank Per Capita, Howard had successfully cultivated an image as the national father figure. It is a longstanding American notion that political parties fall into two basic personality types—Mummy parties and Daddy parties. A Mummy party is most interested in caring for people. It is empathetic, inclusive and concerned with fairness. In short, it wants to give you a cuddle. A Mummy party is seen to be best at providing services—especially health, education and welfare. A Daddy party, on the other hand, is strict. It is big on self-discipline and self-reliance. It is frugal and interested in obedience. In sum, it will stand you on your feet but keep you on your toes. A Daddy party is trusted to keep the national family secure with good economic management and competent security. In the US, the Democrats are the Mummy party and the Republicans are the Daddy. Labor is Australia’s Mummy party, traditionally seen as the best party to handle health, education, welfare and social issues. National security and the economy are seen as the fortes of the Daddy Coalition. In 2004 John Howard won re-election by appealing squarely to the Daddy functions: ‘This election, ladies and gentlemen, will be about trust,’ he said. ‘Who do you trust to keep the economy strong and protect family living standards? Who do you trust to keep interest rates low? Who do you trust to lead the fight on Australia’s behalf against international terrorism?’ Work Choices shattered that image, said Per Capita’s Cooney: ‘It was when Howard went from being a reassuring Daddy to being a nasty Daddy.’

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10 Pissed Against the Wall

At the heart of the Howard Government’s management of the Australian economy was a raging, unending argument. The two most senior figures in the Government were in perpetual conflict over how the nation’s finances should be structured. The Prime Minister always wanted to spend as much of the national revenue as possible. His Treasurer always sought to use any available leeway to cut taxes instead. ‘I had big fights with Howard, all the time,’ Peter Costello said in 2008. ‘Big fights.’ Every year, the argument would end in a compromise, in the form of the national Budget. Once that was settled, the pair would start the argument all over again. It was never finally resolved. But it was never publicly visible. Howard and Costello kept their fiscal feud a close secret. Howard did not describe it as a fight, but he acknowledged that ‘we had differences regarding the mix’ between tax cuts and what he called ‘proper investment’. This contest helps explain the shape of Australian fiscal policy and economic outcomes for the dozen years Howard and Costello held power. It illuminates the tension over the leadership: it was not just a spat over whose turn it was in the top job but also a struggle over 104

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big questions of policy. And the fact that it remained well concealed for four terms of Parliament testifies to the professionalism of their relationship and the discipline of the Howard Government. Finally, it exposes how the fate of nations can turn on the personal preferences— and differences—of the individuals at the top. Costello explained the struggle this way: ‘As the party of low taxes, I thought we ought to keep the ratio of taxes to GDP low, or cut it.’ In other words, the overall burden of tax as a percentage of the national economy should be held down or reduced. ‘My view was always that cutting taxes was more important than new spending. This would be a point of argument and contention between the two of us. Politically, [Howard] always wanted to err on the side of further expenditures.’ The reason was simple, according to the former Treasurer: the Prime Minister believed the public would be grateful to the Government for new spending—and vote accordingly. Howard, when asked, preferred to characterise it this way: ‘It was all part of the normal interaction between a prime minister and a treasurer. Part of the job of the treasurer is to resist any additional expenditure, and it’s part of the job of the prime minister to insist on it in those areas he thinks are of high national priority. And [it’s usual] for the treasurer to sort of grumble about it, but nonetheless do it. That’s how the system works.’ In any decision by a government, the Prime Minister has the upper hand. To strengthen his own hand, Costello habitually delayed telling Howard the national revenue estimates, according to a senior official. The Department of the Treasury alone collates the estimates of likely Federal revenue, based on a range of variables, including economic conditions, employment, corporate profits and tax collection practices. Without knowing how much money the Commonwealth is likely to collect, the Government cannot know how much is available (or not) for spending or tax cuts or to be put aside as surplus. ‘Costello would make sure that Howard didn’t get the numbers till the week before the Budget,’ the official said. It was so late that, by the time Howard saw the final revenue numbers for the Budget, he had no time to develop elaborate spending proposals. By then,

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Costello already had his tax proposals mapped out. He would show both to Howard around the same time. How long was the Treasurer delaying giving this vital information to the Prime Minister? Costello had a reasonably good idea at least a couple of weeks before taking the numbers to Howard. Howard, frustrated, worked to counter this tactic. He ordered his department, the Department of Prime Minister and Cabinet (PM&C), to instruct the Treasury to provide the revenue estimates to PM&C as soon as they became available. Howard’s department would then have been able to give them to the Prime Minister and Costello would have lost his cosy monopoly on the numbers. Under this scenario, Howard would have had a greater opportunity to work up a plan for spending the revenues that Costello wanted to hand back to taxpayers as tax cuts. But Costello devised a counter-counter tactic. He simply told his Treasury officials to ignore the PM&C’s direction. They obliged. The department was under instructions not to give the tax revenue numbers to the PM. The Prime Minister’s bid to get an earlier look at the national revenue estimates was thus thwarted. ‘It’s true to say that you always had to push hard to get that,’ said Howard in 2008. ‘Yes, that’s true.’ Asked if he had instructed his department to ask Treasury for the numbers at the same time they were supplied to the Treasurer, Howard replied: ‘Yes, that’s true.’ And Treasury refused to do that? ‘I’m sure that’s right, yes. I think it probably happened on one or two occasions.’ A senior official said PM&C asked Treasury to provide it with the revenue estimates at the same time as they went to the Treasurer in the run-up to the Federal Budgets of 2004, 2006 and 2007. It was ignored each time. Asked whether Costello was trying to conceal the numbers from him, Howard said: ‘I’m not accusing him of that. But, equally, I can’t deny—I have no direct knowledge. I have no way of knowing whether that’s true or false, you’ll have to ask him.’ Peter Costello remembered it this way: ‘As Treasurer, I would get the revenue estimates generally very late in the process and I would produce a bottom line and give it to Howard. I would do it myself

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because I thought it was the proper way—minister to minister. Howard himself had them and he probably gave them to his department. I didn’t want sensitive economic data going to the public service and out to the press. As far as I know, he was always happy with the arrangement.’ But if Costello’s aim was to hold the line on Australia’s total tax burden, he failed. The ratio of Commonwealth taxes to GDP rose from 22.3 per cent in the final Keating Budget of 1995–96 to 24.6 per cent in the final Howard Budget, according to the 2008–09 Budget papers. This increase of 2.3 percentage points amounts to $23.9 billion (in 2008 dollars), equivalent to the GDP of Ethiopia or Iceland, both ranked around 90th among the 185 nations covered by the World Bank’s global economic survey. Howard presented this not as a failure of fiscal discipline but as a triumph of sensible spending. ‘Look, we had differences on a number of issues in relation to the surpluses. It’s fair to say that, if it hadn’t been for me, we would not have spent nearly as much on defence. That is the spending I’m proudest of. I think every part of it was justified.’ The Howard Government’s last Budget allocated $22 billion to defence, an increase of 107 per cent over the course of eleven Howard Budgets. Defence is the third-biggest area of spending by the Federal Government, after social welfare and health. It accounts for one-tenth of total outlays. To give certainty to the Defence Department in the fraught business of ordering big pieces of military kit, it alone, of all government departments, was guaranteed a 3 per cent annual increase in its budget in real terms, that is, after adjusting for inflation. This automatic increase was to stay in place from 2000–01 until 2015–16. Over the full fifteen years, the guarantee would add a cumulative total of $39.2 billion to Defence’s budget. Big acquisitions—of aircraft and ships—have multi-billion-dollar price tags and require long-term contracts and years or decades of planning and funding commitment. The Howard Government’s 3 per cent rule was a most welcome relief for a department that lived in perpetual anxiety that year-to-year Budget exigencies would sabotage

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key long-term defence needs. The Rudd Government continued this policy; indeed, it has extended its provisions until 2017–18. But Howard’s interest in defence spending went further. In most years, the department was given funding above and beyond the annual 3 per cent real increase. A 3 per cent real annual increase would have raised the size of the military budget by 38.4 per cent if it had been applied across the life of the Howard Government. Instead, Defence got a 107 per cent increase. Howard was so keen to accommodate the Defence Department’s every desire that it enjoyed carte blanche. No major proposal from it was ever denied. Costello describes a total collapse of rigour in the department’s funding: ‘Certainly, if they ever wanted to increase their bid, they were given every encouragement to do so. I spent a lot of time wrestling with the Defence Department. Not because I cut their budget—we were increasing their budget—but because I wanted to make them accountable. The thing about Defence was that they could never tell you how many machines they would need at any one time. If you thought Defence could ever come to a meeting with a specific ask, you are giving them more credit than they deserve. Defence’s attitude was, We will take what we can get.’ So, for example, the department asked for funding to buy three giant C-17 Globemaster III heavy-lift aircraft. Each of these monsters, made by Boeing, can carry four times as much as the old RAAF Hercules. They are the workhorses of US operations in Iraq and Afghanistan. The cavernous belly of a C-17 can carry 72 tonnes at 800 km/h over about 5000 km without refuelling. Thus a single aircraft can transport five of Australia’s 12-tonne Bushmaster armoured infantry vehicles, for instance, or 102 paratroopers and all their equipment. The US Air Force has been trying to have production of the plane shut down for several years; it is keen to start buying the next generation of heavy-lift aircraft, which are much more versatile. Congress, however, continues to appropriate money for new orders of the C-17 to keep production lines rolling and existing jobs and suppliers in place. The US Air Force operates almost 200 C-17s.

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Among non-superpowers, however, an order for three of these aeroplanes is a reasonable expectation. Canada has ordered four, Sweden two, Britain six, and Germany is reportedly considering ordering between two and four. Separately, the NATO alliance has ordered two. But in Australia, after the Defence Department asked the Government to fund three C-17s, the Howard Cabinet suggested to Defence that perhaps three might not be enough, according to a senior official. Defence duly reconsidered and returned with a request for four. The funding allocation went up from about $1.5 billion to $2.2 billion. In other words, the military was prompted to request— above and beyond what it had initially asked for—an aircraft costing about half a billion dollars. Asked about this particular decision, Costello was unperturbed. ‘We did buy four,’ he said. ‘As I recall, we brought forward the purchase to get it in before the end of the financial year so the cost wouldn’t appear on the following year’s Budget.’ That had a couple of advantages. First, it helped use up the windfall revenues that accumulated at an accelerating pace as the commodities boom began to gather momentum. Second, bringing forward this allocation freed money for the following year, an election year, when the Government would want maximum latitude to spend directly on voters or to give them tax cuts. ‘We had a significant build-up in defence spending,’ Costello continued. ‘We bought the Abrams tanks, the AWACs, the joint strike fighter, the C-17s, the Super Hornets. I think all these acquisitions in themselves were right. What I found frustrating was that, when we made the decision to acquire it at one price, a couple of years later it would be significantly more. And a couple of years later it would be significantly more again. By now you’re so far into the contract that it would cost you more to pull out than to go ahead. I was always trying to keep Defence within its capability plan, and hold it within the envelope. I would try to cost it, and hold it to that cost. I think they were given a lot of licence on these issues.’ Australia’s economic development in the twentieth century seemed to be arrested at the quarry-and-farm phase. In the 1980s the founder

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of modern Singapore, Lee Kuan Yew, said Australians were destined to become ‘the poor white trash of Asia’. In 1970 Australia’s percapita income had been the fourth highest in the world, but by 1991 it had fallen to nineteenth place. Other countries surged; Australia stagnated. The era of stagnation ended with the 1983 election of the Labor government. The partnership of Bob Hawke and Paul Keating imposed a dramatic program of reform. The Hawke–Keating years were followed by Howard, who pressed ahead with another wave of economic modernisation. The net result was over twenty years of near-continuous reform, and Australia’s per-capita income is now ranked eighth in the world. In the Howard years, unemployment halved and net household wealth doubled. Australia, bragged Costello, had become not the poor white trash but ‘the strong man of Asia’. From being something of an economic embarrassment, Australia became an economic beacon: ‘In the last decade of the twentieth century, Australia became a model for other OECD countries,’ reported the thirty-nation club of rich economies. As Howard entered his twelfth and final year in power, Australia entered its seventeenth year of continuous economic growth—a winning streak without precedent since Federation. This long boom was partly due to the success of Australian fiscal policy. Howard’s critics dismiss this achievement as dumb luck—the commodities boom delivered mountains of cash. And all Howard did was spend it. Not true. But the mining boom only began in 2002–03, some six years after Howard took office. He inherited a Budget in deficit by the equivalent of 1.9 per cent of GDP, or $10.07 billion. By their second Budget, Howard and Costello managed to turn that into a surplus. By rigorously cutting outlays, they ended up with 1.17 per cent of GDP in hand in 1997–98. And with the exception of 2001–02, they delivered surpluses in every year that followed. The Howard Government retired the national debt, a signal accomplishment. That turnaround in the public finances was due to good policy, not good luck.

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But when the mining boom arrived, framing the Budget went from being a carefully managed process to the equivalent of a cargo cult. Howard’s former chief of staff, Arthur Sinodinos, was also a former Treasury official. He said the boom gave the Budget process ‘a lucky dip feel’, as officials and ministers scrambled to formalise tax cut options and decide which ones would get the go-ahead. Sinodinos recalled that the final updated revenue numbers would arrive ‘at the end, after all the spending had been done, almost like a technique to keep spending under control’, which was exactly Costello’s intention. The faster the revenues rose, the harder Costello worked to counter his Prime Minister’s urge to spend. Costello said: ‘As the revenue estimates strengthened—and that started in 2003 and ’04—consequently our tax cuts became larger, culminating in the package we took to the 2007 election. Certainly, as we went into the election, my desire to cut taxes was very much to the fore. And they were tax cuts which Kevin Rudd copied. Howard prevailed to the extent that some of the tax cuts were less than I would have liked. But I prevailed in that they always occurred, and they were of increasing dimension.’ As the tax cuts grew, however, so did the spending. Overall, of the combined total of government spending increases and tax cuts that the Howard Government disbursed between 2002–03 and 2007–08, 58 per cent of the total went to government spending and 42 per cent was distributed in tax cuts, according to the ANZ Bank’s chief economist, Saul Eslake. In other words, the compromise ran 58 per cent Howard’s way and 42 per cent Costello’s. The struggle between Howard and Costello was not necessarily an evil. It produced a balance between their competing priorities. The result was four successive years of tax cuts, six successive years with a Budget surplus of between 1 and 1.6 per cent of GDP, and eleven successive years of real spending growth averaging 3.6 per cent. The Howard Government’s handling of the resources boom was not ideal, but it was not disastrous, either. History, including Australia’s own history, shows that even the richest countries are likely to mismanage a resources boom. Australia has never ridden a resources

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boom to a happy ending. Booms have always busted ugly. The huge convulsions in income and inflation they produce have never been well managed. Other countries have handled commodities booms with a varying competence. On one end of the scale is Norway. At the other end is Argentina. Norway was successful chiefly because it saved the proceeds of its boom. When it discovered huge oil deposits in the 1960s, it quarantined the proceeds into a separate sovereign fund, the Petroleum Fund, for long-term investment. That fund, founded in 1967, was worth about $400 billion by 2008, roughly the size of the country’s total GDP. Norway saved and invested and prospered. After a century of lagging behind its neighbours, it pulled ahead of Sweden and Denmark because of its smart stewardship of its new wealth. Argentina, on the other hand, the richest country on earth a century ago, squandered its resources income. It spent every cent, plus some more, under the influence of Peronist populism. No matter how much romance Juan and Eva Peron have been invested with, their approach to governance was ruinous. Argentina ever since has lurched from crisis to crisis, sliding ever lower in the international income rankings. Where is Australia along this spectrum? In the commodities boom that started in 2003–04, Australia has muddled along in the middle, saving some of its super-wealth and spending some. An international expert on minerals booms, Bob Gregory, a professor of economics at the Australian National University and former member of the Reserve Bank board, offered this advice: ‘If it’s a permanent boom, you can behave as if it is permanent and you don’t need to do much. But if it’s temporary, you want to store as much money as you can for the future. The only easy leverage for doing this is the Federal Budget. [The Government] ought to be squirrelling away as much as possible.’ Many serious analysts believed the commodities boom would run for a long time, but none ventured to say it would run forever. The Howard Government did squirrel some income away. It set up the Future Fund with $41 billion in cash from surpluses, plus

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proceeds from the sale of Telstra and unsold Telstra shares. The fund was created to provide for the future liabilities of the Commonwealth public service. The Government also created a $6 billion Higher Education Endowment fund. But squirrelling was not the priority. The Treasury reported in early 2008 that, as the Howard era wore on, spending discipline fell away: ‘There has been a reduction in the number and proportion of savings measures included in Budget reports since the 1997–98 Budget. In the 1997–98 Budget, close to a third of all measures had a savings component, whereas more recently, savings measures have averaged around 1.5 per cent of total measures.’ More starkly, the Treasury reported that, from the 2004–05 Budget to the 2007 election, the China boom and a robust economy had added $334 billion in windfall gains to the Budget surplus. Of this, the Howard Government spent, or gave away in tax cuts, $314 billion, or 94 per cent. Again, for perspective, this is the size of the entire annual economic output of South Africa or Denmark. ‘Effectively, the additional revenue from the commodity boom has been spent or provided as tax cuts,’ summarised the Treasury in its summer 2008 Economic Roundup. The study compared Howard’s fiscal policy with that of that touchstone of recklessness, Prime Minister Gough Whitlam. The Australian journalist and author Paul Cleary has reported that, when East Timor was about to be granted independence, Alexander Downer was asked whether he favoured giving it a larger share of the oil revenues from the Timor Sea, in which sovereignty is divided between Australia and East Timor. No, said Downer, because the Timorese could not be trusted with windfalls from commodity exports. Downer said they would ‘piss it up against the wall’, wrote Cleary, a former adviser to the East Timor Government. Yet this is what Downer’s own government did with the proceeds of the Australian commodities boom. Downer acknowledged in 2008 that the Howard Government was a big-spending one: ‘I suppose I am naturally parsimonious, so I think we spent quite a lot of money,’ he chuckled.

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Recent Howard Budgets resembled ‘Christmas night at the pirate cave’, in the phrase of a former Budget analyst with the Treasury and Department of Finance, Stephen Anthony, of the consultancy Macroeconomics.com.au. The chief problem for governments, Arthur Sinodinos explained, is that ‘you can’t sit on big heaps of money . . . The government’s also been spending money and getting criticised by people for spending money. But, I mean, I think you have to do that. [It is] very hard to sit on very large surpluses. So you’re caught between a rock and a hard place. And to some extent we did try to get around the problem by setting up all these future funds—creating these streams of revenue for the future. But our worst nightmare was you might sit on these surpluses, get lambasted by the public for doing it, and then have Labor or someone else come in and spend them anyway.’ That happened in Victoria after Premier Jeff Kennett lost power in 1999. He ‘left a fair bit of money that the Victorian Labor Party lived off for years,’ Sinodinos said. ‘That became folklore within the Liberal Party—why should you hang on to the surpluses? Because your opponents would just come along and spend them.’ The Howard Government did receive a steady stream of expert criticism for being too lax in its fiscal policy, but it was reluctant to listen. It’s notable that the Treasury’s tough assessment was published only after Howard lost power. Saul Eslake, the ANZ Bank’s chief economist, was one of the Government’s most consistent and forthright critics. He was neither strident nor partisan—early on, he routinely commended the Government’s fiscal performance. But Eslake kept a running tally of the windfall revenues that accrued to the national revenue, and the large percentage that the Government was giving away as spending and tax cuts. He also made unflattering remarks about the Government’s accounting practices. He was well qualified—he had been chief executive of the Victorian Audit Commission in 1992–93. Treasurer Costello’s reaction was to try to pressure the ANZ into silencing Eslake. On one occasion, in February 2002, the economist was asked at a conference in Hobart whether the Government ever used ‘creative accounting’. Yes, it did, he said. For example, it ordered

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the Reserve Bank to make dividend payments to the Government at times that suited the Government’s political convenience. But, Eslake added, it was no worse than the Labor Government that had gone before it. When these remarks were reported in the media, Costello phoned the ANZ Bank’s chief executive, John McFarlane and vented his anger. McFarlane was left feeling concerned about the consequences for the bank, so according to Eslake, McFarlane relayed to his chief economist that the Treasurer had threatened to take ‘regulatory action that ANZ wouldn’t like, because of some mildly critical observations I’d made about the Government’s accounting practices’. Eslake phoned Costello to apologise, but the Treasurer would not take the call. McFarlane chided Eslake in an email: ‘The important thing to remember going forward is the big picture for ANZ and to avoid pushing the boundaries for little gain.’ Eslake promised not to comment on the Government’s accounting practices again. He kept his word, even in 2003 when the Reserve Bank disclosed that, at the direction of the Treasurer, it was deferring until 2004–05 the payment of a dividend to the Government of $964 million that would normally have been paid in 2003–04. Eslake contented himself with an email to McFarlane, pointing this out and observing that ‘as you will recall, this Government never, ever engages in creative accounting’. His boss commended him for refraining from public comment—‘thank you for taking the greater good of ANZ and an easier life for me into account’, McFarlane wrote back. Eslake did continue to comment publicly on the Government’s taxing and spending. But Costello’s threat of regulatory retaliation had successfully stopped this expert from openly criticising the Government for its treatment of public finances. Costello waged an unending war over Budgets inside the Government, and he was ready to take the fight to commentators outside the Government as well.

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11 The Primate Model of Ruling

Alexander Downer dates the dinner in the Great Hall of Parliament on 1 March 2006 as the moment the fall of the Howard Government began. It was a year and nine months before Australian voters consigned the Howard era to history. The three big dinners to mark the Government’s tenth anniversary in power ‘will not be triumphal occasions’, the Prime Minister had promised. ‘The golden rule of Australian politics is not to get too full of yourself,’ he said at one of the dinners. He was so careful to preserve his trademark appearance of the ordinary bloke that one observer, Mischa Schubert of The Age, reported: ‘Bland is the new black. Every detail of last night’s gala dinner to celebrate the Howard Government’s decade in power had been scoured for traces of hubris.’ This was smart management of political imagery. But the sombreness was appropriate, according to Downer, one of Howard’s most senior and trusted colleagues, because it was not a celebration of victory but the threshold of defeat. At this moment, when John Howard seemed unassailable, he was, according to Downer, at his most vulnerable. With ministers in their dinner suits and their corporate courtiers paying $10,000 a table to draw near, the second-longest-serving prime minister in Australian 116

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history gave every sign of being a bastion of power. Yet Downer believes this was the very moment when the government lost its inner purpose. ‘I see the tenth anniversary dinner as the great turning point for the government,’ he said after the 2007 election. ‘I think that was the point where it had run out of exciting new ideas.’ Downer recalled his own maiden speech in the House in February 1985. ‘There were all sorts of things I wanted to see happen in Australia. One was a more deregulated labour market; another was to get rid of tariffs; another was privatisation; another was a broadly based consumption tax. I wanted welfare to work; I wanted to give more substance and meaning to the American alliance and the American alliance in Asia. ‘Well, by the time I got to 2006, to our tenth anniversary, we’d done all those things. We didn’t have the one big idea to crusade on in the 2007 election. We offered really just more of the same. After Work Choices [which came into force twenty-six days after the dinner] we didn’t have a big policy reform. We had smaller things, like what policy should we have on climate change. Those things could all be fine-tuned; they could all be improved, no doubt about that. But we didn’t have the next big idea that Australians were crying out for . . . The public is always looking for new ideas.’ The Coalition was suffering from something much more than an ageing leader who had outstayed his welcome, in Downer’s view. It was suffering from a dearth of imagination, which in turn produced a crisis of purpose and a failure of relevance. ‘There’s a cycle in public life [for a] political movement,’ Downer observed. ‘And this was a Western-wide political movement which was embraced by conservatives, starting with the Thatcher revolution in 1979—the market liberalisation/economic rationalist agenda. You can implement it, and then there isn’t more to do . . . All it has to be is managed.’ Downer recalled telling Howard in the last year of the government’s life that ‘we need a new crusade, we need to be out there fighting for something new’. Howard, Downer says, retorted: ‘Well, we’ve done all the things that we really wanted to do.’ A number of people in the Government, and outside it, thought the tenth anniversary was an ideal time for Howard to hand over

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the leadership to Peter Costello. Howard had been thinking about it. He had said as much to Downer. But, as he said in 2008, the circumstances were not quite right: ‘Most probably, my disposition was to retire at the end of [2006]. But, until you actually do retire, you can’t say anything more.’ To announce one’s retirement ahead of time is, as Britain’s Tony Blair discovered, a sure way to be marginalised as the country turns its attention to the coming man. In public, Howard gave no hint that he was considering stepping down: ‘I still have a driving interest and commitment in the job. I still want to do things,’ he told Michael Gordon of The Age in the approach to the tenth anniversary. ‘I’m finding it more stimulating than ever,’ he said separately. Yet there were some subtle signs behind the Government’s closed doors that he was contemplating retirement. Kevin Andrews, for one, noticed less prime ministerial intensity and activity in early 2006. ‘I didn’t feel he was on the ball the way he had been,’ he said later. ‘When he was on the ball you could expect a phone call from him about anything and wherever he was. I remember him being in a CHOGM [Commonwealth Heads of Government Meeting] in Malta, and I remember thinking I’m not going to get a phone call from him for a few days. And then I got pulled out of a luncheon in Hobart because he was on the phone and wanted to talk to me. And here he was in the middle of a CHOGM leaders’ closed meeting . . . wanting to talk to me about something he’d read in an Australian paper that morning!’ By early 2006, however, ‘I got the impression that he wasn’t quite on the ball as much. So whether it was in the back of his mind that he might go, I don’t know, but certainly in the latter part of the year things had changed.’ Howard recalled: ‘My disposition was to go at the end of the year but, before I finally resolved that, I wanted to be certain that Work Choices had got through the High Court. Part of my thought processes was to tick things off, and getting the right court decision on Work Choices was one of those things. [The High Court dismissed the ACTU’s challenge to Work Choices in October 2006.] I knew I had to say something about my future by the end of 2006, whether

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I was going or staying, I’d have to do that. As the year wore on, my thinking was that I would probably go at the end of 2006. I wouldn’t make an announcement about it until right at the end—that transition during the Christmas recess. And by then we would have got the Work Choices decision, and that’s what my mindset was.’ But Howard was simultaneously toying with plans for a future policy agenda: ‘It is true that by 2006, after we had done privatisation of Telstra in 2005, and even got voluntary student unions through in 2005—which was a nice philosophical morsel for a lot of our people who’d fought hard on the issue, and it was important, very important for them—and we got industrial relations reforms through. But then, we had other things to do on the social welfare front. And, of course, we had the coming environmental issue—not coming, it had arrived.’ This suggests that Howard did have in mind a further agenda he wanted to pursue—that he might have been in two minds about retiring in 2006. Reluctance to leave high office, especially the very highest office, is normal and natural. For a leader to walk away at the peak of his power is the hardest decision of all. This is precisely why twentyfive nations set limits on their leaders’ terms. After studying all the national leaders of the 20th century—all 1941 of them—an American professor of psychiatry, Arnold Ludwig, wrote: ‘It seems as if some as-yet-undiscovered chemical, the human equivalent of catnip, gets released in their brains and begins to affect their judgment. As an expression of the intoxicating effects of their social role, they typically come to believe that they are smarter than their predecessors and can handle any personal threats that come their way. So, typically, they often fail to heed advisers who do not tell them what they want to hear and they ignore all lessons from the past.’ Pursuing power is a thrill, attaining it an intoxication, and holding it becomes an obsession. For the leaders Ludwig surveyed, the average time in office was 5.3 years. But when they had the opportunity, leaders stayed on much longer. Eighty-one of them held power for at least twenty years. The longest stayers, other than monarchs, were Enver Hoxha of Albania (forty-one years), Kim Il Sung of North

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Korea (forty-six years) and Chiang Kai-shek, leader of what is now Taiwan (forty-seven years). Ludwig hypothesised in his 2002 book, King of the Mountain, that humans share with their closest relatives in the animal kingdom a ‘primate model of ruling’. This suggested that upon assuming leadership, ‘unbeknownst to them, they assume a role on behalf of their species that they are genetically programmed to play, regardless of the rationalisations they give for their decisions’. He wrote that in both humans and apes, power can bring about physical changes: ‘Like the alpha male monkeys and apes that move about in a more upright, slow-and-sure manner, making their bodies seem larger than they are so that they can appear more ferocious and formidable to subordinates, human leaders, in response to their newly acquired power, often begin to strut about in full military regalia, with their puffed-out chests weighted down by medals attesting to their physical prowess, bravery and masculinity. They also begin to hold forth, pontificate and bark out orders with new authority.’ The most striking example of the physiological effects of power in primates is the silverback gorilla. The male will normally develop the characteristic markings on its back around the age of nine or ten. But if one happens to assume leadership of its tribe at a younger age, its back will turn silver prematurely. Howard had previously been clear-eyed about the best retirement age for his subordinates. After winning the 1996 election, he told one of his closest allies, Michael Baume, that he couldn’t make him a minister in the new government because he was too old. ‘Howard asked him to think it over, citing Baume’s age, over 65, as a reason to move on from the cut and thrust of politics,’ according to John Winston Howard: The Biography, by Wayne Errington and Peter van Onselen. Howard offered Baume a fine consolation prize—the post of Consul-General in New York. A decade on, Howard was having trouble bringing himself to stamp an expiry date on his own political career. Of Australia’s twenty-five prime ministers up to and including Howard, only three managed to retire of their own accord, at a

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time of their own choosing, and none had done so in the past forty years. Australia’s first Prime Minister, Sir Edmund Barton, retired voluntarily, as did the fifth, Andrew Fisher, in 1915, and Sir Robert Menzies, in 1966. A whole generation of State premiers has managed to retire before being forced from office: Bob Carr of NSW, Steve Bracks of Victoria and Peter Beattie of Queensland all followed the example of NSW’s Neville Wran. These are the rare cases where calm judgment has triumphed over the mind-warping addiction of power. All of them—Labor leaders every one—acted in accordance with what Peter Costello called ‘the new model for Australian politics’. A close Howard confidant argued that for him, ‘The whole mindset [was] different. Howard crawled over broken glass to get there and it took him twenty-one years. The sheer emotional investment makes it much harder to walk away.’ And, at Howard’s age, he had fewer options for a life after politics. The prime ministership is, of course, a far greater prize to surrender than a State premiership. A premier attends to roads and railways and schools and hospitals. A prime minister is responsible for the destiny of the nation. Ludwig wrote that the hunger for power among dominant male primates is ‘written in their genes, edited by their cultures’. If Howard’s hold on power was dictated by his genes, it was soon to fall to Australian voters to do the editing.

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12 ‘There Was No Way He Had the Numbers to Topple Me’ The moment John Howard vindicated his leadership by winning the 2004 election, the head of the Liberal Party secretariat began worrying about it. The Federal Director of the Liberal Party, Brian Loughnane, had wanted to talk to the Prime Minister about his tenure as the country’s leader. Howard was now sixty-five, the standard age of retirement. By the time of the next election he would be sixty-eight. Anticipating Howard’s retirement, the Labor Party had already made an issue of the succession in the 2001 campaign and again, briefly, in 2004. ‘It was very clear to me that Labor would run on the leadership issue in the 2007 campaign, and this time it would have more credibility,’ Loughnane said in 2008. He wanted Howard to clarify his intentions well in advance. As Federal Director, Loughnane was also the party’s campaign manager. Unforeseen events can crush a political campaign. Surely, Loughnane thought, the party ought to be able to control the variable of its own leadership. Loughnane ‘said the optimum thing would have been for me to have said was, I am going to stay, and stay for three years,’ said Howard in 2008. ‘He’d have been happy for me to say that any time. But I couldn’t say that, because I knew that I wasn’t going to 122

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stay another three years. I mean, I had ended the last term [with the 2004 election] believing that was going to be my last term.’ So at the start of his fourth term Howard was contemplating retiring in 2006, before the next election was due, allowing Peter Costello some time to consolidate his position as leader before facing the people. ‘And the idea that I would just get up and stay for a fourth term, I mean, I just wasn’t willing to do [it].’ Nor did Howard want to make a promise he didn’t intend keeping: ‘I wasn’t willing to do what Bracks and Beattie and Carr did,’ saying they would serve a full term and then abruptly resigning. ‘That would’ve been dishonest.’ So Howard would not commit to staying. But neither would he commit, even in his private planning with the Liberal Party Director, to leaving. ‘After the 2004 election, a view took hold that Howard was thinking about going,’ Loughnane recalled, ‘and that was left hanging out there for a year. It reinforced the view that we weren’t concerned about people’s priorities. Howard certainly knew it was an issue. He was a realistic politician.’ It was frustrating for Loughnane, but nowhere near as frustrating as it was for Peter Costello. With Howard’s intentions unknown to anyone but the Prime Minister and his wife, the Government remained vulnerable to one of its periodic convulsions on the question. The general pattern was for one paroxysm a year, usually around Budget time, which happens to be a Treasurer’s big annual moment in the spotlight. This time, in 2004, the fit struck on 29 April, two weeks before the Budget, while Costello was putting the final details in order and thinking about his speech. He was in a Melbourne restaurant called Livebait, dining with three journalists from The Age, when Howard called him on his mobile phone. The Prime Minister told his deputy that he had given an interview to two reporters during a trip to Athens; he had made some remarks about the next election that would be appearing in the next morning’s newspapers, and he feared they might be misinterpreted. Next morning, Costello braced for the headline on the front page of The Australian: ‘PM: I won’t make way for Costello.’ Howard had

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told the newspaper’s Steve Lewis and another reporter, Malcolm Farr of the Daily Telegraph, that he thought he could beat Kim Beazley at the next election, a clear signal that he planned to remain in the leadership for the full term. And in case that were not clear, he added: ‘I am not going anywhere.’ He said he had ‘lots of energy’ and ‘lots of things’ he wanted to achieve as Prime Minister. Furthermore, ‘I am not planning my post-Prime Ministerial life.’ It became known as the Athens Declaration. Costello was furious. He was unconvinced by Howard’s explanation. As Pamela Williams of the Australian Financial Review wrote: ‘John Howard has tried to sort it out by saying he was misinterpreted and caught out by a journalist’s question. If so, it’s a first.’ Howard had a formula for deflecting such questions but he had chosen to depart from it. If it was, for Howard, the Athens Declaration, it was, for Costello, the Athens Provocation. Next day, the two men had a three-hour meeting punctuated by pizza for lunch and a discussion of the Budget with senior officials. Costello emerged bristling with anger and indignation. ‘This is an issue that is overshadowing the Budget as of today, so I don’t think it was helpful,’ the Treasurer told reporters. ‘In 1995, when I was the Deputy Leader of the Liberal Party, when John Howard was seeking to return to the Liberal Party leadership, I thought it was in the interests of the party to have a smooth transition. I did everything I could as Deputy Leader to ensure there was a smooth transition, and there was a smooth transition. It set the Liberal Party up for four election victories.’ Asked if he were ruling out a challenge to Howard, Costello replied: ‘I’m just saying—and I’m the Deputy Leader of the Liberal Party, I look to the Liberal Party’s interests—I’m making the point that the Liberal Party has done this badly in the past, and it’s done it well. It’s at its best when it does it well. There’s a very big message to the Liberal Party.’ Howard chose not to hear it. For Loughnane, for Costello, for the Liberal Party, for the Government, for Australia, the question at the heart of the national leadership—the Prime Minister’s intended

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tenure and his plans for the sucession—remained unresolved as 2004 became 2005. And then as 2006 approached. Looking back from the vantage point of 2008, Howard said he’d answered the only way he could when he was asked if he could beat Kim Beazley again: ‘What else was I going to say? If I say, Oh, no, no I can’t, that would have been an argument for me retiring on the spot. Or if I say, I don’t know. I’d beaten him twice—do you really think I’d be equivocal about whether I could beat him again?’ Besides, Howard said, in 2005 he still had unfinished business: ‘I didn’t have any particular thing about beating Beazley again. I just had a thing about . . . We had a number of things we had to do in 2005—we had industrial relations, and we had Telstra, and East Timor was blowing up again, and we had problems with Indonesia. A whole lot of things.’ Did Howard feel that he had a point to prove by staying on? ‘You’ve got a point to prove in politics until the day you leave.’

... After eight years in Federal Parliament and two and a half as Howard’s Minister for Defence, Ian McLachlan was retiring from politics. After attending the final Cabinet meeting of his career, he took leave of his Prime Minister in Howard’s office in Phillip Street, Sydney. It was October 1998. He said, ‘John, you have an obligation to fulfil. I have a note in my wallet which records the deal we did in Peter Costello’s room in 1994,’ McLachlan recalled in 2008. What deal was that? Howard asked. ‘You said you would stay for a term and a half and then hand over to Peter Costello,’ McLachlan reminded his leader. Howard’s response, according to McLachlan, was, ‘I don’t remember it that way.’ This rankled with McLachlan. And it stayed on his mind. A South Australian grazier and one of Australia’s biggest landowners, McLachlan was considered a Howard loyalist and a political straight dealer. That reputation was one of the reasons Howard had asked him to convene

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the original meeting with Costello to arrange for the succession to pass from Alexander Downer. But in the years that followed, McLachlan’s straight nature struggled with his loyalty to Howard. One obvious handover opportunity after another rolled by. In 1999, during Howard’s second term as Prime Minister, Costello gave the first public hint of a specific timeline for his succession expectations when he said that he had only ‘one or two Budgets left in me’. Then Howard won a third term. He speculated about retiring on his sixty-fourth birthday, in 2003, then decided not to. Costello told McLachlan over dinner that year that ‘Howard will never step down, no matter what,’ McLachlan recalled. ‘But I said to Peter, I can’t believe that—he knows the promise he made to you.’ Howard won a fourth term, and still he stayed on. McLachlan grew frustrated and angry. For a year or more he vented his indignation in conversations with other retired Liberal politicians about the deal he had witnessed and the note he carried in his wallet. Most didn’t want to know—one told him to keep the note there permanently. But at at least one dinner he pulled it out and handed it around. In December 2005 at the twentieth anniversary of the Dollar Sweets Case, the landmark industrial relations case that had put a young barrister called Peter Costello into the spotlight, McLachlan chatted with journalist Glenn Milne. He was fulsome in his praise of Costello’s leadership credentials. So fulsome that Milne started to wonder. ‘I was astounded at how passionate McLachlan was in his advocacy for Costello, especially given that he was seen as a Howard man,’ Milne, a long-time press gallery journalist for the News Ltd papers, said later. ‘John Howard once told me that if he were in a war, McLachlan was the person he wanted next to him.’ Milne was intrigued. He started to ask questions. At a Christmas function, Milne said, a prominent Australian business figure, Robert Champion de Crespigny, told him there was a deal between Howard and Costello on the leadership. This was a whiff, but only hearsay—nothing authoritative enough to run with. The tenth anniversary of the Howard Government came and went in March 2006. There had long been hints and rumours about

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some sort of deal, but Howard had always emphatically denied them. When the question was again put to him on the occasion of his tenth anniversary, he replied: ‘The Prime Ministership of Australia is not mine to confer on somebody else. If I decided at some time in the future that I was going to go, then the Liberal Party will decide my successor, and not me.’ He denounced his Labor predecessors, Bob Hawke and Paul Keating, for their handover agreement: ‘I thought it was supreme arrogance on the part of both of them to think that they could have a secret deal witnessed by two people, for heaven’s sake. It’s outrageous. Talk about the party of the people.’ Four months later, on 5 July 2006, reporters asked Peter Costello the same question while he was on a trip to the Solomon Islands. After repeatedly deflecting it, he gave this non-answer: ‘These things are worked in the interests of the Australian people and the Liberal Party and the people concerned, and there is no point speculating on it.’ Milne now redoubled his inquiries. He was finally rewarded when a senior Liberal Party official (not a parliamentarian) told him there had indeed been a deal, and McLachlan had witnessed it. Milne phoned McLachlan and told him what he had heard. ‘Ian, I am going to report this,’ Milne recalled saying. McLachlan said he had no comment. On a point as incendiary as this, Milne decided that absence of a denial was tantamount to a confirmation. He then took his story to Costello’s office for comment: ‘I didn’t want to have a conversation with Peter about this because there was a perception of my relationship with him—that we were close.’ Milne wanted Costello to be able to say truthfully afterwards that he had not spoken to Milne about the matter. ‘I deliberately went through Dave Alexander [the Treasurer’s press secretary],’ Milne explained. Alexander conferred with Costello and came back to Milne with a ‘no comment’. Milne filed the story on Saturday, 8 July, and went to lunch at the home of a Canberra lobbyist, Steve Carney. The story was to run in the next day’s Sunday Telegraph. Milne did not know that after his call McLachlan had phoned Costello. The retired minister told the Treasurer he had decided to

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set the historical record straight and make the leadership pact public through Milne. According to McLachlan, Costello replied, ‘It’s your decision.’ McLachlan asked if the Treasurer objected, and ‘He didn’t try to talk me out of it. I don’t remember what he said exactly, but he didn’t object. If he didn’t want me to do it, I certainly would have heard about it. He gave me the feeling it was a weight off his shoulders. He didn’t start this. Milne’s call came from out of the blue. As far as I know, Peter never told anybody about this.’ Milne’s lunch was interrupted by a phone call from McLachlan. His story had now graduated from being informed guesswork to being confirmed on the record; from being a report that might have been dismissed as speculative to being a crisis for the Howard Government. Milne left lunch and rewrote his story. As published, it read: John Howard promised Peter Costello in a secret meeting 12 years ago that he would hand over the prime ministership after two terms, The Sunday Telegraph can reveal. The undertaking was witnessed by then shadow environment minister Ian McLachlan, who was in the room when the two men discussed their future in December 1994. Mr McLachlan, who made notes of the meeting and has kept them in his wallet for 12 years, yesterday confirmed he was present at the meeting and that Mr Howard had given an undertaking to Mr Costello . . . According to those familiar with the account of the meeting, Mr Howard said words to the effect: ‘I can’t guarantee this to you, Peter, but my intention is not to hang around for ever. If I win, I’ll serve two terms and hand over to you.’ In December 1994, after eleven years in opposition, the Coalition had been in a dismal state under Alexander Downer’s leadership. Support for Downer within the party had collapsed. Labor’s Paul Keating was dominant; the Liberals were desperate. Howard wanted to re-emerge from the backbench to seize the leadership. He wanted to do it bloodlessly, if possible, by persuading Downer and his deputy,

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Peter Costello, to stand aside rather than to oblige Howard to mount a challenge in the party room. Downer was a spent force, but Howard was wary of Costello’s potency. He wanted to come to an understanding with him rather than go head to head. McLachlan arranged and witnessed the meeting in Costello’s office in Parliament House. With that accomplished, Downer stood down. Howard was made leader unopposed, with Costello as his deputy, and went on to win the 1996 election. McLachlan hoped that the disclosure of this arrangement would serve as a catalyst. He hoped it would force a resolution—that Howard would be required to acknowledge his undertaking and hand over to Costello. The national political system and the media held their collective breath. The Treasurer assumed a righteous tone and used the opportunity to press the Prime Minister publicly. He confirmed McLachlan’s version of events: ‘I did not seek that undertaking; [Howard] volunteered it and I took him at his word.’ Howard denied that there was any deal: ‘Mr Costello and I on a number of occasions, over the years, have denied the existence of a deal. The leadership of the Liberal Party is determined by the more than a hundred men and women who make up the parliamentary Liberal Party. The leadership of the Liberal Party is not determined by John Howard or Peter Costello, or indeed any other individual.’ Howard said: ‘The situation is very simple—there was no deal made.’ Recalling the incident in 2008, Howard said he had never believed there was a pact, and neither in his estimation had Costello. One measure of this, he said, was that Costello had never once referred to it between 1994 and the July 2006 story. ‘It’s not something Peter had raised with me,’ said Howard. ‘When we had our lengthy discussion in 2003, which was the lengthiest discussion we had had about the whole issue, he didn’t say, Look, we had a deal that we made in ’94, that you’d hand the leadership over after a term and a half. And the reason he didn’t say it is that we didn’t have a deal.’ Howard conceded that he had spoken the words that McLachlan had attributed to him, but he interpreted the sense differently.

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‘I would have said to Peter, with Ian McLachlan being present, Yes, if I become leader, I’m not going to stay forever. I’m only going to do a term or two. Or a term and a half, or words to that effect. But [Peter] didn’t then say, Right, well that’s a deal. We shake hands on that. You can run, I won’t oppose you—it’s a deal. Now, if that had happened . . . well, a different matter. But that didn’t. That conversation didn’t conclude anything. We went on speaking for weeks, and he was still reserving the right for another five or six weeks to run himself, as he had a perfect right to do. And when he finally sort of indicated that he was not going to run, he didn’t say, Well, now remember, we had a deal. It never came up. Until the thing came out. To think it was a deal is also a misreading of the significance of the discussion that I’d had with McLachlan and him. That was the only discussion McLachlan was involved in with me. He gave an inflated significance to the discussion because he was involved in it. Now I can only conclude that Peter thought that somehow or other this would be the catalyst. And the party would rise and say, Howard must go. Didn’t work that way, though.’ Incensed at Howard’s intransigence, McLachlan released to the media the handwritten note he had been nursing like a grudge: ‘Meeting Monday Dec 1994. Undertaking given by JH at a meeting late pm in PC’s room that if AD resigned and Howard became PM then one and a half terms would be enough and he would hand over to PC. IMcL.’ The Liberal MP Bronwyn Bishop went on ABC-TV’s Lateline to demand that Costello put up or shut up: ‘Mr Costello must challenge for the leadership or go to the backbench. He has to decide whether he wants to challenge or stand aside.’ The denouement was a Cabinet meeting in Sydney two days after the story broke. Howard avoided the cameras and entered through a back way. Costello walked in the front door and paused dramatically in front of the expectant reporters. Choosing to increase the pressure on Howard, he said: ‘My parents always told me that, if you have done nothing wrong, you have got nothing to fear by telling the truth. I told the truth.’ Invoking the memory of childhood innocence he had, in effect, accused the Prime Minister of lying.

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Howard, as leader, bore responsibility for failing to manage an orderly succession. But Costello bore responsibility for his response to Howard’s failure. He committed a fundamental misjudgment. This was not a morality play—it was a power play. Howard went into the confrontation as Prime Minister, with four election victories to his credit, a solid majority of his party behind him, and an iron determination to crush this challenge to his credibility. Costello went into it with a pout, a moral pose, no plan and perhaps twenty-five votes, representing less than a quarter of the party room. Exactly how many votes Costello might have marshalled was never rigorously tallied. Although he talked big to journalists over dinners, he never seriously planned nor organised a challenge to Howard. ‘I had a conversation with him around the time of the McLachlan thing to find out what he would do,’ said Julie Bishop, one of the most senior Costello supporters, who was Minister for Education in Howard’s final Cabinet and Deputy Liberal Leader in the immediate post-Howard era. ‘He was obviously never going to do a Keating. He was never going to challenge and go to the backbench if he didn’t get the numbers.’ Bishop observed, ‘You will never be able to accuse Peter Costello of standing up and saying, I want this leadership and I want it now. Because he was a very loyal deputy. Look, I wasn’t one of the chipmunks—you know, one of the Costello agitators. But I was a great supporter of Peter’s. Not ashamed to be a great supporter—admire the man enormously. And I think he can take so much credit for the success of the government over the four elections that we won. But I was never asked to go over the top and was never told, Julie, it’s on.’ Bishop had not been in Parliament at the time Andrew Peacock was leader but, she said, ‘apparently everybody knew that Howard wanted that job so desperately he’d kill for it’. That wasn’t the case with Costello: ‘I saw Peter as the future of the party. It was a question of when he wanted to grasp that future. Now, maybe it’s been a case of a great misunderstanding between the backbench and his colleagues, but there wasn’t a time where Peter said, Right, this is it. I’m going for it. Are you with me?’

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Another supporter and friend of Costello’s, the then Environment Minister Senator Ian Campbell, corroborated this: ‘He never plotted. He never picked up the phone and said, Right, what are we going to do about this? Howard was very, very lucky to have such a loyal deputy.’ Now, however, the Liberals recoiled from Costello. He was damaging the leader, destabilising the party, creating a dreadful public image of a Government divided, and hurting the re-election prospects of everyone in the party room. Howard might have broken an undertaking, but frustrated ambition and wounded pride did not justify this monumental act of indulgence. If Costello was prepared to launch a challenge, then revelation of the ‘deal’ might have been a useful trigger point—it would have strengthened his case for moving to unseat Howard. But in the absence of any such plan, this episode only exposed Costello’s weakness. As reporters milled about in front of the Commonwealth Parliamentary Offices at 70 Phillip Street, waiting for Howard and Costello to emerge from the critical Cabinet meeting, Labor’s MP Julia Gillard happened to walk by and stopped to chat. She told some of the reporters that it was the perfect moment for Howard to retire. In the middle of his fourth term, at the peak of his powers—‘It never gets better than this,’ she said. It was a version of the very point Costello was making to his Prime Minister upstairs. In an hour-long private discussion after the Cabinet meeting, Costello reminded Howard of his undertaking and repeatedly told him that an orderly transition was in the interests of the party. If Costello thought this might move Howard closer to retiring, he was wrong. Looking back in 2008, Howard said, ‘I can’t tell you what possessed him with the McLachlan case. It was extraordinary. It was bizarre.’ Howard thought Costello should have discouraged McLachlan from going public. Failing that, he thought his Treasurer should have damped the situation down rather than inflaming it. Costello should have said, ‘Yeah, there was a conversation like that, but that was twelve years ago, and we didn’t conclude our discussions about the leadership that night, and it wasn’t a deal, and John’s won

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four elections and, as far as I am concerned, he can stay as long as he wants to and retire at a time of his own choosing. He has earned that right.’ In Howard’s view. ‘That, in essence was the way to handle it. That’s really what the parliamentary party wished had happened.’ ‘The reaction of the colleagues was: Oh, heavens above—that’s twelve years ago. There was nobody in the Cabinet who thought I should go, except for Peter himself. And I can say that Downer, Nelson and Turnbull were emphatic that I shouldn’t go. There was no pressure on me to go at all. None whatsoever. And the general feeling in the party, you know—whether they thought such a conversation took place or not—they didn’t really think that was very important. They certainly didn’t see that as a deal, and therefore they seemed to be saying, Well, hang on—this is December 1994. We have won four elections. What has that got to do with the price of eggs in 2006? That’s not relevant. People were saying to me, John, you’ve got to make it clear what you are doing. And I couldn’t go in the face of that. I assume it was all about creating pressure on me—that was Peter’s mistake. It was the worst thing in the world for him to try and put pressure on me. I’ve been around for a long time—I wasn’t going to react to pressure. ‘After the 2004 election, Peter’s mistake was to not realise what had happened, and that is that I had won four elections. Really, his attitude then should have been, publicly and privately, to have said, Well, you have won four elections, and you have earned the right to retire at a time of your own choosing, and you are under no pressure from me, or any people around me. You know, if he had adopted that attitude, I’d have retired during the last term. Trying to pressure me was the last thing that should have been done . . . He completely and utterly misread my personality on that.’ Costello may have made noises about a challenge, but ‘He was never going to do that. For two reasons. I don’t think he wanted to cause the disruption involved, but I think the other reason was he would never have won. There was no way he had the numbers to topple me at any stage. That was just the reality. And he understood that. I just think it was a pity that he didn’t play his cards differently.’

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In sum, Howard demanded homage, not defiance. He was assured of his strength in the party room and aware of Costello’s weakness. He had considered retiring in late 2006 but remained uncommitted. Now he had consciously to respond to Costello’s posturing: ‘I had to make a decision . . . as to whether I was going or staying. I couldn’t say, Oh, well, look, I’ll tell you in six months’ time. And that was the folly of the McLachlan thing. Unfortunately, Peter had created a situation where I had to declare what I was going to do well in advance of the time that I wanted to do it.’ If Costello hadn’t made his move, ‘I was leaning toward retiring at the end of 2006—that was the logical time to go.’ Instead, ‘the McLachlan thing forced me to make a decision then, and I really had no alternative but to stay because the party reaction to the McLachlan thing was quite strong. There was an overwhelming feeling that I should stay—that they didn’t think [Costello] had handled it properly. And I was just not willing to be forced—to look as though I had been forced out. I couldn’t . . . And the rest, as they say, is history.’ When this argument was relayed to Ian McLachlan, he responded: ‘I’m very disappointed to hear it. If that’s why John did it, then he did it for the wrong reason. He did it out of pride, and not in the interests of a proper, orderly transition to give the Liberal Party its best chance.’ McLachlan’s indignation was heightened by the knowledge that Howard had himself set out the 1994 discussion with Costello as a firm arrangement. On 13 December 1994, eight days after Howard’s meeting with Costello and McLachlan, an Adelaide businessman, Bob Day, was chatting with Howard over pre-dinner drinks at a function in a hotel. Day expressed support for Howard to replace Downer as Liberal leader. ‘At that point,’ Day recorded in a detailed note, ‘John Howard took me by the arm and led my away from the main drinks area and said to me This is how it will go. I will take over the leadership and if we win the next election, then midway through our second term I will step aside and hand over to Peter Costello.’ Even fourteen years later, Day, a sometime president of the Housing Industry Association, said his memory of the conversation was crystal

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clear: ‘There are defining moments in one’s life. I can picture it now just as if it was this morning.’ McLachlan delivered a harsh verdict on his former leader. ‘Howard’s defence of his position seems to be that neither I nor Costello should have pressured him, and that Costello should have said, when I raised the issue, that there was no deal. In other words, he should have lied. ‘Howard said had he not been pressured, he may have resigned. But given every opportunity a number of times, he never did, and had plenty of reasons why he shouldn’t. He never seemed to think then—or even now—about an orderly transition for the party, for its future. Just about, as he puts it, “my personality”. ‘Costello would not have won in a challenge to Howard. Of course not. It was Howard’s job to anoint him. At every opportunity, he and his advisers and colleagues decided he should carry on, until they changed their minds in 2007. But it was too late. And their profound lack of judgment, or his advisers’ lack of courage, produced a young Labor challenger, and an appalling result for the Coalition government.’ Would Howard have retired at the end of 2006 if not for the McLachlan letter and Costello’s reaction? In Howard’s account, he probably would have. Costello, on the contrary, strongly believes there was never the remotest possibility. Is there any external evidence to support either position? Howard had told Downer that he was considering it. Other observations from within the Government suggest that his customary intensity had eased, supporting the notion that he was genuinely weighing the idea. Yet even his most intimate lieutenant could not be certain that he would have retired of his own volition. Arthur Sinodinos agrees with Howard’s interpretation of the McLachlan affair: ‘It was just the wrong psychology to use with John Howard—publicly trying to bully him into submission, you know? Elements of the party didn’t like the way it was done. Look, the whole process of the PM’s decision got brought forward, and I think it probably had a different outcome to what might otherwise have been the case. But I have no basis for that other than my own instinct.’

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Yet we have it from Howard’s own mouth that he had not given any thought to his life after politics. Common sense and human nature suggest that a man who has not even begun to imagine his next phase of life is not seriously planning to move into it. Ian Campbell was troubled by the damage Costello had inflicted on himself in the McLachlan affair: ‘I was one of the people closest to Peter. I never discussed his leadership ambitions with him. Not once. The only time it came up was after the McLachlan thing.’ He told Costello he must never get into such an invidious position again: ‘Know that there are people who care about you. And if anything like that happens, you can always pick up the phone and talk to us about it. He agreed with me.’ Years later, Glenn Milne quipped to Costello: ‘I’m amazed you’re still my friend.’ Costello replied: ‘Me too.’ Mark Textor, Howard’s pollster for a decade, thought the damage done by the McLachlan episode went far beyond Costello. He told Howard the electorate now regarded Howard as a liar and Costello as hopeless. Howard looked like a liar because Costello seemed so upset by his memory of his conversation with him. And Costello seemed hopeless because Howard had failed to endorse him. At a stroke, both of the topmost figures in the Government had been tarnished and two generations of Liberal leadership compromised. Textor could not see how the Government could recover from such fundamental damage to its brand. But Howard saw no way other than to persist: ‘I was forced to make a premature decision about my retirement because of the McLachlan thing and, having made it, it was an extraordinarily difficult thing to contemplate unpicking it.’

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13 Beware of Thyself, Old Man

During the voyage of Herman Melville’s whaling ship the Pequod there comes a moment when the first mate, Starbuck, resolves to confront Captain Ahab. He ventures to the captain’s cabin, where he finds the old man studying his charts and ‘tracing his old courses again’. Starbuck has long been troubled that his captain is putting his personal obsession ahead of the welfare of the ship and its crew. Now Ahab’s priorities are to be put to the test. The store of precious whale oil below deck is leaking. Starbuck advises his captain that they need to interrupt their journey to open the hold, bring up the wooden casks of oil, and stop up any leaks: ‘What we come twenty thousand miles to get is worth saving, sir.’ But Ahab is impatient to be on his quest for the white whale, Moby-Dick, and decides to press ahead, leak be damned. ‘What will the owners say, sir?’ Starbuck remonstrates. Gathering whale oil is the purpose of the venture, after all. ‘Let the owners stand on Nantucket beach and outyell the Typhoons,’ storms the captain. ‘What cares Ahab? Owners, owners? Thou art always prating to me, Starbuck, about those miserly owners, as if the owners were my conscience. But look ye, the only real owner of anything is its commander; and hark ye, my conscience is in this ship’s keel.—On deck!’ he orders. 137

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But Starbuck refuses to be dismissed. Reddening, but still respectful, he edges further into the captain’s cabin to press his point. Ahab is furious. And when Starbuck stands his ground, the narrator records the commander’s response: ‘Ahab seized a loaded musket from the rack . . . and pointing it towards Starbuck, exclaimed: “There is one God that is Lord over the earth, and one Captain that is lord over the Pequod.—On deck!”’ Mastering his emotions, Starbuck calmly rises. As he quits the cabin, he pauses for an instant and says: ‘Thous hast outraged, not insulted me, sir; but for that I ask thee not to beware of Starbuck; thous wouldst but laugh; but let Ahab beware of Ahab; beware of thyself, old man.’ As the first mate disappears, Ahab murmurs to himself: ‘He waxes brave, but nevertheless obeys; most careful bravery that!’ Starbuck has confronted his commander, but he has baulked at mutiny. He has appealed to the better judgment of his captain but shrunk from a direct challenge to his power. He has invoked a greater interest but he will not take arms against his leader to advance it. Ahab has asserted his absolute mastery of his vessel and her crew. He has prevailed not through a reasoned argument but by recourse to raw force. He has not acknowledged any interest or authority in the voyage except his own. He has insisted on his absolute right to pursue his personal obsession even at the cost of his ship and its crew. Nonetheless, old Ahab is shrewd enough to later mollify his chief mate and take his advice about the leak. He knows that, however strong his position, he is vulnerable to the accusation that he is taking the entire enterprise hostage to his madness. As the narrator tells us, having revealed to his crew ‘the prime but private purpose of the Pequod’s voyage, Ahab was entirely conscious that, in so doing, he had indirectly laid himself open to the unanswerable charge of usurpation’. That would have entitled the crew to have refused to obey him further, or even to have wrested command from him by violence. So ‘Ahab plainly saw that he must still in a good degree continue true to the natural, nominal purpose of the Pequod’s voyage’. In other

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words, he had to preserve the appearance that he was conducting the journey for its stated purpose—of gathering as much whale oil as possible and returning profitably and safely to port. He needed to take care to mask ‘the mad secret’ of his obsession. The words of Starbuck proved prescient. The mortal peril to Ahab was not Starbuck, an obedient officer, but Ahab himself.

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PART THREE VENGEANCE

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14 A Very Determined Bastard

When Mark Latham’s leadership of the Labor Party self-destructed in a paroxysm of anger and bitterness on a hot January day in 2005, leaving only a small puddle of bile and pus, Kevin Rudd decided that his time had come. The final debacle of the Latham era had been the leader’s insouciance towards the death and suffering unleashed by the apocalyptic Boxing Day tsunami that killed some 300,000 people from India to Indonesia. Latham wrote in his splenetic diary, later published, that his Christmas holiday had been idyllic except for ‘only one nuisance: the media have been looking for me to comment on the Asian flood’. Even as Latham was writing these words, and even as he was refusing to oblige, Kevin Rudd was in Indonesia inspecting the wreckage. Latham’s day was clearly over. And Rudd believed his own was dawning. He had been relentlessly cultivating support within the party; now he launched a frenetic telephone campaign to lobby his colleagues in the Federal Labor Caucus for their votes in the coming leadership ballot. Some were surprised to have the eager candidate contacting them in the wee hours as he canvassed their votes by satellite phone, calling from remote parts of the devastated archipelago. 143

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Rudd’s efforts were frustrated. ‘There was an exercise of factional thuggery,’ he recalled after becoming Prime Minister. ‘And as a consequence, of course, I didn’t run.’ The Right faction of the Labor Party, together with the section of the Left controlled by Anthony Albanese in New South Wales, resolved to block Rudd’s bid for the leadership. The faction’s chiefs decided that the party needed to install Kim Beazley as its next leader. The Federal Labor Party was so depleted and shocked that it needed stabilisation above all else, they thought, and that meant the experienced hand of Beazley. And, because unity was important, they decided that there would be no ballot. Beazley would be elected unopposed. The Right-factional chiefs who arrived at this decision were Labor’s Treasury spokesman, Wayne Swan; its Communications spokesman, Stephen Conroy; Bill Shorten, of the Australian Workers’ Union; the former secretary of the Victorian branch of Labor, David Feeney; and, most powerful of the group, the NSW General Secretary of the party, Mark Arbib. These men, Rudd sceptics every one, would all be members of a Rudd Government within three years. All would ride into power the unprecedented popularity—the highest approval ratings of any Opposition Leader in the thirty-five-year history of the Nielsen poll—that Rudd generated once he assumed the leadership. ‘The party was in a total shambles and totally depressed,’ Arbib said in 2008. ‘I’d met Kevin Rudd a couple of times and I was impressed. But I thought we needed to stabilise the show and Beazley looked like a safe pair of hands. Kevin had done an amazing job of securing Caucus votes; he went pretty close to getting there.’ But Arbib and the others made sure he did not get there. They worked hard to persuade the Right to abandon Rudd and support Beazley. ‘Rudd has never forgotten,’ said Arbib. ‘He reminds me occasionally, You should have backed me the first time.’ Rudd certainly did not forget. Three years later the lock-out still rankled. Despite speaking from the consoling comfort of Kirribilli House, he was plainly unhappy with the conduct of the factions and still wondering whether without it he might have won the leadership on 28 January 2005 rather than being forced to wait until

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4 December 2006: ‘It was quite plain that [the factional deal] was too powerful a force to resist in terms of being able to then mount a credible leadership bid. I think if it was an open ballot it would have been much more interesting—much more interesting. But that was not going to be the case.’ Could Rudd have won in an open ballot? ‘I think I would have given them a bit of a shake. I think Julia [Gillard; his Deputy Prime Minister] would have given them a decent shake as well. Then the open question would have been where her second-preference votes went, and where my second-preference votes would have gone. But I’ll never know that.’ Rudd ultimately succeeded in the Federal Parliamentary Labor Party not because of the unions and the factions but in spite of them. Rudd had never worked for a union and did not enjoy the patronage of any union. Lacking such support automatically put him outside the faction system, the union-based machine for creating Labor politicians. The unions feed their officials and mates into the system’s hoppers, from where they drop onto the conveyor belt of preselection, which then deposits them into a seat in parliament. It is possible to lack the patronage of a union but to join a faction regardless. But in Queensland, Labor is dominated by the right-wing faction known as Labor Forum, which has become the personal fiefdom of the State Secretary and National President of the Australian Workers’ Union, Bill Ludwig. His son, Joe Ludwig, is a senator. The Ludwig group, which includes Wayne Swan, did everything possible to block Rudd. The union bosses and the faction chiefs were not interested in Rudd’s emerging appeal to the Australian electorate; lacking any hold on him, they feared his independence. And rightly so. Because once he became Prime Minister, Rudd acted immediately to confront the power of the factions. ‘When we won the election, we appointed the Cabinet without any reference to factions. We didn’t need factions,’ he said. ‘And I finally got rid of the rule.’ This rule, Rudd noted, ‘was the reason John Christian Watson ceased to lead the Labor Party. Because Caucus insisted on imposing their will on the leader, on the composition of his front bench.’

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Watson was Prime Minister of Australia for four months in 1904, the first leader of a national Labor government anywhere in the world. As Opposition Leader, he had been humiliated by a decision of Labor’s national conference in 1905 to strip the leader of the power to choose his own ministers. At the instigation of a young backbencher, Charlie Frazer, the conference ruled that henceforth the Federal Parliamentary Caucus should elect the ministers. The decision was justified on the basis of egalitarianism. ‘Given no greater voice than the rawest recruit in the party,’ Watson wrote, ‘I most decidedly could not continue to lead.’ Beseeched by his party, he relented and stayed on for another two years before eventually resigning, dispirited and in poor health. As Rudd put it: ‘We’ve had that rule for over a hundred years. And, progressively, with the factionalisation of parties in the last twenty years or so, it became progressively the project of the factional leaders.’ It had taken 103 years to reverse that move. But on his election Rudd, who had previously been rebuffed and frustrated by the factions, had the satisfaction of recovering that power for himself. ‘The rule changed—back to the leader choosing his Cabinet.’ Yet Rudd was wary of the factions and the unions nonetheless. Huddling with Gillard in Brisbane, the pair crafted their Cabinet list on the weekend of Labor’s election victory. But they took the precaution of calling in the godfather of the Left faction, John Faulkner, on the Monday, and the godfather of the Right, Robert Ray, on the Tuesday. And it was not token consultation. It soon turned into a heated discussion. When Ray arrived in Rudd’s Brisbane office, he discovered that the Right was under-represented. Rudd’s ministry was to contain sixteen ministers drawn from the Left, two from the Centre Left and twelve from the Right. The Right was about to boast an enlarged majority in the newly elected Parliament. Of the 115 members of the Federal Labor Parliamentary Party, the Right claimed sixty, compared to fifty-one from the Left and four others. Rudd and Gillard now proposed that the faction claiming 52 per cent of the Caucus should have 40 per cent of seats in the ministry.

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Ray foresaw ructions. He did not ask for strict proportionality for the Right, but he warned the prime minister-elect that it was ‘a brave decision to simultaneously declare war on the AWU and the SDA’. The Australian Workers Union and the Shop, Distributive and Allied Employees Association are two of the biggest Right-aligned unions in the country. Ray likened the consequences of Rudd’s choice of ministers as a decision to fight a ‘war on the Eastern and Western front at the same time’. The reference to Hitler’s fatal decision to confront too many enemies at once was a clear warning against strategic overreach. The neophyte PM decided not to test his power against the Right and its union allies. He redrew his ministry. When he announced it on the Thursday, the Left was represented by fourteen ministers, down by two. The Right had gained two to fourteen. The Centre Left had one, plus one non-aligned. In January 2005, that change was almost three years away. ‘Beazley was the unions’ candidate, the unions’ man,’ said a senior ACTU figure. The unions got their man. It was a decision that, had it not been reversed, might have consigned Labor to another term in the wilderness. Surrendering to the institutional power of the unions and their parliamentary outgrowth, the factions, Rudd and Gillard announced that they would not stand for the leadership. Beazley was elected, unopposed, on the voices. John Howard was confident he could beat Beazley. And he was very confident that he could beat his potential successor, Rudd, who, along with Gillard, was being talked about as a next-generation leadership candidate. ‘Australians will never vote for Kevin Rudd,’ Howard told political intimates at a dinner at The Lodge in 2005, ‘because he comes across as the class swot.’

... By the end of 2005, within fourteen months of his most emphatic election victory, all the major elements of Howard’s defeat were in place. The Prime Minister himself was still relatively popular, but

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he had mixed the chemicals that were soon to corrode his approval rating and his electoral base. As we know from the Liberal Party’s research, the three principal reasons for the Howard Government’s defeat were the Prime Minister’s long incumbency, the Government’s position on climate change, and Work Choices. But the dangers inherent in these three factors were not yet fully apparent. As the drought took hold and awareness of global warming grew, community alarm over climate change would become more strident. As Work Choices was introduced and some employers took advantage of the laws to exploit staff, the reality of Howard’s reforms would start to confirm the fears the unions had stoked. And the Prime Minister would increasingly be viewed as a relic who could not be trusted to deal with the emerging problems. But in late 2005 there still seemed to be plenty of time and opportunity for the Government to address each of these concerns. Already Labor’s support in the opinion polls was improving. After March 2006, the Opposition stayed consistently ahead of the Government on a two-party preferred basis—the way election results are measured—according to the Nielsen poll published by the Sydney Morning Herald and The Age. According to Newspoll, published by The Australian, this happened five months later—in August—but it happened nonetheless. Labor’s national secretary, Tim Gartrell, however, did not read this as a harbinger of success. Labor had been ahead of the Coalition midway through every one of Howard’s terms, yet the PM had subsequently recovered to seize victory on election day. ‘You cannot take it for granted, you have to fight like alley cats right to the end, because Howard had this great capacity to blindside us,’ said Gartrell. Now Labor braced for Howard to take dramatic action. The single most dramatic action he could have taken was to retire and allow the recasting of the entire Government. ‘We wondered if he was going to hand over to Costello,’ Gartrell related after the 2007 election. ‘We thought that may be enough. He comes along and just changes everything. That’s what you’re looking for in politics, the big

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exciting shift that changes the formula. We thought he might. And reading all the stuff in the media, we started to imagine that they might be getting close already.’ Labor was determined not to be blindsided if this should happen. According to Gartrell, it set up an alternative strategy, the Costello Transition Project. In the event that Howard retired, this group would have a detailed plan ready for an election campaign against Prime Minister Peter Costello. Around May 2006, two senior Labor staffers were assigned to start work on this. One was Jim Chalmers, deputy chief of staff to Labor leader Beazley. The other was Nick Martin, the director of research for the ALP national secretariat. They were assisted by George Svigos, a media aide to Beazley. The starting point was to imagine the day of the handover from Howard to Costello and write a press release in response to the new Prime Minister’s advent. Chalmers and Martin drafted the statement as a way of focusing their thoughts on how they would characterise Costello. They examined the available research on Costello’s image and his history and considered how they wanted him to be viewed in a Beazley–Costello contest in 2007. Chalmers carried this draft press release with him for a couple of weeks, polishing it during spare moments in airport lounges or when an idea struck. Chalmers said later that the campaign against Costello would have been a starkly negative one: ‘Punters didn’t trust him, said he was a snake in the grass, and considered him arrogant—and there’s no question that all that would have been capitalised on with a wellresearched and disciplined attack right from the outset, with not a second wasted.’ Labor would have emphasised the accusation that Costello was even more of a hardliner on industrial relations than Howard. The speculation about a Costello succession was lively enough that a Liberal MP and former Howard minister, Jackie Kelly, said publicly that she would resign from Parliament if Costello were made leader. Chalmers rated the chance that Howard would hand over to Costello by the end of the year at about 60 per cent. There was an awful predicament here for Kim Beazley. Labor had

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pulled ahead of the Government in the polls, yet his personal ratings were in a slump. The party was thriving; its leader was not. A number of factors were combining to undermine the Howard Government’s support. The Reserve Bank was raising official interest rates. Howard had campaigned in 2004 on a slogan of ‘Keeping interest rates low’, and many voters—around a quarter, according to a Nielsen poll—had believed him. It had been an important factor in his victory. But the Reserve Bank was among those who didn’t take Howard’s slogan seriously. Between the 2004 election and the end of 2006, it raised the official rate four times, increasing the burden on the average mortgage holder by around 14 per cent. The occupation of Iraq provided a continuing backdrop of bad news and a constant reminder of Howard’s misadventure with George W. Bush. The news in April included word of the first Australian soldier to die in Iraq, Jake Kovco, who died when his pistol accidentally fired in his quarters in Baghdad. The case of David Hicks was increasingly on the public conscience as he approached his fifth year in detention without trial in the US enemy-combatant prison in Guantanamo Bay, Cuba. Howard faced an uprising on his own backbench over the treatment of people seeking political asylum in Australia. At the Prime Minister’s direction, Foreign Minister Alexander Downer had invented the socalled Pacific Solution, paying the Government of Nauru to hold the ‘boat people’ so they would not set foot on Australian soil until their cases were heard, if ever. A group of Liberal backbenchers, in a rare outburst of dissent, noisily refused to accept the Government’s decision. As the drought tightened its grip, Howard’s apparent indifference to climate change looked increasingly outdated. An inquiry into the Saddam Hussein Oil-for-Food program bribery scandal at the Australian Wheat Board (AWB) summoned Howard, Downer and the Deputy Prime Minister and Minister for Trade, Mark Vaile, to give evidence. Petrol prices were rising. And then there was Work Choices. Yet as bad as things looked for Howard, they never looked good for Beazley. It was a special kind of purgatory. In April 2006, for example, while the Nielsen poll put Labor ahead with 51 per cent

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of the two-party preferred vote to the Government’s 49 per cent, Howard’s personal approval rating was a respectable 49 per cent while Beazley’s was a dismal 30 per cent. The only bigger loser than the Howard Government was the leadership of Kim Beazley. The Labor leader tried to keep it out of his mind: ‘I didn’t worry about it—I kept my eye on the two-party preferred vote,’ he recalled in 2008. And he comforted himself with the thought that Howard had sealed his fate: ‘From March 2006, the Libs had basically lost the election. It didn’t really matter what I did, or what John Howard did.’ Some important Labor figures did not share Beazley’s optimism. Some, especially in the New South Wales Right and the Victorian Left, worried that, while the party had moved to a potentially winning position, its leader might be holding it back. Beazley was aware that the secretary of Unions NSW, John ‘Robbo’ Robertson, was agitating against his leadership: ‘Robbo was not very supportive of me—he was supporting Kevin.’ Rudd’s star was in the ascendant. As Labor’s foreign affairs spokesman, he had publicly prosecuted the Opposition’s case against the Government on the AWB corruption case. He had done an impressive job. He had already established himself as a credible figure with sober, powerful critiques of the Government on a range of issues including the Iraq occupation and the Afghanistan deployment. And the more human aspect of Kevin Rudd was on display in his regular appearance on the flummery-soft Sunrise TV show, where he had shared the stage with the Liberals’ Joe Hockey since 2002. Hockey would tease Rudd about his lack of popularity as the pair breakfasted every Friday on the occasion of their shared Sunrise appearance. Hockey later said: ‘Go and dig out all the old polls, when they used to do those polls on the Labor Party and who would you like to lead Labor. They’d have Beazley, Crean, you know, Rudd and Other. And Other would out-poll Kevin Rudd. I remember those, ’cause I’d be sitting with him at breakfast and I’d say, It’d be better for me to be sitting with Other, than sitting with you cause Other’s more popular!’ No longer. As early as January 2005, when Mark Latham quit as Labor’s leader and the party prepared to elect a new one, the

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opinion polls established a clear hierarchy of popular preference. The Nielsen poll asked voters who would be the best person to lead Labor. Kim Beazley rated 38 per cent; Rudd, 23 per cent; Julia Gillard, 17 per cent. The other contenders had negligible support: only 1 or 2 per cent. A Newspoll arrived at the same ranking and with very similar numbers: Beazley first on 41 per cent, Rudd next on 24 per cent, and Gillard third on 18. Rudd was positioned as the heir to Beazley by popular acclaim. All through 2005, Rudd performed deftly as a politician and reinforced his claim to the leadership. In that year, he managed to advance new policy so successfully that the Howard Government three times felt obliged to change its public position and adopt his policy proposals on important issues. It reluctantly embraced his suggestions to send troops back to Afghanistan to prevent it becoming a failed state, to get Australia a seat at the forthcoming East Asia summit by signing the Treaty of Amity and Cooperation, and to organise a regional strategy for preventing an avian flu pandemic. Rudd, in short, had been making Australian foreign policy from the Opposition benches. He was keeping his opposite number, the Foreign Affairs Minister Downer, on the defensive. The AWB bribery scandal became an opportunity to pursue Howard, Mark Vaile and Downer not just on policy but personally. Rudd relished the opportunity. He later recounted a story that helps explain why he took a personal dislike to Downer: ‘My mum came down to Parliament in 2001. She was already suffering from Parkinson’s disease, and this was about three years before she died. She was there for my swearingin as Shadow Foreign Minister. So we were there—all the family are around and we were having a cup of tea. It was some sort of reception in Parliament House, and Mum was there. I had always had a fairly benign view of Downer, you know, but he came over to Mum, who was eighty years old at the time, and his first observation to her was: Of course, when I was your son’s age, I had already been leader of my party and had become Foreign Minister. It was just a big put-down.’ As the smirking Downer walked off, Rudd recalled, his mother stared at his retreating back and said, ‘What a rude man—an

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exceptionally rude man.’ He said, ‘Mum was stunned, just stunned.’ Rudd was, in his own words, ‘a very determined bastard’. Downer helped make him more so. All this time, Rudd had been building his profile in the media. He was what’s known in the business as a ‘media tart’. He was always available for interviews. He would even phone reporters to suggest them. He was, as then NSW Premier Bob Carr put it at the time, ‘forcing himself into the public consciousness’. He was, in Carr’s view, ‘making himself into an inevitability’.

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In early 2006, the Labor Party in Victoria set about doing what Labor traditionally does best—tearing itself apart. It would be a matter of no great significance in the story of the nation’s destiny except for one unintended, unremarked consequence—it made Kim Carr really angry. Kim Carr is a burly, bearded one-time high school history teacher who decided to go into politics. He crunched his way to becoming a chieftain of Labor’s Victorian Socialist Left, the factional home of Julia Gillard. For his methods, he was honoured with the nickname of ‘Kim Il Carr’, an allusion to North Korea’s former Great Leader, Kim Il Sung. He earned the adulation of some in the Left and the undying enmity of the Right. The Victorian Right powerbroker Senator Robert Ray described him and a rival Right organiser, Senator Stephen Conroy, as ‘factional Daleks’, after the robots from Dr Who whose mission was as unswerving as their dialogue: ‘Exterminate . . . Exterminate . . . Exterminate.’ In 1993, when Industry Minister John Button retired from Parliament, Carr took his seat in the Senate. When Kevin Rudd became Prime Minister, Carr got Button’s old job, too. Rudd gave him ministerial responsibility for Innovation, Industry, Science and 154

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Research, where he took a special interest in Button’s old favourite, the future of the car industry. Although many feared that Carr would apply an old-fashioned interventionist approach to industry policy, his argument is that ‘in the 21st century, innovation policy is industry policy’, and he was credited with a significant role in Toyota’s decision to build a hybrid in Australia. Carr’s aim is to make the Australian car industry, which already exports vehicles and components worth $5 billion a year, an even bigger seller to the world. In early 2006, with elections less than two years away, Carr was gloomy about Labor’s prospects under Kim Beazley. Even though the party was becoming competitive against the Howard Government in the polls, Carr believed Labor’s support was liable to wilt when Howard applied heat. He already had a dim view of Beazley because he thought Beazley indulged his Right faction supporters far too much. In particular, Carr argued, Beazley’s praetorian guard— known by the more bucolic nickname of the Roosters and comprising Wayne Swan, Stephen Smith and Stephen Conroy—were allowed to do whatever they wanted. It was disruptive and divisive. The last straw for Carr was the internal Labor blood-letting in Victoria in February and March 2006, which became the most visible manifestation of the factional hostilities. The effort to unseat Simon Crean, the former Labor leader, from his Melbourne electorate of Hotham drew national media attention to the factional ugliness. Crean was a member of the Right (which is, confusingly, called the Labor Unity faction) and the challenge came from a competing splinter of the Right led by Conroy. Kim Beazley refused to intervene in the blood-letting. The politics were clear. Crean was a long-time rival of Beazley’s, and Conroy was one of the Roosters. Kim Carr was appalled that Beazley would allow this brawling to go unchecked for months. ‘He let the Roosters run riot. That confirmed in my mind that Beazley’s key characteristic was indecisiveness,’ he remarked to a political intimate. Labor could not win under Beazley, Carr concluded. So Beazley needed to be dumped.

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But how to get rid of him? Carr faced exactly the same problem Rudd and Gillard had faced. Looking back in 2008, Kim Beazley explained the structural basis for his leadership among the eighty-eight members of Parliament who comprised the Federal Labor Caucus: ‘I was always thoroughly aware that I was a minority leader,’ he said. He counted the percentage breakdown of Caucus as a split of 40: 40: 20. He had about 40 per cent of the Caucus vote, Julia Gillard could count on another 40 per cent, and Rudd had the remaining 20 per cent. ‘While ever it was split like that, I was secure. Because there was a ceiling on Julia’s vote—she was not going much above 40 per cent. And whenever Kevin was eliminated [in a ballot], his votes would have gone to me.’ Rudd’s base was on the Right and Centre, and his supporters would never second-preference Gillard because she belonged to the Left. It seemed they would always find Beazley a more acceptable alternative. ‘So when the three of us were interested in the leadership, there was no chance I could be replaced,’ Beazley concluded. Carr, however, set about changing this. He sought to engineer a joint leadership ticket—bringing Gillard and Rudd together to build a majority and replace Beazley. Working alone and keeping his efforts to himself, he initiated a series of surreptitious separate meetings with Gillard and Rudd to begin exploring the scope for a joint ticket. Rudd and Gillard were not close. As Beazley put it: ‘She had no particular regard for him. They were not really collaborative in a policy sense, or with any mutual fondness. She was of the Left and had the Left’s support. Kevin had votes from the Right, the Centre and one or two others.’ But Carr was close to Gillard—both were important figures in the Victorian Socialist Left and, although they had earlier had a hostile relationship, Carr had come to the view that Gillard was a woman of talent who had something to offer the party. He became supportive and ultimately her numbers man in the leadership contests. With Rudd, Carr saw his initial task as building trust, giving him confidence that he would not be betrayed—that their meetings would not be reported in the next morning’s newspaper.

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Carr spent months—most of 2006—shuttling from Gillard to Rudd. The two future leaders of the Labor Party did not speak directly about the prospect of a joint ticket until the middle of the year. Over dinner one cold night in Canberra, Rudd put Labor’s problem baldly to Gillard. ‘I think we’re fucked,’ said the future Prime Minister. ‘What are we going to do about it?’ Until that point, if asked, they could honestly answer that they were not talking to each other about the leadership. In the interim, they communicated through their go-between. Asked in 2008 who first broached with her the idea of a joint leadership ticket, Gillard replied, ‘It’s fair to say Kim Carr. He came to me and said, Well, at some point something you need to think your way through is what, if any, role you would play if the leadership comes into issue. And you didn’t have to be on the inside of Labor to work out that if the leadership came into issue that Kevin’s name would be there, my name would be there, the question of the combination would be there, and we needed to deal with that . . . Kim was not pressing me to make a particular determination— it was just knowing that I needed to think it through and work it out. And so I did.’ And the questions she needed to think through? ‘If Kim Beazley were to resign, what would you do? Would you put your name forward to contest as leader? Would you consider supporting someone else in that situation? Would you consider supporting Kevin in that situation?’ Carr had already opened a cautious contact with Rudd before the Victorian factional warring broke out, but the infighting and Beazley’s decisive inaction hardened his resolve. Instead of speculating about the possibility, he decided he would do his utmost to make a Gillard–Rudd alliance a reality. Beazley was his immediate target, but Howard was his ultimate one. ‘What John Howard was doing to Australian society puts an enormous moral obligation on us to do something about our inability to win an election,’ he told political intimates. ‘The people want us to respond to Howard, and the very reason for our existence is

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in question if we can’t.’ The future of the Labor movement under Howard’s Work Choices kept Carr awake at night, he said. As Carr worked covertly to bring the two together to topple Beazley, the leader’s poll numbers did not improve. More and more Labor members started to worry about whether they could win under Beazley. One was the NSW General Secretary of the Labor Party, Mark Arbib. Around mid-2006, he decided Beazley had become a hindrance to Labor’s prospects. He pictured the voters as a great body of water that was ready to flow to Labor. Beazley was a dam holding them back. He started to argue privately that the time had come to break the dam and make Rudd leader. With the key figure in the NSW Right withdrawing his support for Beazley, and with Carr beginning to broker a Rudd–Gillard ticket, Beazley’s support base in the Caucus was near the tipping point.

... ‘I didn’t want to be a three-time loser,’ Kim Beazley recalls. ‘So I just had to take the risk that Kevin and Julia wouldn’t get together.’ Beazley knew his leadership would be over the instant that Rudd and Gillard could agree to a joint ticket. If they joined forces, the Queensland right-winger and the Victorian leftist would command a majority of the votes in the Caucus and the three-time Labor leader would be out. But before this alliance could be forged, Gillard had to accept the hard fact that, although she brought just as many votes to the alliance as Rudd, she would have to surrender her ambition for the top position and accept the deputy’s job. This was not because of her gender but because of her faction. As Beazley explained: ‘If Rudd had stood aside for Julia on a joint ticket, she would have lost because she would not have had 50 per cent of the votes. She could hand all her votes up to Kevin, but he could not hand his votes up to her—the NSW Right would not have voted for her in any circumstance.’ The NSW Right had supported Beazley in January 2005 and effectively shut Rudd out. But Mark Arbib changed his mind when

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he saw the research that Labor was doing among voters in New South Wales. The national secretary, Tim Gartrell, was also supplying him with the national polling results. ‘Work Choices was going gangbusters for us, but the marginal seat polling showed that we hadn’t made the crucial gains we required,’ said Arbib. The distribution of votes was vital. Howard had lost the popular vote at the 1998 election, yet won a majority of seats and retained power. It was nice to know that votes were shifting in solid Coalition seats, but that would not be enough to win. Labor needed to swing enough votes in the marginal seats to tip at least sixteen seats from the Coalition’s hands into Labor’s. But why Rudd? ‘He had the media profile; he had the Sunrise exposure; he was competent, he was articulate, and his life was a rich tapestry. Most importantly, he had a plan for the country—it was a bit Obama-ish, it was inspiring.’ And he was from the Right—not a favoured son of the Queensland Right, to be sure, but faced with choosing between Gillard and Rudd the Right would prefer the conservative pro-marketeer over the left-wing Socialist. In mid-2006 Arbib started to work on persuading his colleagues to change their minds. Eventually he managed to bring most of his faction with him, but it would have been for naught without the bloc of support that Gillard brought. ‘The whole thing turned on whether Kevin and Julia could come to an agreement,’ Beazley concluded. Brought together initially by Gillard’s number man, Kim Carr, Rudd and Gillard had a series of increasingly purposeful conversations during 2006. One of Labor’s Kims was undermined by the other. Kim Carr was pleased to discover that Rudd was not a doctrinaire free-marketeer. In a series of long conversations, he and Gillard sought to explore Rudd’s views on a range of subjects. The two leading Left figures wanted to be satisfied that Rudd would be able to work well with Gillard. And if the answer to this proposition were ‘yes’, then they were conscious that they would need to be able to sell Rudd as leader to the rest of the Victorian Left too. It was, in essence, a series of job interviews—a courtship to win the support of the Gillard group. The conversations, Gillard said later, ‘reinforced the sophistication of Kevin’s foreign policy, explored his deep belief in traditional values,

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his deep belief in traditional education—and rigour in education is something I’ve always believed in—and we discussed the responsibility agenda, the agenda beyond welfare, and the agenda for industry development and high-level [worker] skills for the future’. The Australian Manufacturing Workers’ Union is a vital part of the support base of Labor’s Victorian Socialist Left. Carr was pleased to discover that Rudd believed in a role for the government in the future of the manufacturing sector and in the life of the country more broadly. This was the essential difference between Labor’s Left and Right. The Left believes the state should intervene in the market while the Right instinctively recoils from this idea. When Rudd made clear that there were indeed circumstances where he could support government intervention in the market, he seemed able to bridge the ideological and factional divide. A satisfied Carr told colleagues that Rudd said he had learned from the mistakes of free-market purists. Unseen and unheard by the rest of the party, Rudd and Gillard struck their agreement to run together as a leadership joint ticket—Rudd as leader and Gillard as deputy. The factional logic of their support bases dictated the order of the ticket. But, after the 2007 election, Gillard added in an interview that she thought Rudd was the readier of the two: ‘It wasn’t a question of Kevin coming in and making a pitch to me. None of that was necessary. I mean, I knew Kevin well enough to think it through for myself. I mean, he was ready to go; he was the best prospect. He had that connection, you know—that bit of special connection with the electorate that you need. And I think that I was proved right on those judgment calls.’ Gillard put her political ego and personal vanity aside to support Rudd as leader. It did also work in her interest—she became Deputy Leader of the Federal Government rather than the leader of a small bloc of members of the Opposition. Yet it required a self-abnegation and political maturity of which many politicians would not be capable. ‘When Julia ultimately decided to stand aside, that gave Kevin the opening. That gave Kevin the numbers,’ Beazley concluded. He had been living in the knowledge of the fragility of his position.

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He had been living in hope that Rudd and Gillard would not get together. ‘But they did,’ he said with a resigned sigh. As to when the deal was struck, the two sides have different answers. ‘It was mid-year [in 2006],’ said Rudd in 2008. ‘It was quite late— I would say it was October,’ said Gillard. The discrepancy seems to be explained by differing interpretations of events. Rudd seemed to have had the impression that Gillard was on board earlier than Gillard herself thought so. Participants also made the point that the decision was gradual—there was never a formal declaration. Rudd’s courtship of the Gillard Left continued until the challenge against Beazley in early December. He positioned himself as not just a political and policy warrior but an ideological one as well. When Howard gave a widely publicised ideological call to arms in a speech on October 3 to mark the fiftieth anniversary of the founding of the conservative magazine Quadrant, Beazley was silent. But Rudd responded with a call to arms of his own in an essay in The Monthly magazine under the heading ‘Howard’s Brutopia’. It concluded: ‘Given that John Howard’s neo-liberal experiment has now reached the extreme, the time has come to restore the balance in Australian politics. The time has come to recapture the centre. The time has come to forge a new coalition of political forces across the Australian community, uniting those who are disturbed by market fundamentalism in all its dimensions and who believe that this country is entitled to a greater vision than one which merely aggregates individual greed and selfinterest.’ Peter Costello mocked the essay in Parliament, pointing out that Brutopia was a fictitious place in Donald Duck comics. But the essay hit its intended mark. Rudd impressed quite a few on the Labor Left with his ideological combativeness and his eloquent advocacy of a social-democratic alternative to conservatism. He was positioning himself publicly as an alternative to Howard, but also as an alternative to Beazley, a leader many in the Left considered to be too conservative—too much like Howard. Rudd’s intellectual seduction of the Left also included a 16 November speech titled ‘What’s Wrong with the Right: A Social

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Democratic Response to the Neo-Liberals at Home and the NeoConservatives Abroad’. The address, delivered to the libertarian Centre for Independent Studies, was an erudite critique of the great hero of the CIS, the libertarian philosopher Friedrich Hayek. It agitated the CIS terribly, and it thrilled members of the Labor Left. Beazley was in an unusual position—even as Labor’s lead over the Coalition solidified, his personal poll numbers turned to mush. He was a loser leading the winning party. This reached a critical point in September, when two events illuminated the dangers in this paradox. One was the State election in Queensland. The re-election of Peter Beattie’s Labor marked the first time since the 1930s that Labor had won a fourth consecutive term in that State. Yet the Beattie Government was beset by a series of compounding crises in the health system and serious voter disgruntlement over a number of problems, including systemic under-investment in transport and other vital infrastructure. The Queensland election demonstrated that even a government in crisis can be re-elected if the leader is reasonably well liked and the opposition leader, in this case Lawrence Springborg, is not. In the same week, the public opinion polls demonstrated afresh that the situation at the Federal level was exactly the same—the Prime Minister was reasonably well liked and the Opposition Leader was not. Specifically, even though Howard had been battered by what Beazley had called the ‘triple whammy’ of rising interest rates, expensive petrol and an unpopular labour law, he managed somehow to enjoy an approval rating of 45 per cent in Newspoll and 55 per cent in the Nielsen poll, both published in mid-September. Kim Beazley’s approval rating, after almost two years in the job, was stuck in the 30s. Beazley was squarely in the zone occupied by the Queensland Opposition Leader, Lawrence Springborg, just before he was humiliated. The trajectory of Beazley’s popularity over the previous decade had been relentlessly downward. His approval rating in his first term as Opposition Leader had averaged 51 per cent, the Nielsen poll

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showed. In his second term he averaged 49 per cent; in his third term, 41 per cent. In mid-September, the Nielsen poll gave him 38 per cent; Newspoll 31 per cent. And his disapproval rating was in the 50s. In this regard, he was actually in a weaker position than Springborg. In the thirty-year history of the Nielsen poll series, two Federal leaders had won elections with approval levels as poor as Beazley’s— but only in the most extraordinary circumstances. Malcolm Fraser had an approval rating in the mid-30s shortly before he won against Gough Whitlam in 1975, but Whitlam had just been dismissed by the Governor-General. Paul Keating was in the same realm of dubious popularity when he won the 1993 election, but his opponent was the ‘feral abacus’ John Hewson, who was threatening to impose a goods and services tax and cut tariffs to zero. Federal Labor in 2005 and 2006 was doing a great deal right. It was outwardly unified, it was working on serious policy development, and it had made a successful beginning on assaulting the Government’s interest-rate credentials. But while these were all necessary conditions for winning, they were not sufficient. Labor also needed a popular leader. Beazley was trying. But, after almost two years as Opposition Leader, and on his third attempt, his chances were looking dire. The other event in September was Labor’s internal polling. Labor’s pollster, Tony Mitchelmore, had compiled a research dossier based on sessions with focus groups in Sydney, Perth and Adelaide. The party’s National Secretary, Tim Gartrell, gave the summary to Kim Beazley in Beazley’s Parliament House office. ‘Leadership is now Labor’s biggest negative,’ the report found. It was a hard moment for Gartrell, but harder for Beazley. Gartrell later said, ‘I remember coming back to him with, This is very tough. This is very difficult. This is not good.’ Gartrell did not believe Labor could win with Beazley at the helm. ‘I thought we might get really close, and maybe get just below the line. I never thought we could win convincingly, but I thought—best-case scenario—we’ll lose, but we’ll get some more seats and we’ll build a foundation for victory the time after.’

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As National Secretary and campaign manager, Gartrell carried the chief responsibility for winning the election. But he did not try to persuade Beazley to resign—for Gartrell had three reasons, he said. First, ‘You can’t completely demoralise, smash the person to pieces. Because there was always a chance that he was going to continue. You’ve got to make sure that he gets out of bed. You can’t say, Kim, you are fucked.’ Second, he didn’t think it was his role in the party: ‘I never said, You should think about your position. I thought a lot about saying it. And I thought a lot about my role and the role of the national secretary. And my conclusion was that it’s the people who have the vote—the people who have to organise the vote—they’re the ones who have to go and talk to the leader. Because a leader is going to say [to the party secretary], Oh, that’s your view, is it. Cheers, mate! He’s got to have the numbers basically in front of them. They’ve got to say, By the way, there’s a challenger and you’re gone. They’re always going to be able to justify their way out of just putting the former without the latter. And because I’m not a numbers gatherer, then you’re only going to get part of the equation.’ So it would be not only inappropriate but also ineffectual, in this view. Third, Gartrell could not be sure about the alternatives. Did he think Rudd would make a better leader? ‘I was unsure. But when it started to get closer to the leadership ballot, I started to think maybe someone just has to step forward because Kim is going really bad. But I was never entirely convinced that Kevin would actually stand up and take him on.’ Part of the paradox of Beazley’s position was that the evidence against him was equivocal. Neither Arbib nor Gartrell had an ironclad case that Beazley was a hopeless proposition. Beazley emphasised the two-party share of the vote, and Labor had undeniably pulled ahead there—so Gartrell felt ‘I couldn’t have definitively said, We’re completely going down the toilet.’ And ‘There were still plenty of people who said, Good bloke. Women would say, What a nice man. That sort of stuff. But there wasn’t any strong leader who can stand up for himself.’

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There was, in short, enough positive news for the Roosters to justify holding their ground. They had the unanswerable rejoinder: how can you know that Rudd would do any better? No one could prove that he would. Rudd was a risk. Beazley and his bloc refused to budge. Arbib had been seeking to avoid a challenge, fearing its divisiveness. Rudd and Gillard, too, hoped to be given the leadership through an agreement rather than a ballot. But the challengers wanted at least a year or so to consolidate their position before late 2007, when the election was due. And in the end Beazley’s supporters gave them no alternative—in anonymous remarks to reporters, remarks that found their way into print, one of the Roosters suggested that Rudd lacked courage. They dared him to mount a challenge. But braggadocio is no substitute for numbers. As the weeks wore on Beazley’s numbers did not improve, and Labor’s confidence in him continued to fall away. Rudd and Gillard knew they had the numbers to replace him. All they were waiting for was some clear justification to move against him, some sort of trigger. It arrived in the form of a gaffe by Beazley. On 17 November he called a media ‘doorstop’, a brief stand-up statement for the cameras usually followed by a limited number of questions from reporters. He wanted to offer condolences to the TV talk-show host Rove McManus on the death of his wife, Belinda Emmett. In a moment of absentmindedness, he confused the Australian comedian with the political adviser to George W. Bush, Karl Rove. ‘The first thing I want to say is this: today our thoughts and the thoughts of many, many Australians will be with Karl Rove as he goes through the very sad process of burying his beloved wife.’ In a statement later, he said he of course meant Rove McManus. ‘My thoughts are with him now just as they were this morning.’ This came as the last of a series of small errors and very human slips. The unfortunate irony was that Beazley has a fine mind and is one of the most knowledgeable men in Australian affairs. He did not lose his leadership over his gaffes, but they created an opportunity for his enemies to move against him. The Rove mix-up, as he later remarked, ‘influenced the timing, but not the outcome’.

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In the last week of November, Mark Arbib orchestrated a procession of figures from the NSW Right to tell Beazley and the Roosters that they could no longer support the leader. Apart from Arbib himself, Chris Bowen, Tony Burke and Roger Price passed on the news that Beazley had lost their backing. The aim was to create the impression of a haemorrhage of support so as to pressure the Beazley camp into capitulation. Instead, the Roosters and Beazley’s patrons in the union movement got angry. The right-wing unions were unhappy to see the forces of the left, in the person of Julia Gillard, rampant. Pro-Beazley union leaders made threats against some of the NSW Right insurgents supporting the Rudd–Gillard ticket. Beazley himself did not want to be, as he put it, ‘a three-time loser’. His union patrons demanded that he fight, and he thought it was a fight worth having. ‘I thought it was a close contest—maybe five votes in it.’ The baby-faced, soft-spoken Chris Bowen emerged as Rudd’s numbers man. Invaluable to a leadership challenge, the numbers man’s job is to marshal the votes, count the numbers and deliver the prize. Labor has a tradition of tough-guy numbers men like Graham Richardson and Robert Ray. In this case, Beazley had the Roosters, three of Labor’s most seasoned and effective factional operators. Gillard had Kim Carr, one of the ‘daleks’ of the Victorian Left. Aside from himself, Rudd had his sole adviser, the youthful Alister Jordan, then aged twenty-seven—smart and hard-working, but a staff member and not a Caucus peer. This was a potential problem. When a challenge moves to the action phase, a politician cannot ‘do’ his or her own numbers. A member of the party who is planning to vote against a candidate will often be unable to tell the candidate straight out, restrained by natural human reluctance to offend a colleague. A candidate trying to do his own numbers will get a misleading tally and an unpredictable outcome. The candidate traditionally speaks to the party members, seeks to persuade them and asks for their support. It is the numbers man who phones the members later to see whether the candidate has been successful. The numbers man’s effectiveness depends on his relationships with his peers as well

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as his ability to make a canny assessment of their intentions. Rudd had Mark Arbib, one of Labor’s most powerful party officials, on his side, and Arbib was a bedrock of support and advice. But he could not do the numbers for Rudd outside his own group, the NSW Right. Rudd needed a numbers man inside the Caucus. In the months leading up to the challenge, Rudd approached Caucus members with diplomatic obliqueness—he asked to meet and brief them on Foreign Affairs and Trade, his portfolio responsibilities. It was a useful cover. The niceties dispensed with, the conversation would turn to the state of the party and the leadership. And so it was with Chris Bowen. Bowen was the thirty-four-year-old member for Prospect in Sydney’s outer west. He was a lifetime warrior for the NSW Right: he had joined the party at fifteen and was secretary of his local branch at eighteen; he was a union organiser at twentytwo, Mayor of Fairfield at twenty-five, a Federal MP at thirty-one. In mid-November, only three weeks before the challenge eventually occurred, he met Rudd to talk about trade policy. By the end of a onehour conversation, it was clear that Rudd had Bowen’s support for the leadership. They started to run through a list of Caucus members— the people Rudd could count as supporters, the ones he needed to work on, the ones he could write off. There were no lists committed to paper but the next time the pair met, about a week later, Bowen, without actually discussing the role with Rudd, had slipped into the job of numbers man. This time the names were written, lists made, phone calls assigned. As poll after poll reinforced the weakness of Beazley’s position, Rudd’s support gathered strength. In the last week of November he and Gillard decided to challenge the following week—the last Parliamentary sitting week of the year. The ballot would be at a mid-week Caucus meeting. They would announce the challenge on Sunday, 3 December. Their best assessment was that, while they needed forty-five votes to win a bare majority in the eighty-eightmember Caucus, they now had forty-nine or fifty votes. But as expectations built and media speculation swirled, Bowen told Rudd he thought they needed to act sooner. The atmosphere

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had become feverish. Beazley might decide to pre-empt Rudd, announcing a spill, or ballot, before Rudd was ready in an effort to recover the initiative. Rudd conferred with Gillard by phone. They agreed to bring the ballot forward to the Monday, 4 December. Rudd would announce the challenge on 1 December. He visited Beazley’s office in Parliament House that day to tell him in person. On the Monday, dozens of press gallery reporters waited outside the Labor Caucus room in Parliament House to hear the results of the leadership ballot. A number of them received text messages from Labor contacts inside even as the formalities were still underway and Rudd was making his first remarks as leader. But several of the journalists were surprised to find that the news of the ballot—Rudd 49, Beazley 39—had come not from a Labor source but from John Howard’s office. The Prime Minister’s press secretary, David Luff, a former reporter, had been sent the news by a contact of his own within the Labor Caucus. He now relished showing the press gallery this evidence of the permeability of the Labor Party. Was this a hint of the Labor bitterness and disunity that might follow Rudd’s triumph?

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16 Brand Rudd

Rudd insisted on the right of the leader to choose his own front bench, a break with Labor practice and a challenge to the power of the factions. But he pursued a policy of no recriminations and was judicious in his choices. Even though the Member for Melbourne, Lindsay Tanner, thought he had a longstanding informal understanding with Rudd that he would get the Treasury portfolio, Rudd decided he needed to bring the Roosters into the new leadership group in the interests of cohesion. He did not want the former Beazley crew disgruntled and potentially disruptive. And while Tanner was one of Labor’s more formidable policy thinkers, he carried no Caucus votes with him. Rudd put his long-running differences with Wayne Swan aside and kept him in place as Treasury spokesman and as part of the core strategy group, which also included Gillard, Gartrell and Arbib. ‘There was no argument about it, there was no discussion about the shadow ministry beforehand, and no bargaining about my position,’ said Swan in 2008. ‘It was Kevin’s sole decision. We had a yarn the night he won. I said I wanted to stay and he said he’d be happy to have me.’ Tanner became Rudd’s Finance spokesman. He was understandably disappointed to miss out on the high-powered, 169

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high-profile Treasurer’s post, but he readily resigned himself to the political realities. Beazley believed his decision to retire from Parliament also mitigated tension: ‘In the end I got out because I wanted the people who supported me to be able to bond with Kevin. Kevin and Wayne are getting along well; but if I had still been around, it would have been hard.’ He agreed that there were other factors in his decision not to linger, and to leave altogether. When had he made up his mind to quit Parliament on losing the leadership? ‘In my heart, I probably decided on the day I became leader.’ Gillard later drew the conclusion that the ballot she and Rudd had tried to avoid, rather than dividing the party, ultimately helped to unite it: ‘With the benefit of hindsight, I would say Kim Beazley did the right thing to fight the ballot. As painful as all of that was, I think there was something healing about it as well.’ Shortly after the ballot, Beazley received more pain with the news that his brother David had died. Nonetheless, Beazley was nothing but gracious. He and his supporters ‘immediately accepted the ballot and sort of regrouped, almost instantaneously, to get on and fight the election’, Gillard recalled. ‘And I could point to Wayne Swan, Stephen Smith— people who obviously not only had been very strong supporters of Kim but inevitably would have had a lot of emotion riding on the whole day . . . but, once [the result] was called, they picked themselves up and got right in there and really put their shoulders to the wheel.’ On reflection, she said, ‘If an agreement had happened, there would always have been doubt in people’s minds about whether it was the right thing—doubt in people’s minds about where the support really was. And, without testing that, maybe it would have been harder for people to accept the result and move on.’ Rudd also made it a priority to acknowledge the interests of the dealmaker who brokered the winning leadership ticket, Kim Carr. Rudd’s first public remarks on policy were about the future of manufacturing, and he made Carr Labor’s shadow Industry Minister. His part in crafting the new leadership partnership a well-kept secret, Carr listened with considerable satisfaction as Rudd expressed his

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own views exactly: ‘Our belief is that Australia has reached a fork in the road. There’s a fork in the road when it comes to our economy. The question that’s being asked is: Will Australia in the future be a manufacturing country? Will we still make things? Or is that all gone? We believe we have a future as a manufacturing country. We have a future with new knowledge-intensive industries, but it’s one where government must be engaged, not just sitting idly by, watching from the sidelines.’ This is precisely what Carr had hoped to hear from the new leader. For Labor, the salve of success healed any internal irritations. The moment Rudd took the leadership, Beazley’s dam broke. Labor’s poll numbers moved even higher. Howard Cabinet member Kevin Andrews said later he thought voters ‘were really against us in 2001 and 2004. I think it was the combination of some of the issues of the time that they didn’t think Labor was ready to be trusted with. With Rudd, I think they decided they were willing to trust him.’ By the time Rudd was elected leader, most of the elements of his policy program were already in place in his own mind. He was not an empty suit stepping in to pick up an agenda dictated by the party: ‘I think I had a pretty clear idea about the platform I would run on before I became leader,’ he said. ‘Certainly, I had been long persuaded of the productivity agenda, for example, long persuaded of the climate change agenda, long persuaded of the federalism agenda and, of course, because of my foreign policy background, long persuaded on Iraq and on the Asia-Pacific regional agenda. And you’ll see all of those schematics outlined pretty clearly through from when I became leader until about March/April that year. And I think it was around about April that we had a climate change summit in Canberra. The first policy documents we’d put out at the end of January were on the education revolution and the entire productivity argument. There was a long policy document on early childhood education.’ Rudd said climate change was not just a matter of politics for him: ‘The truth is, I had read the literature over the years and then spent some time over dinner with Al Gore, talking it through, in ’05/’06. But also, we had deeply held views within our family. Therese [his

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wife] and the kids have a deep conviction and view about the need to act. And not based on sentiment, but on extensive reading. I think what stung me about all these IPCC scientists is that you’ve got 4000 blokes—and they are mainly blokes—running around with white coats in a fairly conservative profession saying, Yeah, it’s beyond reasonable doubt. At that point a moral imperative kicks in and you have a responsibility to (a) get on top of this, and (b) to act on it. And we did.’ Broadband internet access was one policy priority that Rudd added to his agenda after assuming the leadership. The move came at a dinner in Sydney with one of the Roosters, Senator Stephen Conroy, whom Rudd had kept on in his post as Opposition spokesman on Communications. ‘The conversation went along the lines of me saying, What the bloody hell’s happening with broadband? It’s atrocious. Some of my constituents complain about it. What are you doing about it? Then he said, We could do x, y and z, or we could do a, b and c. I said, That’s pretty incremental. What do you need these days by way of megabytes per second to be mainstream or middleupper? To which he said, Ten megabytes per second. I said, OK.’ The next day Conroy came back to Rudd with a revised ambition for 12 Mb/s. The average speed of Australia’s best-quality internet connections was 1.5 Mb/s. Rudd asked how much it would cost to bridge the gap. Conroy’s answer: ‘Invest a lot of money.’ Rudd’s rejoinder: ‘OK. Go and find out how much.’ They developed a plan to invest $4.7 billion to build a national high-speed broadband system. Rudd explained how this fitted in with his objective of taking political ownership of the future: ‘So the common theme was the future—broadband infrastructure in the future, climate change policy to ensure we have an environmental future, a productivity agenda to look to the economy in the future, and a new approach to the federation, which is about better governance in the future.’ The future was also occupying a lot of time in Tim Gartrell’s present. Now that he had a new leader to sell to the Australian voting public, he wanted to find a marketing theme to fit Rudd. ‘The freshness, the newness, the future stuff—that was what Rudd brought

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to the table . . . So, we started talking about how we were going to get this down to short messages. The [ALP National] conference was about fresh thinking . . . That was the first thing. And then with fresh ideas and views there were lots of jokes about the Fresh Food People. Which was quite funny because one of our ad guys went to work for Woolworths in early ’07.’ Someone suggested ‘Fresh ideas and future thinking’, but Gartrell insisted that the slogan had to be two or three words maximum. He thought that Latham’s ‘Taking pressure off families’ for the 2004 election was too long and unwieldy. They settled on ‘Fresh thinking’ because ‘we actually thought that suited Kevin. Because thinking is a bit more serious. Anyone can have fresh ideas, but they can be bubble and froth. But thinking actually matched him.’

... In his last months as leader, Kim Beazley had not adopted the ‘Working people’ mantra that EMC had long advocated. He was still singing from the ‘Middle Australia’ songsheet. One day, immediately after the Bracks Government was re-elected in Victoria in November 2006, Beazley put the two together. He congratulated Steve Bracks for standing up ‘for middle Victorian families, working Victorian families’. If one was good, and two were better, then perhaps three would be best of all. He went on to say that ‘we understand absolutely that ordinary, middle, working Australian families feel deeply threatened [by Work Choices]’. When Rudd replaced Beazley a few weeks later, ‘working family’ became Labor’s new—and incessant—refrain. Rudd repeated the phrase so often that he began to test what Tim Gartrell called the ‘vomit principle’: the maximum number of times a politician can say a particular phrase before throwing up. Yet in Gartrell’s view, it isn’t until then that the concept begins to register with the ordinary voter. Rudd’s performance as a human slogan machine was so relentless he was lampooned for it. If, as Josef Goebbels said, repetition is the

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linchpin of propaganda, then Rudd proved to be an enthusiastic propagandist. As George W. Bush put it in 2005: ‘See, in my line of work you got to keep repeating things over and over and over again for the truth to sink in, to kind of catapult the propaganda.’ Commentators who later complained about Rudd’s merciless repetition of ‘working families’ tended to forget that the end of Beazley’s leadership finished off the repetition of his own contribution, ‘ordinary middle working Australian families’. Rudd did not take the phrase ‘working families’ from EMC, which had recommended ‘working people’. Nor did he take it from any particular source. The term had been in political parlance for years. Bob Carr had used it in campaigning in 2003. In the fi rst phase of the Democratic Party’s presidential primaries, the Iowa Caucuses, in January 2004, the Teamsters transport union massproduced placards that read: ‘Gephardt: Fighting for Working Families’ in support of Congressman Dick Gephardt. The Labor Government of Victoria used the phrase in its election campaign in November 2006. As he prepared to challenge Beazley in December 2006, Rudd had started to think about what he might say in the event that he should win. ‘It’s one thing to do the numbers; it’s another thing to have a vision,’ as one of his lieutenants put it. ‘Working families was an expression that was just generally floating around, and Kevin grabbed it and put it in his pocket.’ As he started to craft some remarks, he seized on ‘standing up for working families’. It had all the striking originality of the other expressions from his victory speech, the ‘fork in the road’ and the ‘bridge too far’. Rudd embraced ‘working families’ like a kid with a new toy. At Labor’s campaign launch in November 2007, he would use it twelve times. In the leaders’ debate he used it twenty times. And he didn’t leave it on the campaign trail. He took it into government, where it quickly spread and was soon virulent. The commentator Richard Farmer counted, in just one fortnight of sittings in March 2008, 450 uses of ‘working family’ or ‘working families’ in the House of Representatives. In nine sitting days Senators uttered the phrases

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124 times. It was ‘surely the most chronically overflogged pinch of American political jargon for the past 20 years, at least’, wrote David Wilson in The Age.

... Labor made two other important early decisions on the marketing of Kevin Rudd, Labor leader. Both were TV ads. The first introduced Rudd to voters as the man who grew up in rural Queensland, the bloke who cared about kids’ education and the future. It became known as the Eumundi ad, after the tiny town where Rudd spent his childhood. The other branded him as an ‘economic conservative’. Before Howard could vandalise Rudd’s image in the public mind, Labor leapt in and digitally enhanced it. ‘Our first discussion was, What are we going to do for Australia Day? It’s a good opportunity,’ recalled Gartrell. Australia Day came fifty-three days after Rudd became leader and 270 days before the election. This was unusually early to be running campaign ads. The Labor adman Neil Lawrence strongly urged the others in the strategy group to go early; they all agreed. Their reasoning: ‘The commonly held view was that, yes, Kevin is a blank canvas. Let’s fill the canvas in before they do,’ said Gartrell. They did it with the Eumundi ad. Filmed against the town’s idyllic greenery, Rudd, wearing an opennecked shirt and speaking over the twang of a guitar, spoke mainly about education. ‘So, why did we do that? Because that month we launched our first policy, which was on the education revolution. There’s actually no deep mystery there,’ said Gartrell, who wrote the script. ‘It’s just a purely positive ad. It says, this is what I believe in, this is what I intend to do.’ Next came the ad touting Rudd as an economic conservative. ‘When it comes to public finances, I am an economic conservative and always have been and always will be,’ Rudd said later. ‘When I say I’m pro-American it’s because, in my twenty-five years in the Australian diplomatic service through until the present, I always have been. And for reasons of a realist view of foreign policy. Well, it’s just

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me. Why should the Liberals command that space? It was as much my space, you know.’ But how to communicate it? The idea to state it baldly in a TV ad also came from the adman, according to Gartrell: ‘Kevin had talked a lot about wanting to get across that he’s fiscally conservative, but I think it was Neil Lawrence who said, Why don’t we just boldly claim it?’ And so they did. It was one of the most remarkable political ads screened on Australian TV—the Labor Party spent real money to show Kevin Rudd making this boast: ‘A number of people have described me as an economic conservative. When it comes to public finance, it’s a badge I wear with pride.’ Most ads clamour for attention by being sensational. By contrast, this ad is remarkable because it deliberately positioned its product as boring. But Labor had a last-minute panic about this ad. Gartrell remembered: ‘Just before the ad went to air I thought, Fuck!’ Was Rudd right? Was his claim independently verifiable? Had a number of people really described him as being an economic conservative? ‘So I Googled it and I found two references to Kevin Rudd being an economic conservative—one was in a Paul Kelly article [in The Australian], and then one other that was sort of, Kevin Rudd likes to tell people he’s an economic conservative.’ It was enough, he decided. Gartrell was delighted with the result: ‘It got reasonable cutthrough. And it created a whole debate. I think one of the funniest things throughout the campaign was everyone started to talk about being an economic conservative. It created a controversy point. Neil Lawrence said, It will get the other fellow trying to argue whether you are or aren’t an economic conservative, so you’re claiming the debate. Don’t think of an elephant, you know? It was wonderful—the Liberals went off their heads.’ Even the leader of the Greens, Senator Bob Brown, tried to claim the title: ‘I’m the real economic conservative of the campaign.’ Most importantly, the ad helped reinforce the perception of Rudd as a low-risk alternative to Howard. For twenty years, the electorate had consistently perceived Labor as less competent than the conservatives as economic managers. Howard had won the 2004 campaign partly

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by portraying Labor’s Mark Latham as an economic risk. It was central to Labor’s hopes that it reposition itself as a safe choice. This competition for the title of economic conservative eventually yielded a trivial but telling exchange in Parliament. During question time one day in May 2007, John Howard and Kevin Rudd looked at each other across the table they shared at the centre of the House of Representatives. It just so happened that the Prime Minister and the alternative prime minister were both wearing red ties. While one of Howard’s ministers held forth from the dispatch box, the two leaders exchanged a few quiet remarks about their neckwear. The exchange could not be heard in the press gallery above, but one of them later said that it went something like this: ‘That’s a very red tie you’re wearing today, John,’ Rudd observed. ‘Not as red as your socialist-red tie,’ Howard replied. ‘Ah, but I have a conservative blue stripe across mine,’ the Labor leader rejoined. The Coalition under Howard faced an analogous position to Labor under Beazley: it had to choose whether it would change leaders. But whereas Labor was ahead but its leader was lagging, Howard was ahead while his Government was lagging. There was a strong case for the Liberals keeping their leader in place, and an equally strong one for replacing him. Yet for both parties, it was impossible to know whether change would improve their prospects. Labor screwed up its courage and acted. It worked. Rudd immediately became the most popular Opposition leader in the thirty-five years of the Nielsen opinion poll, and Labor moved into a commanding lead over the Government. Now Howard was under tremendous pressure. He had insisted on holding on to the leadership. The onus was now squarely on him to regain the initiative and recover the lead.

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PART FOUR DEFEAT

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17 A New Model For Old Governments

The big challenge for the Labor Party in early 2007 was how to persuade the people of New South Wales to re-elect a rotten, incompetent, ageing State Government. The fact that it succeeded contained lessons for incumbents everywhere, including in Canberra. The experience confirmed the effectiveness of what Peter Costello has called the ‘new model’ for political leadership. NSW Labor was able to renew its image and extend its shelf life by changing its leader from Bob Carr to Morris Iemma. The party had first won government in 1995, making it a little older than the Howard Government, which was elected in 1996. But just as the effects of the Carr Government’s chronic underinvestment in water, transport, hospitals and other infrastructure converged to start damaging Labor’s electoral viability, Carr resigned. He had been Premier for ten years. The ALP installed Iemma, who had a year and a half to consolidate his position before the election in March 2007. By changing leaders Labor appeased public anger, satisfied the desire for change, yet preserved its long hold on power. The Iemma Government was no more competent or clean than the Carr Government, but by changing leaders Labor was able to extend its tenure by at least one four-year term. Labor was governing with an enormous 181

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buffer—toppling it would have taken a notional uniform swing against it of 12 per cent—but it was not prepared to chance its future on Carr’s popularity. In the event, the swing was held to a modest 3 per cent. The manoeuvre, brutal as it was, was effective. This ‘new model’ does not necessarily solve the problems of the people, whose interests might not be served any better by a change of leader. And it does not solve the problems of the leader, who must be dispatched to make it work. But it does solve the principal problem of the ruling party: hanging on to power. Of course, there were many differences between NSW Labor’s position and that of the Coalition in Canberra. The latter was not regarded as incompetent or corrupt as the Government, and Howard himself was still reasonably popular. Nor was there much similarity between the replacement leaders, actual and potential—Morris Iemma was little known, whereas Peter Costello was a household name. Nevertheless, it was a fascinating case study in the potential effects of leadership management. A second lesson from the New South Wales election was the benefit of moving early to ‘frame’, or control the public perception of, an issue, a candidate or an election. Federally, Labor had already used pre-emptive framing to shape the public view of Rudd before the Government could do so—to paint the blank canvas, as Labor’s Tim Gartrell put it. It swiftly and successfully positioned Rudd as an economic conservative and an education campaigner rather than an untested risk to the economy, as the Government would try, too late, to portray him. And the ACTU had framed Work Choices as an assault on workers’ rights, pre-empting the Government’s effort to frame it as a liberating instrument of choice. NSW Labor didn’t just reframe its own image. Its framing of the Opposition Leader, the Liberals’ Peter Debnam, set a new benchmark in State politics for its bare-fisted negativity. Debnam called it ‘the most vicious political campaign in history’. A former national president of the Labor Party, Stephen Loosley, concurred at the time: ‘The New South Wales campaign was the most negative in Australian history. I think it’s a sign of the times and I think

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our politics will increasingly become negative.’ In this, Labor was emulating Howard’s successful attacks on Mark Latham at the 2004 Federal election. This was a big departure in a State where premiers traditionally ignored their challengers to deprive them of attention and relevance. Labor’s concerted campaign targeted misadventures in Debnam’s earlier career in business, his representation of the affluent electorate of Vaucluse, and the fear that he would transfer State employees to the federal industrial-relations system. Labor said its New South Wales campaign was modelled on the 2004 Coalition campaign against Mark Latham, which had attacked his inexperience and his record on Liverpool Council and reminded voters of the high interest rates at the end of Paul Keating’s prime ministership. The General Secretary of NSW Labor, Mark Arbib, said he thought that campaign was ‘technically outstanding. It’s not a secret that we copied many of their tactics and used them against Debnam.’ ‘Don’t risk Debnam’ was a well-used Labor punchline in the campaign, a direct lift from the Coalition’s ‘Don’t risk Latham’. Labor placed on one of the main arterial roads into Sydney a huge billboard that read: ‘Peter Debnam has lost touch with working families.’ It was an explicit early model for the later campaign against Howard. ‘What Mark Arbib did in New South Wales was to define the campaign and define the issues,’ Tim Gartrell later remarked. ‘So from that experience we decided to launch our election slogan in midSeptember, much earlier than you normally would.’ And then there was Work Choices. Even though it was a Federal issue, Labor had played up Peter Debnam’s statement that he would hand the State’s industrial-relations powers to Canberra. And so Work Choices became a State issue. Exit polling conducted for the NSW union movement found that 27 per cent of Labor voters said industrial relations was a decisive factor in the State election, while 35 per cent said it was significant. A Nielsen opinion poll late in the election campaign also identified industrial relations as the biggest single issue on NSW voters’ minds. Morris Iemma claimed that Work Choices was decisive in a number of electorates: ‘It’s a piece

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of legislation workers and families hate. There is a clear message to Canberra, and they will ignore it at their peril.’ In public, Howard played down the impact of the Federal workplace laws in the NSW Coalition’s defeat. He asserted that, while a section of the Labor vote no doubt felt very strongly about Work Choices, it did not determine the election’s outcome. In private, Howard was somewhat more troubled. He was receiving a stream of Liberal Party polling that suggested Work Choices was deeply unpopular and a serious electoral liability. But he kept this to himself. And he remained unconvinced that he needed to make any change to his historic legislation. ‘We expected Howard would take the kick up the bum from the New South Wales election and do a U-turn on Work Choices, but he refused to take the kick,’ concluded Arbib. Impressed with Labor’s campaign in New South Wales, Tim Gartrell asked the NSW General Secretary to join him full time in preparing the Federal election campaign. Arbib accepted the invitation and moved in May from his office in Sussex Street to Labor’s national campaign war room in Sydney’s Surry Hills. The New South Wales election was replete with lessons for the Federal election that would follow in eight months. The Howard Government did not act on any of them. Of course, there was one further implication of the New South Wales election—that incumbent governments were very hard to dislodge, no matter how woeful they might be. Complacency would have commended this lesson to the Howard Government. But a government that had been consistently and increasingly behind in the polls should not have been satisfied with the counsels of complacency.

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18 ‘Shit, We Have to Do Something’

The Liberal Party’s pollster, Mark Textor, was listening to a focus group of swinging voters one evening in December 2006. It was the week after Kevin Rudd had been elected Labor leader. Textor was curious to hear what ordinary Australians thought of this. The published polls had already shown that Rudd’s arrival had dramatically boosted Labor’s support. But this was not enough information to guide the ruling party. The fraction of voters expressing a preference for a political party is vital information. It is the what of politics. But politicians always want to know their reasons—the why. Like the measured size of a building, voter preferences convey quantity but not quality. Numbers may be high, but unsteady and vulnerable to collapse. Textor was alarmed to discover that in this focus group support for Rudd was not only high, it was also strong. For the pollster, it was a threshold moment. It was, as he would later tell colleagues, the ‘Shit, we have to do something or we’re going to lose!’ moment. ‘Work Choices had created strong undercurrents of concern about the Government,’ Textor said later. ‘But it took Kevin Rudd to provide the voice and the vehicle for it.’ 185

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Howard realised that he was in difficulty. He did not think it was fatal, however, and he was not alone in this judgment. It was the orthodoxy that the electorate’s infatuation with Rudd would cool as it had with Mark Latham. As Rudd arrived to confront Howard, Arthur Sinodinos left the service of the man he had for over a decade called ‘the boss’. Sinodinos was convinced that Howard would ultimately triumph. ‘I was expecting the honeymoon with Rudd to end at some stage. I think we just all thought, Nah, he’s too new and inexperienced; this can’t last.’ The timing of Sinodinos’s departure was purely coincidental. He had promised himself during the 2004 campaign that he would not endure another campaign with Howard; if he hesitated now, he would soon find himself in an election year and unable to leave. He did not pause to reconsider. And Howard went into 2007 without the chief counsellor of his prime ministership. Howard was prepared to make serious changes, as he always was when electoral survival was at stake. He would not countenance standing aside now that he had declared his position after the McLachlan note affair, but he was prepared to replace the ministers responsible for his two biggest policy problems—Work Choices and climate change. On the ratification of the Kyoto Protocol, he would not reconsider. Having initially signed Kyoto and then abandoned it, he would not backflip again. So long as Bush refused to ratify Kyoto, so did Howard. The Australian leader was prepared to change any position on any policy, except those where he had acted in solidarity with Bush. All else was negotiable in the pursuit of electoral survival, but solidarity with the leader of the conservative world was immutable. So even when he began to move towards concessions on Work Choices, he doggedly stuck to his guns on the Kyoto Protocol and the Iraq occupation. Did Howard’s ideological, political and personal attachment to Bush sometimes overpower his political judgment? On the day after the US Senator Barack Obama announced that he would seek the Democratic nomination for the presidency, Howard demonstrated

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that it did. On 11 February 2007, he made the extraordinarily rash statement that ‘If I was running Al Qaeda in Iraq, I would put a circle around March 2008 and pray, as many times as possible, for a victory not only for Obama but also for the Democrats.’ Howard had, at a stroke, demonstrated his attachment to the Iraq occupation, which Obama wanted to bring to an early end, and to the US Republican Party, which Obama hoped to defeat. He also irritated Obama and politicised the Australian alliance with the US. Obama fired back that the US had 140,000 troops in Iraq: ‘And my understanding is Mr Howard has deployed 1400. So if he is . . . to fight the good fight in Iraq, I would suggest he calls up another 20,000 Australians and sends them to Iraq, otherwise it’s just a bunch of empty rhetoric.’ Howard also knew that his intransigence on Kyoto was hurting the Government in the polls. When the British Government released Sir Nicholas Stern’s report on the economics of climate change in October 2006, the difficulty of his position was starkly exposed. Here was an issue of gathering urgency and electoral concern, but Howard could not credibly address it. His stance on Kyoto disqualified him from being listened to on climate change. He resorted to telling a meeting of Coalition MPs not to be ‘mesmerised’ by a single report. He would not take the electorally dangerous position of arguing against the need for action on climate change, but he could not plausibly promise to do anything about it, either. Out of the public gaze, Howard’s Environment Minister, Ian Campbell, was working on the Prime Minister to take practical measures to deal with climate change. He spent months urging Howard to put a price on carbon emissions. Campbell argued that, as the party of the market, the Liberals should harness market forces to help solve the problem of carbon mispricing. In what Stern had called ‘the greatest market failure the world has seen’, the price of carbon fuels had never included the full cost of using them. In economists’ jargon, the ‘externalities’ of such fuels had never been ‘internalised’. One externality was the heating of the planet. To explicitly include the cost of this would make carbon fuels more expensive and that, in turn, would help ration their use. Howard showed little interest.

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‘The break for me came when John went to the US and got all excited about nuclear energy,’ Campbell related. ‘Because for nuclear to be viable, you need a carbon price.’ Generating electricity from a nuclear reactor in Australia would be far more expensive than burning coal. No investor would spend billions on a nuclear power plant in order to generate an uncompetitively priced product—that would be the path to bankruptcy. To make nuclear power competitive with coal would require either subsidies for nuclear power or a higher price on coal. Subsidising nuclear energy would be costly to taxpayers and difficult to justify in a country with bountiful cheap coal, gas and renewable energy. But coal could be made more expensive by putting a price on carbon. How big a carbon price would be required to make nuclear power competitive in Australia? ‘We studied this,’ Campbell said. ‘It would take a carbon price of about $45 to $50’ for each tonne of carbon emitted into the atmosphere. ‘By starting an inquiry into nuclear energy, as sure as night follows day you will end up with a carbon price inquiry. The PM and I had a private discussion about this, and then we had a Cabinet discussion. It was not a strong debate. It was, OK, let’s do a nuclear inquiry first, followed by a carbon inquiry.’ Campbell phoned the head of the Australian Greenhouse Office, Howard Bamsey. ‘I said, It’s happening.’ He didn’t quite bring off the pledge he had made to Bamsey, that Australia would have a carbon trading scheme by the end of 2006, but he did accomplish an inquiry into one. Campbell remembered Bamsey saying: ‘I didn’t believe you, but I believe you now.’ There are two practicable ways of putting a price on carbon emissions. One is to simply tax them. This is administratively simple and has the virtue that the cost is precise and fi xed. The other way is to issue licences to emit carbon. If the number of tonnes covered by licences is fewer than the number of tonnes for which licences are available, the additional licences will acquire a value as carbon emitters buy them. This is administratively complex but it has the virtue that the government can set a limit on the total volume of emissions and thus directly control it. The Howard Government

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opted to explore the idea of a licensing system, usually known as an emissions trading scheme. Howard accordingly announced on 6 June 2006 ‘the establishment of a prime ministerial taskforce to review uranium mining, processing and nuclear energy in Australia’, chaired by the nuclear physicist and former Telstra chief Ziggy Switkowski. Six months later, he announced an inquiry into a carbon emissions trading scheme, to be chaired by the secretary of the Department of Prime Minister and Cabinet, Peter Shergold. ‘We need to maintain the prosperity that our abundant fossil fuels have given us, while at the same time exploring options for global climate change solutions and accelerating the development and deployment of low-emissions and clean-coal technologies,’ Howard said. The emissions trading scheme inquiry was under way, but Howard wanted to do more. The cutting edge of the climate change debate in Australia, he reasoned, was the drought. And if drought was the problem, then water was the solution. To address water policy would be practical and local—unlike the international Kyoto and the rather abstract idea of emissions trading. Malcolm Turnbull, the Parliamentary Secretary to the Prime Minister, had been privately putting to him for some months now a plan to tackle the water crisis in the Murray–Darling river system. The Murray–Darling basin produced 40 per cent of the nation’s food, but it was drying up. In December 2006, Howard started to develop Turnbull’s proposal into the Government’s first big initiative of the election year. To signal a whole new approach to the environment, he named Turnbull his Environment Minister, shuffling Campbell into Joe Hockey’s former portfolio of Human Services. ‘I took the idea to Howard in the middle of ’06,’ Turnbull said after the 2007 election, ‘to deal with what I saw as a hopelessly dysfunctional system of governance, the Murray–Darling Basin, where you had four States, each of which had competitive interests with the others. They were supposedly managing it, but it wasn’t being managed at all. If you went anywhere in the world of water policy, everyone said the same thing—of course, if you were writing the

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constitution today, you’d put the interstate waters under Federal control. But it was too hard. It was in the too-hard basket. John had the courage to back me in taking it out of the too-hard basket.’ Turnbull proposed that the Federal Government legislate unilaterally to take control of the Murray–Darling. The Prime Minister baulked. He wanted to persuade the States to refer their powers, Turnbull recalled: ‘I thought that was unbelievable. They will never do that. They will tell us to drop dead. Well, three of them did refer powers. So we ended up with my Plan A. But only because Victoria wouldn’t play ball. But we got 90 per cent of what we wanted. Secondly, he was prepared to put a lot more money into it than I had imagined possible. But it was the political decision that people baulked at, not the money.’ Two days after announcing Turnbull’s appointment, Howard announced a plan to spend $10 billion to renew the Murray–Darling. The States would be asked to refer their powers over the river system to the Commonwealth. In return, the Federal Government would pay to line irrigation channels, renew thousands of kilometres of piping, and buy back from irrigators licences to use unsustainably large amounts of water. It was 25 January, the day before Australia Day. Howard was well pleased that he had started the election year by seizing the initiative on a big reform of vital national importance.

... Employment Minister Kevin Andrews, when he began to lose the public debate about Work Choices in the first few months of 2006, had asked for the resources to set up a special unit within his office. He proposed that it would be run by a key member of his staff, the famously aggressive Liberal activist Ian Hanke, and that it would act as a rapid response team to react to the ACTU’s Your Rights at Work campaign. But the Prime Minister’s office quibbled about who would work in the unit and where it would be located. ‘In the end, we just gave up trying to get it established because of the hassles involved,’ said Andrews.

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Instead, in August 2006, Howard had assigned to his Employment Minister an assistant minister, Joe Hockey. The initial instruction from Andrews to his new assistant was one that baffled Hockey. He was told to keep quiet and not engage in public debate about Work Choices. ‘I defied it,’ said Hockey of the directive. ‘We had to engage in the public debate. Because it’s a truism in politics that, if only one side of the story is ever presented, then it becomes indisputable fact. And that was what our research showed—that in the absence of any contrary argument, people had to believe what the unions were saying.’ Hockey acknowledged the power of the ACTU advertising campaign. The so-called ‘Tracy ad’ he described as ‘a classic’. It portrayed employer behaviour that was illegal under Work Choices, he said, but it was powerful and the Government was helpless in the face of it—‘Truth is no longer required in political advertising.’ Still, as Hockey took up the cause and went from function to function defending Work Choices, he came to a depressing conclusion. The argument was already lost. In January 2007 Howard decided to move the austere Andrews to the Immigration portfolio, promoting the avuncular Hockey into his place. It was now a year and a half since the Tracy ad had been launched and public opinion about Work Choices had first formed. The logic of the shuffle was clear—Howard thought it was not the product but the salesman that was the problem. Almost as soon as he became Employment Minister, Hockey started urging Howard to change the labour laws the Prime Minister had spent his entire career trying to achieve. For Hockey, it was the product that was the problem. ‘My advice was that we needed to soften the laws—we needed to ensure penalty rates and public holidays were put back in [as minimum employment conditions],’ he recalled. His was not a lone voice. Behind closed doors, a chorus of Howard’s closest advisers was urging him to reconsider Work Choices: Hockey was joined by the Liberal Party’s Federal Secretary, Brian Loughnane, both the principals of the Liberals’ polling firm, Lynton Crosby and Mark Textor, and the industrial relations adviser on Howard’s personal staff, Jamie Briggs.

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While Howard was in the midst of trying to deal with these big threats to his government, he was abruptly confronted with an acute threat to his own seat. In February, the former ABC-TV presenter Maxine McKew declared herself a candidate for Labor in the seat of Bennelong, Howard’s bailiwick for the past thirty-three years. While planning the defence of the outer reaches of his realm, the king discovered that his own castle was in jeopardy. McKew was smart, articulate, accomplished, personable and, among those who watched the ABC, well known. Although she was married to a former ALP National Secretary, Bob Hogg, she had conducted herself in her decades on air in a professional, reasonably non-partisan manner. She did not look like an angry leftist with a vendetta but a self-possessed career woman who had made a considered decision in good conscience to oppose Howard. McKew quickly discovered that Howard had a good grip on the local chambers of commerce, the two local newspapers, and the RSL and other local clubs. ‘They felt proprietorial about him, and he felt he owned them,’ she later said. But McKew had the advantage that Bennelong was a ‘classic ABC footprint’, where many of the tertiaryeducated, middle-to-upper-middle-income voters ‘felt they know me’ from TV. The boards, committees and memberships of many of the local institutions were immediately divided; some members were strongly committed to Howard, yet others were very curious about McKew and wanted to give her a hearing. ‘My candidacy threw a bomb into the middle of these arrangements that had been in place for years,’ she said. Howard’s response was to say he would ‘work even harder for the people of Australia—and that, of course, includes Bennelong’. At the very least, McKew would oblige Howard to actively defend his own seat in Sydney’s northern suburbs. No longer was he free to patrol the borders of his domain; this new challenge meant he had to keep coming back to shore up the centre. McKew loathed the suggestion that she was a distraction. She contested the election to topple Howard from his seat, not to provide some helpful harassment to help Labor topple the Coalition in other

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seats. She wanted to be deadly to Howard, not a mere irritant. But initially it seemed unlikely that she could defeat the Prime Minister in the seat he had held so solidly for so long. The seat had been Liberal continuously since its creation in 1949, and no Prime Minister had lost his seat in a general election since the conservative Stanley Melbourne Bruce in 1929. To win, McKew would need a swing of 4.1 per cent. This was not vast, but neither was it trivial. It was of about the same order as the 4.8 per cent swing across the country that would give Labor the sixteen seats it needed to form government. Bennelong had become a bellwether seat—as it went, Australia was likely to go. When McKew’s candidacy was announced, Kevin Rudd told colleagues that he gave her a one in five chance of taking the seat. Persistently dreadful poll numbers and the insistent prodding of his advisers finally pushed Howard to breaking point in early April 2007. In a phone call with Hockey on Good Friday, the Prime Minister agreed to amend the signature reform of his fourth term. ‘I thought, I’ve got him over the line, and he was prepared to change,’ Hockey recalled. Howard said, ‘Well, how do you think we should do it?’ Hockey replied, ‘How far can we go?’ The next step was for Howard to raise it at the next Cabinet meeting, in Brisbane. Yet Hockey said the ministers were wary of seeming enthusiastic about any backdown: ‘It was a rather muted conversation,’ he recalled. ‘They knew it was an article of faith for John Howard—the whole of Work Choices—so there weren’t many people there stretching their relationship and arguing strongly in favour of changing it.’ But Howard signalled that he wanted to ‘do something’ to make the policy more politically viable and he sought the Cabinet’s leave to pursue the idea with Hockey outside the Cabinet process—a manoeuvre known as getting a ‘hunting licence’ from the Cabinet. The Cabinet agreed, and that was the last time Howard troubled to ask its opinion on the matter. Howard and Hockey, working without reference to the Cabinet, now also set up a mechanism to work around the Department of Employment and Workplace Relations. Because ‘the department leaked like a sieve’, Hockey said, he installed a team of seven officials

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in the North Side Hotel, across the road from his electoral office in North Sydney. Jamie Briggs from Howard’s office, three members of Hockey’s staff and three experts from the department worked up the detail of what was to become Howard’s big policy concession, the so-called Fairness Test. In essence, it would restore a safety net to workers at risk of losing pay or conditions. For any worker covered by a collective agreement or working in an industry normally covered by one, or on an Australian Workplace Agreement (AWA) earning under $75,000, ‘adequate compensation’ would have to be paid for the loss of any working condition or benefit. It was the reintroduction of a central safeguard that Howard had deliberately ripped out of the system with his Work Choices law—the ‘no disadvantage’ test. Hockey had another goal: ‘I wanted to kill Billy,’ he said. Billy was a fictitious unemployed youth featured in a Work Choices brochure; he was intended to demonstrate the benefits of the new regime. He’d got his first job because his boss was allowed to offer him a low wage without the traditional extras like penalty rates. But the unions had turned Billy into a stick to beat the Government with. The ACTU’s Greg Combet pounced: ‘Under the new laws, to get a job as a retail worker Billy has to sign an AWA individual contract that removes his rights to public holidays, rest breaks, bonuses, annual leave loadings, allowances, penalty rates, overtime and shift loadings. If the company Billy works for employs less than 100 staff, he will also have no protection from unfair dismissal under the government’s new laws.’ The union news journal Workers Online dubbed Billy ‘Howard’s Bastard’. In contrast to the happy Billy of the Government’s advertising, the unions found a real Billy. This unemployed youth got a job but was unhappy with the poor conditions. The media reported his story, and the Billy of Howard’s marketing effort became an embarrassment. Now Hockey wanted to eliminate the possibility that anyone could be employed without penalty rates and holiday pay. Howard agreed to Hockey’s demand, but with great reluctance. ‘Howard had fallen in love with Billy,’ the Employment Minister recalled. Once the changes were ready for announcement, the Government hit a snag of timing. The amendments were designed to show the

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public that far from being a blunt instrument, Work Choices was now safe and harmless. To overcome entrenched suspicions, the announcement needed to generate plenty of media buzz. That meant it needed to hit the news before the Federal Budget on 8 May. The Budget was to be another big set-piece in Howard’s re-election campaign and could not be overshadowed by coverage of the Work Choices change. But now a succession of events conspired to crowd the national news agenda. Hockey and Howard watched and waited anxiously, day after day, for an opening in the news flow. The Labor Party’s national conference finished on Sunday, 29 April, in a blaze of controversy over the new Rudd–Gillard industrial-relations policy, which business attacked as too prescriptive and too pro-union. Hockey said: ‘It was a complete disaster for Labor, and so we held back.’ But simultaneously, ‘we were being wedged by the budget, which was a week later’. In the interim, the eccentric Liberal Senator Bill Heffernan made his own contribution. He repeated his remark from the previous year that Julia Gillard was not fit to lead because she was ‘deliberately barren’. Recalled Hockey: ‘That was horrific timing, and a horrific statement, and so we basically left it as late as possible.’ The final date for the announcement was 4 May, the Friday before the Budget. The night before, so as to amplify the news impact, Howard took the rare step of personally phoning senior political reporters at all the major newspapers. He told them the gist of the announcement—and told them not to quote him. The information was offered strictly on a ‘background’ basis. The story was now sure to be on the front pages soon after midnight, which in turn meant it would be picked up on radio and TV from early morning; yet the words Howard actually spoke at the formal announcement would be fresh enough to guarantee a big run on TV news bulletins that night. At his press conference, he denied that he was doing a backflip. ‘Some will say that,’ Howard allowed. ‘I believe that, with legislation as big and as important as [Work Choices], you do need to monitor

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its operation. I always said we would be willing to fine-tune it.’ Hockey, standing next to Howard at the lectern and suffering from the flu, didn’t get a word in. The Fairness Test, nicknamed the ‘Battlers’ Clause’, was later rammed home with a vast taxpayer-funded advertising campaign.

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19 The Wizard of Oz

With the Murray–Darling plan launched, a nuclear power inquiry under way, a task force designing a carbon emissions trading scheme, and Work Choices amended and relaunched, the next big step in rebuilding electoral support would be the Budget. The Budget was the customary pivot point for the Government’s fortunes. In the previous three election years it had been the moment when the Government moved from laggard to leader. The Budget underscored the strength and health of the economy. There would be big spending, big tax cuts, and a respectable surplus. Costello managed to hold the line on the surplus at his self-set minimum of 1 per cent of GDP. This translated into a surplus of $10.6 billion, though it ultimately came in at the larger figure of 1.3 per cent, or $14 billion because of the profits cascading from the commodities boom. Thus Costello could claim that ten of his twelve Budgets had produced surpluses, and that the last five had also yielded income tax cuts. The Budget accomplished three political feats for the Government. First, it preserved its bedrock political asset—its image as the party of superior economic management. Second, it directed money to the lower-middle-income ‘Howard battlers’, with a $21-a-week tax cut for people earning $30,000 to $40,000 and a more direct payment of 197

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child-care rebates. Together with the new safety net that Howard had belatedly put under Work Choices, this was designed to regain the allegiance of the battlers, who could give the Government the outersuburban seats it needed to retain power. As well, the Budget held out the promise of bigger tax cuts to the higher paid. In all, these tax cuts represented $5.3 billion in revenue forgone in the first year, and a total of $31.5 billion over the four-year forward estimates. Third, the Government surprised everyone with a new emphasis on higher education—an attempt to counter Rudd’s promise of an ‘education revolution’. Rudd had held a monopoly on this subject. Now the Government was talking about it too. After ignoring the funding needs of universities for a decade, it suddenly found a vast sum—$9 billion—for vocational education, schools and universities. Of this, the centrepiece was a new $5 billion Higher Education Endowment Fund, to be financed from the surplus. The capital would be preserved, and its earnings—an estimated $300 million a year—would be ploughed into higher education. As Costello put it at the time: ‘I think the education revolution has happened. They will turn up at the Winter Palace and find that it’s all over.’ The Budget aimed at the familiar compromise between the taxcutting Treasurer and the free-spending Prime Minister. But because it was an election year, the balance tipped in Howard’s favour. The average increase in Commonwealth spending in a non-election year under Howard was 2.5 per cent after removing the effect of inflation. But in an election year under Howard, spending increased by an average of 5.4 per cent. Ministers had brought to Howard and Costello opening bids for new spending that were worth a total of $22.3 billion across the four-year period covered by the forward estimates. Of this, Costello allowed $9.9 billion to go before the Cabinet’s Expenditure Review Committee for consideration, according to a senior minister. Of this, $7.6 billion worth of proposals was approved for inclusion in the Budget. Howard spent an extraordinary $4 billion in immediate ad-hoc cash payments to voters. These were one-off payments, part of no particular program and with no particular rationale. The party that

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boasted of its fiscal rectitude now exposed itself as fiscally flatulent. The elderly, for instance, were given $500 apiece ‘to share in the economic growth they helped create’. Carers were handed cash bonuses of $1000, plus another $600 for each person in their care. People earning under $58,000 shared in a $1.1 billion one-off government contribution to their collective superannuation accounts. The Budget was a monolith the Government pushed into place to block out as much as it could of Labor’s daylight. It was big enough and smooth enough that Labor was unable to find a toehold. In a vast manifesto covering $240 billion in outlays across every portfolio, Labor could find nothing to oppose. One consequence was that, in a week in which the Opposition typically attacks the Government over the flaws in its Budget, the Government stayed the offensive. Parliamentary question time in the days immediately after the Budget was dominated not by Labor attacks on the Government but by the Government taunting Labor over its industrial-relations policy, which was in a state of some confusion. Rudd was under sustained pressure. His policy had enraged every major employer group in the country and he stood accused of trying to sabotage the economy. The Labor leader had signalled that he would conduct a ‘fine-tuning’, and the Government harried him relentlessly. And the Budget forecast sunny economic times, sunshine the Government was determined to bask in. The Treasury forecast strong real economic growth of 3.75 per cent in the year ahead with ‘quiescent’ inflation of 2.5 per cent. The Budget not only blocked Rudd’s light, it starved him of air, too, according to the Australian Financial Review’s Laura Tingle. ‘The gasping sounds you may be hearing this morning are the Labor Party struggling for oxygen’, she wrote the day after it was announced. It seemed that the Coalition was once again set for an election-year comeback. At the online betting agency Centrebet, the Government became the punters’ favourite for the first time since March, with a payout of $1.90 to Labor’s $1.87. But the voters were not so easily moved. The opinion polls did not respond. Howard’s reaction veered from disbelief to dread. In

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mid-May he told a meeting of the Coalition parties in Parliament that the polls might be reflecting the Australian people’s ‘innate sense of humour’. The next week he told the same group that ‘the public opinion polls suggest we would not just lose but be annihilated’, according to the Coalition spokesman’s post-meeting briefing to the media. Howard conceded that the longevity of the Government’s three ‘most visible figures’—himself, Peter Costello and Alexander Downer—was a double-edged sword. The troika had been one of the Government’s strengths; it was now also seen as a weakness. This is exactly what the Liberal Party’s research was showing. Howard was reading the research, getting the message, and not lacking in self-awareness. But he was also not offering to change the standing of any of the three ‘most visible figures’. He hoped his warning of annihilation would help snap the electorate out of its trance-like adulation for Kevin Rudd. The Prime Minister told his party that, as he moved around the country, he found ‘no apparent hostility’ to the Government but that nevertheless ‘people are thinking of change; that is the mood in the community’. They had to recognise that they had a problem. Howard now moved swiftly on multiple fronts. The Government quietly dropped the term Work Choices from its lexicon. And, after abandoning the Australian Guantanamo Bay detainee David Hicks in 2002, Howard successfully pressured the Bush Administration to have him returned to Australia. Hicks came home two weeks after the Budget. Howard pushed the nationalism button, introducing into Parliament at the end of May a new Citizenship Test, which added to the existing English comprehension test some new questions on Australian history, culture and values. Climate change policy came next. On 1 June the task force investigating a carbon emissions trading scheme, the Shergold Inquiry, recommended that Australia implement a wide-reaching scheme by 2012. Two days later Howard embraced its findings in toto. Next, the Government announced its own plan for a national broadband network. Then came the intervention into the Aboriginal communities of the Northern Territory.

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On 30 June terrorists drove a jeep laden with propane canisters into Glasgow’s international airport terminal. It failed to explode, but started a fire and injured five passers-by. Two days later a twentyseven-year-old Indian-born doctor, Mohammed Haneef, was arrested at Brisbane Airport, becoming the first person to be detained under the 2005 Anti-Terrorism Act. All the while, Howard kept up a steady drumbeat of warnings that Rudd and Labor would wreck the economy. The Howard Government attacked Rudd whenever the opportunity presented itself. In March he was accused of keeping company with the disgraced former Western Australian Premier, Brian Burke, who had served a jail sentence for corruption. Peter Costello delivered the toughest tirade against Rudd in Parliamentary question time: ‘Those who understand politics will say it was no coincidence that the Leader of the Opposition was looking for numbers for his leadership bid when he happened to be going regularly to Western Australia to meet with Mr Brian Burke. Mr Brian Burke never does something for nothing. Anyone who deals with Mr Brian Burke is morally and politically compromised.’ Rudd denied that he had sought Burke’s support in his bid for the Labor leadership, but accepted that he had erred in meeting a politician whom Labor’s WA branch had declared off limits to its members. Said Rudd: ‘It was a mistake, an error of judgment, and I accept this. I’m old enough and ugly enough to admit when I got something wrong.’ Nine days after the Government launched the first Burke attack, Rudd was accused of distorting his account of his childhood. The story he’d told—part of the ‘rich tapestry’ that Mark Arbib thought helped make Rudd such a good candidate—was that when his sharefarming father had died after a car crash the farm’s owner, Aubrey Low, had thrown Rudd, then aged eleven, and his brother and mother off the property. But the Low family denied this account and was seeking legal advice. ‘Breaking their silence, five members of the Low family claim that, far from “evicting” the Rudds, their father went out of his way to accommodate them’, wrote Kerry-Anne Walsh in Sydney’s

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Sun-Herald. The story quoted Low’s daughter as saying: ‘He’s dragged our father’s proud reputation through the mud time and time again. Dad was a caring, compassionate man with terrific family values. What pains us most is the fact that he thought the world of the Rudds.’ The report included Rudd’s reponse: ‘My mother was told that she had to leave the farm—and that was that.’ Rudd and his staff worked hard, but in vain, to stop publication of the story. Alexander Downer and Peter Costello took the opportunity to question Rudd’s truthfulness. In May the bad news for Rudd was his wife’s firm’s underpayment of some of its staff. Therese Rein had built Ingeus from a two-person business in Queensland into an export success employing 1300 people in four countries. The company reported total revenue in 2005–06 of $175 million and after-tax profits of $10.4 million. Its revenue from operations in France, Germany and Britain eclipsed that from its Australian base. Its business was to take ‘unemployable’ people and make them employable, and it did this on government contracts. Now, just as Rudd led a sustained attack on the Government over its industrial-relations policy, Melbourne’s Herald-Sun disclosed that the firm had put fifty-eight staff on a contract that stripped them of overtime pay and penalty rates in exchange for a paltry extra 45c an hour. It was exactly the sort of exploitative behaviour Rudd had accused the Government of condoning. Rudd called a press conference and explained—on behalf of his wife, who was overseas—that it had been an ‘honest mistake’. A year earlier, Rein’s firm had bought the company that employed the fifty-eight and unwittingly inherited the problem. When it had been discovered, the company paid some $70,000 in restitution. Rudd admitted that he was ‘embarrassed’. Although the Government did not attack Rein directly, Howard and Joe Hockey spoke in Parliament about the need to be alert for exploitative employers and the importance of protecting workers. A day later Rein announced that she would sell the Australian arm of the business to avoid any possible future conflicts of interest. She said it would be perceived as improper for her company to receive ‘even one dollar from an Australian Federal Budget, if my husband were to be elected prime minister’.

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But what drew the most attention was the news in August that Rudd had visited the New York strip club Scores. ‘Kevin Rudd hits a strip club’, shouted Sydney’s Sunday Telegraph on 19 August. The story, by Glenn Milne, opened: ‘Kevin Rudd’s hopes of becoming Prime Minister have been rocked by a visit to a New York strip club where he was warned against inappropriate behaviour during a drunken night while representing Australia at the United Nations.’ The story claimed that Rudd had been warned against touching dancers and might have been asked to leave. Rudd conceded that he had visited the club in September 2003, while he was the Opposition spokesman for foreign affairs. He had left a dinner in the company of Col Allan, the editor of Murdoch’s New York Post, and Warren Snowdon, a Labor MP. However, Rudd said he had been too drunk to recall any details. He told the paper: ‘Notwithstanding the fact that I had had too much to drink, I have no recollection (nor does Mr Snowdon) of any incident occurring at the nightclub—or of being asked to leave. It is our recollection that we left within about an hour.’ In all the ensuring coverage, the claim that Rudd had received any sort of warning or been asked to leave was not repeated—nor supported by Rudd’s companions, the club’s management, or any other source. Rudd suspected Alexander Downer had given the story to Milne in an effort to snare him in scandal. Weeks earlier, Downer had been heard by members and journalists calling across the House of Representatives to Rudd, ‘We know what happened in Scores!’ And two senior press gallery journalists, the Sydney Morning Herald ’s Phillip Coorey and the Daily Telegraph’s Malcolm Farr, wrote in published articles that Downer or his staff had been pushing the story to gallery reporters for months, without success, before Milne wrote it up. In an interview in 2008, Downer denied being the source. He said: ‘I was at the same function as Kevin Rudd was. It was the Australian–American Association dinner at Ciprioni’s Midtown restaurant. After dinner he went off with Col Allan. I heard a completely different version of the story of what happened to Kevin Rudd, and it was a lot less flattering to Rudd and it’s the version I believe to be much more accurate. I can

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tell you here and now that if it had been my story, the facts as I understand them would have been less flattering.’ Downer declined to elaborate. Howard and his Government were fighting with energy and determination. It was vintage Howard, but it was also wholly ineffective. The published opinion polls all stayed remarkably steady through 2007. Nielsen and Newspoll showed Labor’s share of the two-party preferred vote moving in a tight range of not more than 3 per cent on either side of 57 per cent from April 2007 until the campaign itself. These polls have a margin of error of 2 to 3 percentage points. Labor’s rock-like support seemed impervious to all the Government’s assaults. Bill Bowtell, a former adviser to Paul Keating, observed: ‘It is hard to escape the conclusion that the great necromancer Howard has morphed into the Wizard of Oz, pulling lever after lever behind a tatty curtain, mystified why nothing seems to work as well as it once did.’ What had gone wrong? Many things both specific and general. On matters environmental, Howard’s refusal to embrace the Kyoto Protocol was, for many people, a disqualification for the Prime Minister. If Howard was serious about climate change, voters would ask, then why did he not ratify Kyoto? The answer from Howard was that the treaty was ineffectual and tokenistic. Well, in that case, what harm could it do? Howard could not give a convincing answer. He dared not speak his true reason—his solidarity with George W. Bush. The Liberal Party’s Federal Director, Brian Loughnane, said in 2008: ‘The political significance of climate change was that Labor was able to use it to drive the idea that John Howard was out of touch.’ In one Labor TV ad, Howard was pictured in bed asleep as the alarm clock of global warming rang three times. Howard’s response was to pull the covers over his head. ‘Howard’s asleep on climate change,’ concluded the voice-over. ‘Eleven years. Still asleep.’ Next to Howard’s alarm clock on the bedside table was a framed photo of a smiling George W. Bush posing with a beaming Howard. And the strategy of establishing the nuclear power inquiry, which was supposed to lead logically to an emissions trading scheme, was foiled.

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Instead, Labor and the green lobby successfully used it to frighten voters, claiming the Government planned to build nuclear reactors across the country. On Work Choices, Howard’s amendment did not change public opinion. The man who had conceived the anti–Work Choices campaign for the ACTU, Tony Douglas, of the consultancy EMC, said he wanted to make the point that the Government was implementing the new laws to help its mates in big business. He had remembered that the Government’s Nick Minchin once told a group of rightwing industrial-relations activists, the H.R. Nicholls Society, that the Liberal brand was at its weakest when it was seen to be aligned with big business. ‘We were really going after the brand,’ said Douglas. So he created an ad in which a corporate board gleefully plotted to use Work Choices to cut workers’ pay and entitlements even as they banked a record profit and planned executive bonuses. Feeling ran strongly against Howard on his industrial policy, as one actor discovered to his dismay. ‘The guy who played the chairman came back and said, I’ve been abused and people swore at me, and he couldn’t understand why people he didn’t know were abusing him,’ said Douglas. The hapless actor eventually realised that the ad was so convincing that some workers took it for reality. And Howard’s motives for his eleventh-hour tinkering were in doubt. When the Sydney Morning Herald’s Phillip Coorey broke the news that the Government had decided to dump the label Work Choices, the story was instantly picked up and zinged around the country’s media. That evening, the ACTU happened to be running a focus group in Perth. The people in the group brought the ditching of the term up spontaneously, and ridiculed it. They felt Howard had obviously done it to save himself, not because he cared. He had permanently lost credibility as a politician who could be trusted to protect workers’ conditions. Then there was the David Hicks case. By January 2007, after the fifth anniversary of his detention by the US military, a number of Coalition MPs reported that it had become an important source of disgruntlement in their electorates. Howard promised a

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Coalition party meeting that he would attend to this ‘irritant’. And so he did—Hicks was brought home and locked up. But if this appeased any small-l Liberal voters who felt strongly about civil liberties, they were immediately outraged again by the Government’s treatment of Mohammed Haneef, who seemed to be suffering political persecution in Howard’s quest to look tough on terror. And, in any case, many of these voters had not forgiven Howard for the invasion of Iraq. On the other hand, the proposed new Citizenship Test was designed to shore up the support of the bigots and xenophobes who had formed Pauline Hanson’s constituency. This group, at least, was still with Howard. The Budget failed to revitalise the Coalition’s support. In part this was because of an increasing electoral imperviousness to big spending proposals and even tax cuts. With each passing year, the poll ‘bounce’ that followed Budgets had grown smaller. Voters, it seemed, had come to expect big spending and tax cuts as a given. In the Government’s final three years the Budget bounce seemed to have vanished completely. This was not exclusive to Howard– Costello Budgets; when the first Rudd–Swan Budget was delivered in 2008, it too produced no discernible gains in the polls for the Labor Government. But the 2007 Budget had enormous significance for both parties. At its core lay the questions of economic management and economic credibility. When Australian voters are asked which political party is better at managing health, they normally and overwhelmingly answer Labor. Likewise with most major policy areas: education, the environment, industrial relations and family issues. There are two exceptions: management of the economy and national defence—the nation’s prosperity and its security. These are the great monopoly powers of the Federal Government, and they are the bedrock determinants of the nation’s success or failure. In 1998, 2001 and 2004, Howard had campaigned squarely on one or both of these issues. And the conservatives had owned them. Howard had only two cards to play, but he had turned them into trumps. Rudd conceptualised these as a set of Russian babushka dolls. He told the Sydney Morning Herald in 2005: ‘The outer shell of the

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babushka doll is national security. The public has to be able to look you in the eye and have confidence that you will maintain security. Peel that layer off. Next, people want confidence that the economy will be well managed and that you can provide them with the basics of life—a job and an income.’ It was only then that the voter would consider the next layers inside the doll—Labor’s traditional offerings. ‘Peel that layer off. Next, people ask, What will happen if I get sick? Who will be there to look after me? Next, people want to know, How do I provide for my kids’ education? Then, at the inner core, is community. I think there’s still a deep yearning for people to be involved in community life.’ Rudd’s verdict on Labor’s performance: ‘Our experience of the last decade is that the community has had reservations about these two outer shells.’ Credibility on the two foundations of national ‘hard power’ was a prerequisite for electoral success. When Labor failed to achieve this, it failed altogether. John Howard had a similar view. He told an international gathering of conservative leaders in Washington in 2002: ‘Clearly, economic competence and the strength of a nation’s economy is an enormous weapon in the hands of an incumbent government.’ Even in its fourth term, even as it lost credibility in other areas, the Coalition retained its commanding lead on the issues of national security and economic management. In the early phase of Howard’s fourth term, he enjoyed an emphatic advantage of two to one over Labor on credibility in these two areas. Labor had spent years thinking about this problem, but it had found no solution. When Rudd took the Labor leadership, he brought new credibility to the national security question. The electorate had spent five years watching him as Labor’s foreign affairs spokesman; it had been impressed by his calm but relentless prosecutorial pursuit of John Howard and Alexander Downer across the deserts of Iraq, through the cells of Guantanamo, down the hallways of the White House and between the silos of the Australian Wheat Board. By election day, Labor had closed the gap with the Coalition on the national security question. But on economic management, the Government still had a commanding lead over Labor—22 percentage points in Newspoll

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and 29 in the Nielsen poll. According to the orthodoxy, and according to Rudd’s babushka test, this would have denied Labor victory. A vital segment of the electorate was inclined to vote Labor yet likely to stay with Howard unless Labor could reassure them on the economy. Labor’s head office in Canberra labelled these ‘economy-at-risk’ voters according to the party’s National Secretary, Tim Gartrell. Ultimately Rudd and the Labor Party overcame this problem. Yes, they promised to mimic Howard’s macroeconomic policies, but they had done the same in 2004 so this was obviously not enough. What else did they do? Several things. First, they reframed the economy as a political issue. While the Government talked about macroeconomic indicators, Rudd talked about kitchen-table indicators. As he said in July: ‘The statistical averages don’t reflect the day-to-day realities that so many families face.’ With this simple but powerful insight, Rudd did something amazing: he subverted the Government’s tale of economic success and turned it into a narrative of discontent. When Howard skited about the strength of the measured economy, Rudd sympathised over the unhappy state of the ‘felt economy’. When Howard boasted of rising wages, Rudd empathised with people struggling to pay rising grocery prices. When the Government bragged about falling unemployment, Rudd clucked over the problems of child care. Rudd did not argue that the economy was in poor shape; it was evidently in robust health. Instead, he questioned who was benefiting. While someone might have been profiting, it was not the typical ‘working family’. Rudd said, again and again, ‘positive plans for the future on the cost of living, grocery prices, and affordable housing for working families is what the Australian people want to hear from us’. Labor had tried this tack before. Mark Latham had proposed to ‘Ease the squeeze’ in 2004. But in that case there were problems with the timing and the candidate. It was a time when even the ‘felt economy’ felt pretty good. House prices on the city fringes were at all-time highs and interest rates at all-time lows. But since then, house prices in outer urban areas had fallen. And rates had risen—six times by mid-2007. The interest-rate burden had increased by one-seventh.

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So, in New South Wales for example, the percentage of households suffering from so-called ‘mortgage stress’—where repayments consume 30 per cent or more of disposable household income—had risen from fewer than a quarter in 2001 to over a third in 2007. And then Howard imposed Work Choices. Howard conceded in 2008 that he had underestimated the power of Rudd’s alternative story about the ‘felt economy’. He said: ‘I think the cost-of-living issue was significant. And everything is relative. The fact that you are better off now—everybody’s better off—is lost if you compare yourself with your neighbours who might have done even better, and if you don’t have as much as you’d like. You don’t compare yourself with the person in a like situation five years ago. You just don’t do that. I think the relative cost-of-living thing probably worked more against us than we imagined. It’s counter-intuitive to a lot of people to have a swing against the incumbent government when the economy overall is strong. But if you look at the groups in the community who are feeling financial pressure—and there are a lot of them—the fact that you have near full employment is not a mitigating factor if you’re straining with your mortgage, and you’re straining with petrol and you’re straining with that. I think the cost-of-living thing, in a funny sort of prosaic way, is as much the explanation for why we lost as anything.’ Labor grasped that, for Howard’s battlers, the cost of living had grown, and cleverly reframed the economy not as an abstract set of indicators but as a personal set of day-to-day realities. And the Howard Government failed to respond. A further crucial reason that Labor was able to establish credibility on the economy was the persona of Rudd himself. Tim Gartrell explained the observations of Stephen Mills, a researcher with Labor’s polling firm UMR: ‘He said people would have faith in Kevin if Kevin was reassuring—he watched focus groups and did some work on it. The key thing for the “economy-at-risk” voter was Kevin Rudd. He was a safe pair of hands; he was reassuring. Stephen’s view was that these people needed to be reassured. Kevin’s manner and statements had to be calm. It was a tonal meta-message, he thought. And he was right. It didn’t take long for Kevin to get it. When we

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talked to Kevin about things like the debate preparation, we’d talk to him about this—the need for reassurance, balance and being calm.’ Labor formally added this to its campaign themes. In its mid-year strategic update, the party’s campaign team ‘confirmed that stale versus fresh and future versus past were working very well for us. We added in the idea of safe change, and that ensured a sober tone to our work.’ What about the Coalition’s attacks on the character and persona of Rudd as a man who fraternised with the convicted fraudster Brian Burke, whose tale of childhood hardship had been challenged as fictionalised, whose wife’s firm had been found to have underpaid its workers, and who had got drunk and gone to a strip club? Each of these attempted attacks foundered. In the end they strengthened Rudd and rebounded on the Government. In the Burke matter, the Government’s attack came to an embarrassed end when it emerged that one of Howard’s own Cabinet ministers, Ian Campbell, had once given Burke a hearing in his capacity as a lobbyist. Howard demanded, and got, Campbell’s immediate resignation. Whatever Rudd had been doing, it seemed, Howard’s people had been doing too. And the challenge to Rudd’s childhood recollections made no discernible impact on Rudd’s standing or credibility. On the question of Therese Rein’s firm, the story served to draw attention to the fact that she was an authentic entrepreneurial success—a wholly self-made, multimillionaire, multinational businesswoman. Rudd was the man the Government wanted to portray as a captive of trade union bosses, yet this episode brought to national attention the fact that, while Rudd might have a partnership with labour, he was in bed with capital. This only made it harder to argue that he was any kind of economic risk. The story also showed Rudd’s marriage to be a modern match between two career people, subtly reinforcing his claim to be a force for modernisation. In every one of these cases, Rudd did not seek to deny the embarrassing facts as they emerged. He was prepared to own up to the truth. In some—such as the Burke affair and the pay matter and the strip club adventure—he, and even his wife, were prepared to

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admit error and promise to learn from their mistakes. This was a profound contrast to John Howard’s inability to admit error or to apologise with any sincerity. By comparison, Rudd’s behaviour was refreshing. And as for Rudd’s notorious visit to Scores, it was nothing less than a triumph for him. Rudd initially feared otherwise. On the day before publication, Glenn Milne asked him for comment, so he knew the story was about to hit. Julia Gillard was expecting to see Rudd at a conference they were attending in Melbourne, the annual gathering of the Australian–American Leadership Dialogue. Rudd had been a member of the dialogue, an exercise in private diplomacy founded by the Melbourne businessman Phil Scanlan, for a decade. As the Saturday wore on, Gillard was puzzled when Rudd failed to show up for the conference at the Park Hyatt Hotel. ‘It was odd,’ she recalled in 2008. ‘It was not like Kevin not to be there. I started to get a bit anxious and then I got a call from him. I stepped outside to talk. Kevin said, There’s something we have to deal with in tomorrow’s newspapers—it’s a big problem for us. ‘He sounded really grim and described it as a big problem so I thought it was some amazing catastrophe. Then when he said, I was drunk in a bar in New York and it was a strip club, it was so exactly not what I thought he was going to say that I just burst out laughing. The whole thing was so absurd. Of all things, and of all people! He listened for a minute, then he said, You need to stop laughing now. We need to talk about how to deal with this. It was just an absurd moment.’ But in the first polls to be published in the aftermath of the news, Labor’s support surged and so did Rudd’s approval rating. Howard had expected this. His then Chief of Staff, Tony Nutt, read the story in the paper and immediately phoned Howard at 7.30 on Sunday morning. Howard’s first reponse was a loud ‘What!?’ Nutt phoned around to find whether anyone in the government was responsible for the story. He came up blank. ‘Howard hates this stuff [personal attacks on politicians],’ Nutt told a confidant. ‘Trying to run Kevin Rudd as morally unfit was stupid,’ he said, ‘because he is not morally

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unfit.’ And Alexander Downer recalled that when the story broke, ‘Howard was unhappy about the story being in the news. He told me he thought it would be helpful to Rudd.’ As Nutt was on the phone to his perturbed Prime Minister, the Labor leader himself was giving every appearance of being completely untroubled. Together with his wife, Therese, he was at the Sunday breakfast session of the Australian–American Leadership Dialogue. Rudd was seated at a table at the front of the room; other people at the breakfast, when they heard the news later, marvelled that he seemed entirely relaxed and in good humour. Inwardly, however, Rudd had none of Howard’s confidence that the Scores incident would work to his advantage. Asked in 2008 whether it was an ‘Oh no!’ moment for him, Rudd answered: ‘Oh, that’s just life. Uncomfortable things happen to everybody at various times. That’s just life. Take it on the chin, and off you go. Just get on and do your job.’ He was also determined not to give the Coalition an opening, he said: ‘I think the other thing which also steels my mind is that the Liberals—who are so addicted to negative personal politics, as they always have been and they always will be, because I think that is deeply in their DNA—still haven’t worked out that ultimately it says more about them than it does about the person they’re trying to attack.’ He added that ‘with all those sorts of things, you’ve just got to be up-front about the fact that you’ve never seen yourself as some sort of paragon of human virtue. I’ve never been of that view, never will be of that view.’ Gartrell concurred. ‘I think what saved Kevin is that he never sought to put himself forward as a really righteous Christian. He’s a progressive Christian, but he’s never gone around moralising. If he had done that, I think this would have really hurt him because of the hypocrisy.’ Instead, said Gartrell, ‘two months later, I was listening to a focus group in Penrith [on Sydney’s western outskirts] when this came up. It was just classic. The women all just laughed and said, Good luck to him! One said, I reckon it’s about time he mans up! One woman was a bit, I don’t like men who do that, but the rest were all, Oh, yeah! The blokes—they all look at each other, and one of them goes,

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Oh, come on fellas, who hasn’t had a look behind the curtains? It sort of gave Kevin a definition. In the groups people had all heard of him, but they’d never heard of any detailed policy or anything. Universally, people we’re saying, Yeah, that’s cool. Funnily enough, they all intuited that it was the government that put this around.’ Gartrell’s account of voters’ reactions was borne out by the results from eight focus groups convened by the Sydney Morning Herald about a month after the Scores story broke. No one in any of the eight groups spoke of it as a negative. The most common reaction was that it had humanised Rudd. Another was that it was no big deal; after all, most people had some experience of a strip club. In the Newspoll published about two weeks later, Labor’s primary vote was up from 46 per cent to 51 per cent. This was nothing short of mind-boggling. Labor had spent a decade trying to sustain a primary vote of 40 per cent—its primary vote in the 2004 election had been 37.6 per cent. And Rudd’s personal approval rating in the same poll was up by six percentage points to 66 per cent—a record high for him in Newspoll. This was the same Newspoll that found Labor’s share of the two-party preferred vote had zoomed to 59 per cent, and which plunged Howard into despair. The Coalition figures who had circulated the Scores story in the hope of damaging Rudd now found it had inflicted serious damage on their own party. Before his drunken outing, Rudd seemed to some a bit of a smartsounding intellectual type. This proved that he was a bloke. By the end of the week Lindsay Tanner, Rudd’s future Finance Minister, was hoping that no interviewer would ask him if he had been to a strip club. ‘It wasn’t because I had been, but because I hadn’t been,’ said Tanner later. The polarity had been reversed; going to a strip club had been turned from a possible source of embarrassment to a source of some sort of pride. It had been thought to be a potential negative for a political leader, yet it had turned out to be a new sign of political modernity and humanity, and maybe even virility. Finally, beyond Howard’s Wizard of Oz inability to pull any levers that worked for him, Labor won because of its overarching strategy.

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Rudd simply refused to play according to Howard’s rules. In earlier campaigns, Howard had successfully managed to put Labor on the unpopular side of the argument on major issues. This was known as wedging—manipulating an issue so as to put a metaphorical wedge between a political party and the bulk of popular opinion. But Rudd and Labor were determined not to be outmanoeuvred in this way. Gartrell said Labor was on a ‘wedge avoidance alert’. Rudd refused to take issue with Howard when the Prime Minister was plainly hoping for a fight; instead he stuck to his own agenda. The Coalition derided this as Rudd’s ‘me-tooism’. Rudd’s policy mimicry was so great, Peter Costello said, that ‘the more I hear from Kevin Rudd, the more I wonder whether even Kevin Rudd wants a change of government’. The online satirist Hugh Aitkin said Rudd was proceeding according to ‘the clever principle of similar difference’. Howard recalled later: ‘His policy was to sound as much like me as possible, except for those one or two areas where of course he had to be different—such as IR and climate change. Apart from IR and climate change, how is he any different to me?’ But Howard’s complaint was in fact Rudd’s accomplishment. His me-tooism was his way of writing ‘return to sender’ on Howard’s invitations to an argument. Rudd stuck doggedly to talking up his own policies and his own agenda. He offered Australians a low-risk alternative government that essentially offered the status quo minus the least palatable bits—Work Choices, Kyoto intransigence, and Howard. Howard was trapped, pulling the levers in vain. And he knew precisely why nothing worked as well as it once had. He said after the election: ‘In 2007 I started the year with the Murray–Darling Plan. We had the Higher Education Endowment Fund in the Budget, we had the Northern Territory intervention, and we had the Emissions Trading Framework . . . four initiatives covering the environment, water, indigenous policy and education.’ Yet despite their importance, ‘They weren’t seen politically as big exciting new items—why? Because we’d been in power for a long time. Now, if they had been unveiled with anything like the specificity we gave them—if they

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had been unveiled by the Opposition—people would have been having, sort of, torchlight processions saying, Isn’t this wonderful, this visionary Opposition? For the incumbent government, initiatives are progressively discounted for excitement as the years go by.’ And he saw this at the time? ‘Yes, I did. We made these big initiatives and it was not seen as exciting. But Rudd said, We’ll have an education revolution, and everyone breathlessly said, Oooh, isn’t that wonderful. What I’m saying is that it is very hard for a long-term government to keep re-exciting people, because they have been there for a long time.’ So, if that was the problem, what was the solution? ‘I don’t think there is one,’ Howard said. ‘I just think it’s the age—it just happens, and there’s nothing much you can do about it.’ But some of Howard’s colleagues and advisers, and not only Peter Costello, had a very specific suggestion for what he could do about it.

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20 ‘A Profound Failure’

Other than Peter Costello, the first member of the Cabinet to confront John Howard and urge him to resign was Malcolm Turnbull. This also made Turnbull the only minister who didn’t covet the job himself to urge Howard to abandon it. It’s the toughest advice any minister can offer his leader. It was the middle of 2007. For the first time in Howard’s prime ministership, the Budget had failed to reverse election-year misfortune. Howard had suggested that the polls showed the Australian people’s ‘innate sense of humour’. If so, the punch line was fast approaching, and no one in the Government was smiling. ‘We had one big issue,’ said Turnbull in 2008. ‘The Government had been in office for eleven and a half years. The Prime Minister was sixty-eight. He wasn’t going to serve out another term, and that Anno Domini factor, as he used to call it himself, was the whale in the bay. Whichever way you tried to slice or dice the argument, you couldn’t ignore it.’ Turnbull, Howard’s Minister for the Environment for the preceding half year, was the newest member of the Cabinet. He and Howard had been on opposing sides of the republican debate in 1999. Turnbull had led the Australian Republican Movement, while Howard had been the country’s chief monarchist. At that 216

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time, the Prime Minister had reluctantly agreed to hold a referendum on whether to change Australia from a constitutional monarchy to a republic, but he had not supported the proposal. He had framed the referendum question so as to split the republican vote, and the referendum failed. Turnbull’s response was to brand Howard the man who ‘broke Australia’s heart’. But the one-time barrister and investment banker had later secured Liberal Party preselection for Australia’s wealthiest electorate, the seat of Wentworth in Sydney’s eastern suburbs, and won the seat in 2001. He was too formidable a talent to waste on the backbench or in a parliamentary secretary’s post, and Howard had been forgiving enough to invite him onto the Government’s top table. Turnbull now tested this tolerance by urging the country’s second-longest serving leader, a man fifteen years his senior, to resign. Turnbull had a special incentive: ‘I have a very marginal seat. It was very obvious to me that the longevity of the Government and the Prime Minister himself was the issue.’ Marginal seat-holders, dwelling on the edge of the electoral precipice, will fall off at the least tremor, whereas it takes an earthquake to dislodge an MP from a safe seat. A politician in a marginal seat is always the most sensitive to electoral seismic activity. Turnbull explained: ‘John Howard was our second-longest serving prime minister. It was not in the party’s interest for him to lead us into an electoral defeat, one where the polls were telling us he would lose his own seat. We had a number of conversations. The point that I made was always the same. Which was expressed as much out of concern for him as for the party. It was this: that the Labor Party was going to make him the issue. He was going to be the issue, which he was. It was all going to be about “too long in office”, “too old”. And then all the things that flowed from that—“out of touch”. I was saying to a friend, Mate, I think you should hand over.’ Unknown to Turnbull, Mark Textor was having a series of similarly difficult conversations with the Prime Minister at around the same time. Howard’s pollster—one of his most important sources of advice through four victorious elections—did not directly advise Howard to

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retire. But he bluntly told the leader that the Australian voting public wanted him to retire. In one variant of the oft-repeated conversation, Howard would exclaim, ‘But they like me.’ And Textor would reply, ‘Yes, but they want you to go.’ Howard was right. His approval rating remained around 50 per cent in the Nielsen poll up to the very day he was thrown out of office. This is one definition of popularity, but in a two-party system all things are relative. And Rudd’s approval rating as Labor leader was far higher: 65 per cent in February 2007, breaking Bob Hawke’s twenty-four-year-old record of 62 per cent. Textor was also right. Most voters did want Howard out of office. Australians had a regard and respect for Howard to the very end, but they also wanted to be rid of him as Prime Minister. Turnbull and Textor, separately, returned to this subject with Howard. They were not making tactical, token statements to Howard, so that they could later distance themselves from him if he lost. They had multiple conversations with him in earnest efforts to persuade him. Both men believed that the Government’s prospects of re-election would improve with Howard gone and Peter Costello leading. Although Costello was suspicious of Turnbull, regarding him warily as a potential rival, Turnbull had no illusions. He recognised that in late 2007 the only alternative to Howard was the Treasurer and Deputy Leader. His vision for the Coalition had Prime Minister Costello at the helm: ‘My views about the desirability of a handover strengthened during the year. If there had been a handover to Costello, we wouldn’t have had a sixty-eight-year-old PM who’d been in office eleven and a half years and was going to retire in the next term. We would not have had a new face and Peter had been a key part of the government for all of its term so the longevity issue affected him too, but at least we would have had a leader who was fifty years old and who would serve out a full term. Would that have caused us to win the election? Well, views differ about that.’ Textor’s view was equally clear. The government had made serious policy changes yet reaped no advantage. The problem, then, was not the policy but the policymaker: ‘Howard was in a Catch-22—when

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you are down, you try to get out of it, and people say, He’s only doing that because he’s down. At that point, it’s a complete loss of credibility, a complete loss of any hope,’ Textor reasoned. Costello would have cancelled out the Rudd ‘change’ factor, Textor thought, and as a new leader he would have had the electorate’s attention. From the enemy camp, Labor’s Tim Gartrell recognised the syndrome. Asked their opinions of the Government’s 2007 initiatives, Labor focus groups dismissed them because of the motives they imputed to Howard in pursuing them. With Howard’s intervention in the Aboriginal communities of the Northern Territory, for example, Gartrell said: ‘We thought, Here we go. This is a bit of a rabbit out of a hat!’ But the focus groups said, ‘This is terrible and all these things shouldn’t be happening.’ They wanted to know, ‘One, why didn’t he do anything about it for the last twelve years? And, two, he’s pulling this one because the election is close and he’s desperate.’ Gartrell thought the intervention was made out of cynical motives that rebounded badly: ‘You get bad polling and you think, Oh shit, I’ve got to start doing things to pull out of it. And you start getting desperate, and start looking desperate.’ This was precisely how Labor had reacted in 2001, when the Government had taken a hard line towards a boatful of illegal immigrants picked up by the merchant ship Tampa. Labor’s focus groups would say, ‘We like John Howard, because he’s done the moral thing,’ Gartrell recalled. ‘And, I feel sorry for him. He looks so tired. It must be so terrible having to make these hard decisions. We’d say, What about the Opposition? And people would answer, Oh, they’re just being politically opportunist.’ Caucus at the time ‘was ripping itself apart over what was the right thing to do—principle versus political expediency’, Gartrell said, yet the focus groups would say ‘that we’re playing political games and Howard’s done the right thing. That period completely changed the way I view politics.’ The experience taught him that as long as voters felt well inclined towards a leader, they would make allowances for him and believe the best about him and his motives. If bent too far, however, this loyalty would snap, and voters would become hostile and believe

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the worst. Howard had been the beneficiary of this sort of electoral loyalty in 2001, while Labor had been its victim. In 2007, that had been reversed. The Labor Party’s adman, Neil Lawrence, had claimed enviously to Labor officials that ‘the shortest political contact line in this country is Mark Textor to John Howard’, according to the journalist Christine Jackman. Lawrence was envious because he thought it a good thing for pollsters and campaigners to have direct access to a political leader. But by 2007 Textor’s contact line, while still direct, had apparently picked up a lot of static. Howard did not heed his advice, nor Turnbull’s. On 6 August, some of Textor’s advice was published on the front page of Sydney’s Daily Telegraph. The report, by journalist Malcolm Farr, began: A devastating report to the Government’s top leaders has warned of crashing voter support and unease over John Howard’s age. The confidential dossier, obtained by The Daily Telegraph, outlines a recovery strategy for the Howard Government and makes it clear that voters are looking to Labor’s Kevin Rudd for a generational change. It contains a damning critique of the Prime Minister as old and dishonest, while Mr Rudd is seen as genuine and accessible. The Government had to stop Labor setting the agenda, stress its economic management record, and paint Labor as a risk—or it would face electoral oblivion. The advice came in a detailed, confidential report, ‘Federal State of Play—Oz Track 33’ by pollster Mark Textor on June 21 . . . The report confirmed that age was an issue in this election between Mr Howard, 68, and Mr Rudd, about to turn 50. And it tracked important groups—including the so-called aspirational voters who helped elect Mr Howard in 1996—who have recently shifted to Labor. The Liberals were hugely troubled by this leak. Some speculated that Textor, frustrated by Howard’s obduracy, had released the report

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to give the Prime Minister a jolt. Others thought he’d done it to absolve himself from any future claims that he was complacent as the Government headed for defeat. Senior Labor officials believed the research report had been leaked by associates of Crosby Textor to the NSW Labor secretary, Mark Arbib, who in turn passed it to Farr. Textor’s firm, Crosby Textor, paid a security consultancy to investigate the leak. It exonerated Crosby Textor. Given the Liberal Party continued to retain the firm, it is clear it attached no blame to the firm for this breach. The key point about the document was not what it contained but what it omitted: the central point Textor had made to Howard privately, that the electorate wanted Howard, personally, gone. The last time Turnbull spoke to Howard about the leadership was, he recalled, ‘when Peter Costello’s off-the-record event with those journalists blew up’. On 14 August the ABC’s Michael Brissenden, The Bulletin’s Paul Daley and The Age’s Tony Wright broke a previous promise to keep confidential a dinner conversation they’d had with Costello back in 2005. They now revealed that Costello had told them he would challenge Howard for the leadership if it were not his by 2006. Turnbull saw the PM just after this extraordinary revelation to continue the discussion about his resignation: ‘And he said, Look, the die is cast, with the fatalism of the soldier determined to do his duty.’ Soon after this, around the end of August, Mark Textor set off with his family on a driving holiday in Queensland—his one holiday of the year. Approaching Rockhampton, he had a sinking sensation. It was one of the traditional working-class Labor towns that had voted for the Coalition in recent elections as part of the Howard’s battlers phenomenon. Now, on telegraph poles and buildings, billboards and sidings, bumper bars and front lawns, he saw ‘Your Rights at Work’ posters and stickers and placards. After the election, he told the ACTU’s head of communications, George Wright, in a chance airport encounter that ‘When I saw that, I started to get brown trousers—Jesus, we are fucked!’ In town after town, Textor saw the same. It was starkly clear: the ACTU campaign was well organised, the anti-Howard message was

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dominant, and important swing voting blocs were probably lost to Howard. The rain set in, Textor’s baby came down with croup and his family ended the holiday from hell in the Tully Base Hospital. The Coalition was in awe of its leader. With the exception of Peter Costello, with his longstanding demand for Howard to retire, no Cabinet minister before Turnbull had dared directly advise the PM to step down. Even as the Government prepared itself for the ‘annihilation’ its leader had foretold, its members were mesmerised by his reputation for political genius, by his record of success and by his dominance within the party. After the Turnbull attempts, nobody else broached that subject directly until the Sydney APEC meeting in early September. Not everyone in the Coalition was mesmerised, however. After the story of Costello’s dinner-time braggadocio with the three journalists appeared, the maverick Liberal backbencher Wilson Tuckey let it be known that he had faxed a letter to Howard urging him to resign. Because of Tuckey’s erraticism and eccentricity, however, he was not taken seriously by Howard in this matter. A more serious figure in the party, Nick Minchin, in late 2005 had indirectly tried to suggest that Howard retire. He suggested to Alexander Downer and Arthur Sinodinos that Howard would be well advised to retire on his tenth anniversary, in March 2006. ‘The time to go is when everybody is asking you to stay,’ Minchin explained in 2008. He did not tell Howard this face to face, he said, ‘because I knew Howard was not responsive to this view. I knew I had to convince Alexander and Arthur . . . If anyone had suggested to John that he should go, the first thing he would do is ask Alexander and Arthur what they thought about it. I could have felt good about myself and told him myself, but it would have been a pointless exercise.’ Minchin also feared that Howard would not trust his motives: ‘He had, regrettably, formed the view that many of the things I did around the place were factionally driven and from my overt affection for the conservative side of the party. And, because I had been working closely with Peter Costello in the Treasurer–Finance Minister role,

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we had a close relationship. If I had approached the PM directly, he would have seen me as a flag carrier for Peter.’ In 2008, Sinodinos could not remember this suggestion coming from Minchin, and nor could Downer. Howard said he found it strange that Minchin had told journalists after the election about his indirect efforts, yet never spoken to him directly. ‘For the record,’ he said, ‘Nick Minchin never fronted me and said, I think you should retire. I think that’s a bit odd. I mean, if you’re the Leader of the Government in the Senate and you feel that strongly, why not walk around and tell me? I mean, I wasn’t unapproachable. I wasn’t a Menzies—I wasn’t sort of the Father of the Party.’ Did he receive the message via Downer and Sinodinos? ‘No, I didn’t get the message. I know that Downer didn’t want me to go. So it could be that Minchin had spoken to Downer, and Downer may have said to me: Oh, look, I think Nick thinks you ought to retire. But he never came to me with it. He was, in strict theory, the number three person in the Liberal Party. Not in reality—the number three person in the Liberal Party in reality was Downer—but Nick was the Leader of the Government in the Senate. If he thought that I should retire, he should have come to see me. Shouldn’t he?’ So did Howard believe there was revisionism going on in the Coalition after the election loss? ‘A lot.’ In previous elections, the Liberal Party had convened a Federal Executive Strategy Committee to take an overview of the election campaign and the party’s preparations. It was dominated by officials from the organisational wing of the party. While the Prime Minister is all-powerful in the parliamentary wing, the officials in the organisational wing are not appointed by the Prime Minister. The Federal Executive Strategy Committee would typically comprise the party president, the past president, the party treasurer, the party’s Federal Director, the party’s pollster, an experienced MP and the party leader. In the past, this had been a forum where powerful Liberal officials like Tony Staley and Shane Stone could exercise oversight and impose accountability on the parliamentary leader. But attempts to bring such a group together for the 2007 campaign failed. Howard

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refused to agree to any meeting, so none took place. For the 2007 election, there was no Federal Executive Strategy Committee. Instead, Howard created a small, inner strategy group within the parliamentary wing. In it he included the Leader of the National Party, Mark Vaile, plus Peter Costello, Alexander Downer, Nick Minchin, Mal Brough and one Liberal Party official—the Federal Director, Brian Loughnane. Howard said he first convened the group in February 2007, and that it met for an hour on eight or ten occasions until the election, usually over dinner at The Lodge. Its purpose was ‘to just talk about what had to be done in a rather more relaxed fashion. It was in addition to our formal policy meetings; it was just a way of, very frankly, kicking things around.’ The group discussed tax reform, Iraq, Kyoto, Howard said. ‘I mention it, not so much because the discussions were profound, but simply as an illustration that I involved to the maximum extent I could my senior colleagues. I mean, I was quite open to all of those senior colleagues during 2007 that I believed we had a political problem.’ Downer described this strategy group as a ‘Kitchen Cabinet’. It produced some of the Coalition’s main election campaign proposals, he said, ‘but they weren’t very successful—we lost the election’. The group commissioned Costello to produce a tax package for the election, and he devised the essentials of what became Howard’s $31 billion tax cut election promise. It also came up with the education tax rebates that Howard announced at the Liberal Party campaign launch. Two proposals that it did not initiate were the Work Choices amendment, which stemmed from Joe Hockey’s work, and the Northern Territory intervention, which was Mal Brough’s initiative. But the biggest of all the issues facing the Howard Government— the status and tenure of its leader—was not mentioned in the strategy group at all, according to Downer: ‘It’s a bit hard to do that—he’s sitting there.’ Howard, by vetoing the creation of a Federal Executive Strategy Committee, had denied the wider Liberal Party oversight of the election. He had refused to acknowledge any accountability to the party. Instead, he had kept tight control over the Kitchen Cabinet and its agenda. He

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did not introduce the question of the leadership or encourage others to do so. The problem that Malcolm Turnbull described as ‘the whale in the bay’ went unmentioned and unaddressed. Only when Howard read the 4 September Newspoll, in the week of the Sydney APEC meeting, did he show a real willingness to reconsider his position. One news report seemed to contradict this picture of intransigence. On 17 July, The Australian ran a front-page story under the headline ‘PM Asks Cabinet: Is It Me?’ The newspaper’s political editor, Dennis Shanahan, wrote; ‘John Howard “bared his throat” to his cabinet colleagues yesterday, inviting them to blame him for the Coalition’s polling results. John Howard wants to know if he is part of the Coalition’s problem. The Prime Minister asked an electoral war cabinet in Canberra, “Am I the problem?”, inviting his colleagues to offer frank criticism of his leadership. But his colleagues were silent.’ This much-remarked-upon report suggested a moment of openmindedness from Howard. But ‘I sat next to Howard the whole time—it never happened,’ Peter Costello said after the election. Other ministers concurred. Howard said in an interview: ‘I remember that very, very clearly. I was just inviting people to sort of express their views, and what I really said at that meeting was that they should feel free to say anything they wanted to. I definitely did not use those words—I think somebody else put that interpretation on it.’ Did Howard express the same idea using a different form of words? ‘No, no, no, no. The subject was why aren’t we doing better in the polls? Our political position. But I certainly never said it was me.’ Because Howard did not believe that he was the problem: ‘My view is that people formed a view about the Government, and that obviously included a view about me—I mean, you can’t form a view about a Government in isolation from its leader. But the evidence was that the electorate didn’t have a poisonous attitude towards me.’ In other words, Howard conceded that he was part of the problem, but not that he was the critical part. As Howard’s decision to block the creation of a Federal Executive Strategy Council attested, he was in no mood to take advice from outside his own claque. And even within it, he was not open to advice

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about his tenure as leader. But the Prime Minister’s Office reached a new level of hostility to unwelcome advice when presented with a research brief from Crosby Textor dated October 2007. The document, titled ‘State of Play Qual Notes’, summarised the findings of focus groups, or ‘qualitative’ polling in marginal electorates. It reported that Howard was seen to have no future agenda for Australia, that Rudd was not seen to be risky, and that there was a strong desire among voters for change. In sum, the Howard era was coming to an end. A focus-group member from the outer-western Sydney seat of Lindsay had said: ‘I’d like a change—I don’t think John Howard has anything left in him.’ Another from Deakin, in the eastern suburbs of Melbourne, said: ‘There’s no long-term vision from them—they are saying, Righto, we’ve done a good job with the economy. Now give us your vote.’ And one from Howard’s seat of Bennelong complained: ‘They don’t seem to plan for the future; they promise you things and then break [the promises].’ Another voice from Deakin: ‘There’s quite a few things he is not listening on, like IR and the Iraq war; plus you’ve also got things like fuel prices and general affordability issues.’ Deakin again: ‘He is playing catch-up, doing things to try and get back up in the polls. But it’s a case of too little, too late.’ And a voter from Lindsay: ‘John Howard has passed his use-by date.’ Mark Textor presented the research to the Prime Minister, which is standard procedure. Soon afterwards, however, a senior Liberal Party official phoned Textor and, in a very non-standard procedure, asked to see the videotapes of the focus groups. As a focus group is led through its discussions by a facilitator, the sessions are recorded for later study by the market researchers, who will harvest quotes, summarise themes and write up a report for the client. The people in the groups are promised anonymity and the market research industry has rules to require this. The senior official’s request implied that he didn’t trust the report’s accuracy. In the history of Crosby Textor’s relationship with the Howard Government, which was even longer than the eleven and a half years of the Government itself, this was unprecedented. Textor, aghast, refused. He was so troubled that he

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discussed the ramifications with his colleagues. It was not the end of the matter. Soon afterwards, one of Howard’s staff phoned Textor demanding an explanation. The pollster stood his ground: ‘Haven’t you people got anything better to do with your fucking time?!’ he exploded. Asked about this episode later, Howard said he had not heard of it. The former Prime Minister said that his strategy group was ‘my way of being absolutely satisfied that there was not some silverbullet response—some solution to our difficulty that we had denied ourselves. It was an opportunity for people in an even smaller group to speak very frankly about what we needed to do. And I am quite certain that it was effective. Nobody said, after the election, Look, I told Howard to do this, but he didn’t. So therefore we lost the election.’ This conclusion overlooked the fact that Costello had been urging Howard to step down and conduct a smooth transfer of power since 2001. It neglected the fact that Malcolm Turnbull and Mark Textor had been telling him for months during 2007 that the electorate had turned against him. And it denied the fact that the majority of his Cabinet formed the view—on 6 September 2007, at the discussion hosted by Alexander Downer after the APEC meeting—that Howard should retire, though voluntarily, and hand the leadership to Costello. This was the great, glaring piece of advice—the big and obvious step—that was available to Howard and that he chose to ignore. Turnbull later reflected: ‘With the benefit of hindsight, the failure to manage that succession was a pretty profound one.’

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21 Don’t Think of an Elephant

Kevin Rudd stood at the lectern in a Fox studio braced for questions from John Howard and from the compere of the so-called Great Debate between the leaders. It was 6 September 2007, and the Prime Minister was miles away. Standing in for him at this Labor rehearsal was Senator Robert Ray, the big, gruff, pipe-smoking warlord of the Victorian Right of the Labor Party. Playing the part of the compere was Senator John Faulkner, the tall, deliberate, owlish godfather of the NSW Left. At the back of the room were a handful of Labor officials waiting to critique the leader’s performance. ‘Playing the part of John Howard was not the proudest role in my political history,’ Ray said later. ‘But they picked me because I’m not intimidated by Labor leaders.’ The burly, swarthy senator, whom Paul Keating nicknamed the Fat Indian, had played the same role in debate rehearsals with Kim Beazley and Mark Latham. ‘Do you have a glass jaw?’ he asked Rudd. The Labor leader calmly ignored the pith of the question and went on to make a point about his plans. Ray was satisfied. When he had asked Latham impertinent questions, the then Opposition Leader had reacted angrily. At one moment Ray had feared Latham would rush across and punch him. Rudd had briefed himself thoroughly on a broad range of topics. 228

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‘But the point was not the individual questions—it’s the cumulative pressure,’ said Ray. The overarching aim was for Rudd to be calm and reassuring. It was the ‘tonal meta-message’ that Stephen Mills had emphasised and that had become central to the Labor campaign. To increase the pressure on Rudd, ‘we made both rehearsals go for ninety minutes, assuming the actual debate would go for sixty’, said Ray. As it happened, the Liberals decided to make it a ninety-minute contest. The judges of Rudd’s performance at his two rehearsals gave him top marks, according to Ray. This dry run, Rudd’s second, was a month before Howard announced the election and six weeks before the actual debate. It was further evidence of the early planning and careful preparation of the Labor campaign. A story circulated during the campaign that Howard had refused to agree to a debate rehearsal. This was only partly true. Howard did not agree to a fully mounted rehearsal—with a stage and a lectern and a surrogate Rudd and the full play-acting—but he did sit through a session in Kirribilli House some weeks after Rudd’s rehearsal. The Prime Minister’s private staff peppered him with possible questions. Howard had been more rigorous in his earlier campaigns, but for the 2004 debate against Latham he had contented himself with a question-and-answer session with staff. Now he did so again. Howard had generally been judged to have lost the debate against Latham, yet he had gone on to win an emphatic victory with an enlarged margin of votes plus control of the Senate. The veteran campaigner could have been forgiven for thinking that the debate was not going to be the decisive factor in the election. But as Rudd submitted to his second rehearsed grilling, the debate was far from Howard’s mind. This was the day of the APEC business dinner—the day when his distressed Cabinet colleagues concluded that their Prime Minister should retire. The Government was in utter disarray, in contrast to the orderly election preparation then underway in the Labor camp. While the Coalition was trying desperately to decide the fundamental question of who would lead it to the election, Labor was working on fine-tuning the skills of its leader.

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Around this time, the Coalition’s advertising team was still awaiting decisions on what to put into its election campaign ads. But by now, Labor not only had its own ads organised but was mocking up potential attack ads from the Government, then preparing responses to those attacks. It was war-gaming tactics the Coalition had not yet selected, and designing ways to beat them. Labor anticipated Coalition challenges on six themes, and predicted some quite accurately. The Coalition had already started to criticise Labor’s strong union connection, so Labor did not need to be clairvoyant to prepare for this. Still, some of the Labor attack ads on the Labor Party were more effective than those ultimately launched by the Liberals. For instance, one mock attack ad Labor prepared was a TV commercial beginning with a black-and-white head shot of Kevin Rudd looking grim. The words next to it, which were simultaneously spoken by a gravelly male voice, read: Kevin Rudd wants to control Australia. Then, against a blank, black screen: But do you know who really controls Kevin Rudd? Next came a series of four slides with facts about Labor’s ties to the unions. On each, the initial number was big and in alarming red, followed by matter-of-fact black-andwhite text: $50 million has been donated to Labor by unions since 1996. 100% of Labor Members of Parliament are union members. 70% of would-be ministers in a Rudd Labor Government are former union officials. 3 out of 4 Labor senators are former union officials. . . . and there’s more of them on the way . . . And then the final screen: DON’T RISK RUDD. The initial letter of the word RISK was in red, framed by a red box. This ad was produced in July, four months before the election. No Liberal ad had as much information or punch. As ad maestro Mark Arbib recalled: ‘In 2004, Latham rode into the valley of death and they stood on both sides and just poured fire down on him and murdered him. Kevin Rudd was not going into the valley without massive firepower supporting him.’ Labor decided that it had been a

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mistake to let the Liberals target Latham with ads on interest rates and not try to respond. This time it would be different. Having anticipated ads like the attack on Labor’s union ties, Labor then created ads to defeat them—response ads. The concept was to have a TV screen on a desk showing a Liberal attack ad; Kevin Rudd then reached across to switch it off and calmly debunked it. So when the Liberals eventually ran their ad with a union official on a megaphone yelling ‘We’re coming back!’, Labor quickly inserted it onto the TV screen next to Rudd who, switching it off, then addressed the camera: ‘Another scare campaign from Mr Howard—always claiming the sky’s about to fall in. This time it’s the unions. Mr Howard wants to divert attention from his unfair Work Choices laws . . .’ Rudd went on to talk about his positive alternative. Likewise with the Liberal ad portraying Rudd as an L-plate driver. The ad claimed that ‘learners like Kevin Rudd and Wayne Swan’ would put the economy at risk. In the Labor response, Rudd froze the frame and again calmly dissected the Liberal scare campaign. Labor’s anticipatory work allowed it to have these responses running within a day of the Liberal attack. The greatest edge that Labor enjoyed at this election, however, was the fact that the ACTU had been running highly effective ads against Work Choices. These would continue through to election day. With the unions running a negative campaign against Howard, Labor’s resources were freed to concentrate on a largely positive ad campaign. The Government tried to counter the ACTU by conscripting its own ally, big business. Joe Hockey pressed a number of business lobby groups to create their own pro–Work Choices ad campaign. But their ads were ineffective. One was full of technical economic details, and made implausible claims based on highly dubious economic modelling. Another made an attempt at an emotional impact: three burly union officials, their trousers held up by braces, walked ominously into a small retail shop and turned off the lights, supposedly foreshadowing the return of union thugs under Labor. It was simply laughable. And big business’s efforts were far outspent by the ACTU’s estimated $28.5 million campaign. The main accomplishment of the business

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groups that paid $6 million for the pro–Work Choices ads was to antagonise the incoming Labor Government. While the Rudd Government would exact no retribution against these groups it did do the obverse, showering favours on the one major business group that had refused to participate in the pro– Work Choices campaign—the Australian Industry Group. Its head, Heather Ridout, was appointed to four high-level advisory boards within a few months of Labor’s win. This put her in a position to help shape the Government’s industry policy. The business commentator Alan Kohler wrote in May 2008 that ‘one of the more remarkable things that has occurred in the business world since the election of the Rudd Government has been the meteoric ascendancy of Heather Ridout. The chief executive of the Australian Industry Group is in everything.’ That included the board of Infrastructure Australia, the body set up to advise the Government on the nation’s infrastructure needs; the tax review headed by the Treasury Secretary, Ken Henry; the Government’s Business Advisory Group; and Skills Australia. The whole episode convinced Howard’s Education Minister, Julie Bishop, Deputy Liberal Leader after the election, that the system needed reform: ‘I find this a very significant and disturbing issue. And that is that we saw an unelected third-party entity—the union movement—spending more money than the two major parties combined to affect the outcome of an election. And let’s be blunt—that is what it was designed to do. I mean, the Liberal Party couldn’t afford eighteen months of advertising the way they did it on this one issue. It clearly affected the outcome of the election. I think it’s something that we as a country should look at very closely—as to whether that’s healthy for representative government and democratic outcomes. I think that should be looked at.’ The Liberals might not have been able to sustain eighteen months of advertising in support of Work Choices—each of the political parties spent around $15 million on their own campaigns—but the Government certainly did. The Howard Government spent $137 million of taxpayers’ funds on pro–Work Choices advertising and promotion, according to the Department of Education, Employment

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and Workplace Relations in its testimony to the Senate Estimates Committee after the election. Howard defended this as a public information campaign. Federal Governments continuously run one sort of public education campaign or another, and most are unobjectionable. Defence recruitment ads have been a constant in recent years. And the Australian Quarantine and Inspection Service spent $400,000 on an avian flu prevention campaign, for example. But the Howard Government’s campaign supporting its industrial-relations changes had a strong element of argumentation and advocacy. One stated: ‘Countries have the choice of either going forwards or backwards. Marking time is not an option.’ This is not a statement that communicates information about the application of Work Choices legislation. It is a sweeping assertion that associates Work Choices with a subjective definition of national progress. The Government’s ability to deploy taxpayers’ funds to finance political propaganda is a big advantage to the incumbent. When the Keating Government spent $12 million of taxpayers’ money on advertising its failed Working Nation program, Howard was furious. He promised to cut such spending if elected. And, true to his word, he did. Howard halved the level of Federal Government ad spending he had inherited from Keating—from a touch over $100 million to about $50 million. But then he started to ramp it up again. In 2000 he spent $211 million in tax money in an effort to reassure voters that the GST was a good idea. Together with the $156 million he spent the next year, this unquestionably helped him win the 2001 election. The total spent on Federal Government advertising in the life of the Howard Government was $1.7 billion. Yet political advertising, even on an enormously expensive scale, cannot sell an unpopular product. In 1995, when he railed against Keating’s Working Nation ads, Howard said: ‘The taxpayers will see through it. They don’t want their money wasted on glossy advertising designed to make the Prime Minister feel good.’ He was right, and Keating lost the 1996 election. In 2007, the vast application of money and ad space failed to make any serious impact on the entrenched

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public perception of Work Choices. Nonetheless, Kevin Rudd was incensed at Howard’s misuse of public funds; he promised to subject government ad campaigns to independent review by the Commonwealth Auditor-General to ensure that they would be informational and not political. The Liberal Party, in planning its campaign, was at odds with itself not only over its leadership. It had a further complication. When Howard arrived at meetings to review the campaign advertising, his wife, Janette, usually accompanied him. This had happened in previous elections, too. She took an active part in discussions, and some of the professionals in the campaign team resented the influence she brought to bear. They did not object to her presence, but they were irritated and frustrated at her effortless ability to stand in judgment on work that teams of professionals had spent weeks preparing. One adviser, who did not want to be identified, recalled: ‘We would say, Here are our criteria. Here are the ways this ad will meet these criteria. Here’s evidence it works. And here’s why—within the limits of the time and money available—we think we should go with it. It was methodical and professional. It was focus-group tested, professionally reviewed, legally reviewed, and peer reviewed. And then she would say, I don’t like the lighting, or Do people really understand debt? No one dared to argue with her. You couldn’t say she specifically vetoed any ads, but people deferred to her because they didn’t want to have to spend an afternoon arguing with the boss.’ Asked about his wife’s role in reviewing campaign ads, Howard argued that she had a right to get involved: ‘In the nature of campaigns, your wife travels with you, and in the campaign and the immediate pre-campaign period she was with me a lot. There would have been occasions where she might have seen ads, but there was absolutely no process whereby she was authorised to approve ads. But if I was in a room, and Brian Loughnane came in and said, What do you think of this ad? and Janette was with me, she might express a view. Why not? She’s an intelligent woman; she’s put up with thirty-three years of politics; she has a bloody right to express a view occasionally. I mean, what’s wrong with that?’

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Howard used every moment before election day to shake up the sense that the outcome was a foregone conclusion, to demand that voters reconsider. He tried every possible device and stratagem, thrashing around in a desperate series of twists and turns, prepared to try anything to win. Anything, that is, short of breaking solidarity with George W. Bush or handing power to Peter Costello. In the lead-up to the election, Howard had been waging a guerrilla war against the States on a range of fronts. He had intruded on States’ powers in industrial relations, using Work Choices to override the State systems, and over the Murray–Darling, offering the States cash on condition that they refer their powers over the river system to Canberra. And he had asserted Federal power by intervening in the Aboriginal communities of the Northern Territory. On 1 August, he had taken his war to a new level when he travelled to Devonport and visited a hospital that the Tasmanian State Government had marked for closure as part of a larger reorganisation and which happened to be in the marginal Federal seat of Braddon. The Liberals had won Braddon from Labor in 2004 but the Liberal member, Mark Baker, held it with the thinnest of margins, just 1.2 per cent. Howard declared that he would not allow the Mersey to close—the Commonwealth would take over its funding at a cost of an estimated $45 million a year. Hospitals are a State function, as Howard recognised: ‘This is not something the Commonwealth has normally done in the past, but action was needed. The Australian people are not especially concerned about theories of governance when it comes to the delivery of basic services.’ Howard’s Health Minister, Tony Abbott, had for years suggested a systemic revision to allow the Commonwealth to take over the States’ responsibilities for the entire health system. Howard had always resisted. But now the prospect of defeat changed his mind. Yet this was not the sort of revision that Abbott had proposed. Of the 755 public hospitals across Australia, Howard had chosen to federalise one—one hospital in one State. He did not take the idea to the Cabinet; there was no planning, no coordination, no consultation, no detailed costing and no rigour. He seemed to be

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redrawing Australia’s constitutional lines of responsibility one hospital at a time, one marginal seat at a time, one election at a time. The announcement was welcomed by local residents, and roundly condemned by experts in health policy, public administration and economics. An authority on public health systems, Paul Gross, described the Mersey Hospital decision as ‘the worst of all possible worlds’. Turning it into a community-run, federally funded hospital would not fix any of the problems facing the hospital system. It was ‘a dangerous affront to hospital quality and safety’ and ‘an act of economic irrationality of the kind that the Government likes to accuse Labor of’. Which was pretty much Peter Costello’s view. The Treasurer had already turned down a proposal by the hospital for Commonwealth funding and tried to dissuade Howard from agreeing to it. When a local activist had approached Costello with the request, ‘I told him the Commonwealth wasn’t in the business of running state hospitals—it was a matter for the State Government,’ Costello said later. ‘I thought it was bad policy, and so did John Howard. It was done to try and help Mark Baker; I thought it was bad principle.’ Costello recalled the Prime Minister telling him of his plan. ‘I said to Howard, What’s the principle here? We have no idea how to run hospitals. How will you quarantine this takeover to this hospital? Are you going to offer to take over every hospital that’s going to be closed? How will you know which are viable and which are not? Where is this going to stop?’ Howard’s response, according to Costello, was, ‘Look, it’s a marginal seat; we have to do something to help Mark. There was no great principle.’ Costello also pointed out that the idea of Federal takeovers of State hospitals had been rejected in earlier Cabinet discussion of Abbott’s proposal. ‘The Cabinet was opposed to the general principle and ordinarily we would have followed the general principle.’ The Howard Government’s lack of credibility on climate change was continuing to depress its share of the vote and to contribute to the fatal image of the Prime Minister as the leader of the past, in contrast to Rudd, the ‘leader of the future’. Now the Environment Minister,

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Malcolm Turnbull, saw an opportunity to conduct what he called an ‘elegant dismount’ from the Government’s position of truculent defiance of Kyoto. After months internally canvassing the idea of a reconsideration, he wrote a paper for Howard that set the stage for a Cabinet discussion in mid-September. The Sydney APEC summit having just wrapped up, the PM would be calling the election in a month. Turnbull proposed that Howard change policy and ratify Kyoto. ‘The Kyoto Protocol had become seen in the community as a sacrament, a symbol, of our seriousness in dealing with the challenge of climate change,’ Turnbull said in 2008. ‘All of our measures— many of them world-leading ones—were devalued in the public mind because we had not ratified the protocol.’ The new minister had made the same discovery that his predecessor, Ian Campbell, had made: the refusal to ratify Kyoto was a veto on any further consideration of Howard’s environmental policies. As Turnbull concluded: ‘We were like the person who is a good person—a good Catholic in the sense of complying with all the commandments of the Church, being good to his family and children, and giving to the St Vincent de Paul Society—but then doesn’t go to Mass. The Archbishop will say, No, you’re very bad—you’ve failed to do your sacramental duty. Kyoto had become a symbol.’ And the Government’s argument that Kyoto would somehow harm the economy was simply not plausible, Turnbull said: ‘We struggled to argue credibly that ratification would damage our economy, as we had, some time before, committed to meeting our Kyoto target and it was clear we would be able to do so without much difficulty. So we were taking considerable political pain for not ratifying a treaty, the terms of which we were already committed to comply with.’ Australia’s reason for staying out of Kyoto was that it did not require China and India to limit their emissions, so it was bound to be ineffective. But by 2007, Turnbull said, Kyoto’s importance in the public mind had grown. ‘Defending the Government’s position, I would often say the Protocol was a treaty, not a sacrament, but politically

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it had become very sacramental indeed. Every time Kevin Rudd was asked what he would do if elected, he cited ratifying Kyoto as either his first or second priority. It was obvious his polling was telling him it was important.’ Now came the perfect moment for the ‘elegant dismount’ Turnbull suggested to his Cabinet colleagues. At APEC, Howard convinced the Chinese to agree in principle that in the next round of climate-change talks developing nations too would have to make a contribution. Turnbull thought the Government ‘could respond positively and magnanimously to this change in China’s position with a shift in our own: ratify Kyoto, but on the basis that the post-Kyoto agreement would have to include action from all major emitters’. This move, he argued to his colleagues, would be politically powerful: ‘Rudd promised to ratify Kyoto, repeal work choices, and to have an education revolution, whatever that is. You could have taken item No. 1 off the list. He would not have had that advantage over us any more.’ But Turnbull’s proposal failed. ‘I did attempt to persuade my colleagues. I think it would be fair to say that, of the people in the room, there was a small number, a very small number, who felt it would be wrong to ratify Kyoto. There was a number who supported me strongly. Then there was a number who said, Oh well, with the benefit of hindsight of course we should have ratified it; but it’s too late now.’ One of this last group was the then Defence Minister and future Leader of the Opposition, Brendan Nelson. ‘If you had a new leader, you could have changed [the Government’s stance on Kyoto],’ he said in 2008. ‘But you couldn’t have had John Howard criticise it for ten years, and then support it near an election.’ What about Turnbull’s reasoning that it would be portrayed as a response to the change in China’s position? ‘I don’t remember him saying that,’ stated Nelson. Turnbull said ‘Howard gave me the impression of being very open minded’ about his proposal. Yet the Prime Minister did not exert his influence to support it. If he had wanted to make the change, Howard could have done so even if his Cabinet were equivocal or divided. He chose not to. Solidarity with Bush was preserved.

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Instead, the environmental vote got a sop. Three weeks before calling the election, Howard announced a new national clean-energy target. On the same day that Kevin Rudd met the US climate change campaigner and former Vice-President Al Gore, Howard announced a so-called mandatory renewable energy target (MRET) requiring that 30,000 gigawatt hours per year, or about 15 per cent of the nation’s energy, would need to come from low-emission sources by 2020. But if any voter paused to reconsider Howard’s environmental credentials on the basis of this, it would have been the briefest of hesitations. Ten days later Turnbull announced his decision to allow a much-protested-against pulp mill in Tasmania’s Tamar Valley to be built. Labor, which had gone ‘green’ in Tasmania in the 2004 election and lost two seats as a result, was anxious not to be outflanked in that State once again. Rudd and his environment spokesman Peter Garrett meekly mimicked the Government in endorsing the mill. And Labor announced its own mandatory renewable-energy target of 20 per cent. In one final convulsive twist, three days before calling the election Howard made a nationally televised speech to declare that he had changed a lifetime of thinking about reconciliation with Aboriginal people. If re-elected, he promised a referendum on whether indigenous Australians should be recognised in the preamble to the Constitution. It would be a ‘statement of reconciliation’, he said. After rejecting the idea throughout his tenure as Prime Minister, he now proposed it to be ‘the cornerstone of a new settlement’ with Aboriginal people. It was such an abrupt reversal, and from a position so vehement, that it required explanation. ‘I acknowledge that my own journey in arriving at this point has not been without sidetracks and gullies,’ he said. ‘There have been low points, when dialogue between me as Prime Minister and many indigenous leaders dwindled almost to the point of non-existence. I accept my share of blame for that. The challenge I have faced around indigenous identity politics is in part an artefact of who I am and the time in which I grew up.’ This contrition from Howard was uncharacteristic—he was recasting one of the most deeply entrenched features of his political identity.

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It was an utter surprise, and deliberately calculated to be so. It was a final pre-campaign demand for the attention of the electorate—an effort to say, Look at me! I can still be interesting! I can do fresh thinking too! The speech was so rushed and so ad hoc that his Minister for Indigenous Affairs, Mal Brough, found out about it only at the last minute. Howard called him either the night before the speech or on the day he delivered it. Brough couldn’t recall exactly, but it was so late it amounted to a mere courtesy, not a consultation. And it was so obviously motivated by political panic that it earned for Howard only scepticism. He had tolerated with equanimity Aboriginal activists turning their backs on him, as famously happened at the 1997 Reconciliation Convention, but when the broader electorate turned its back Howard sought reconciliation urgently. He denied that it was a ‘road to Damascus conversion’. The problem for him was that it was evidently a deathbed one. Nothing Howard did in that election year was judged on its merits. Every decision came across to the public as a desperate ploy for re-election. Because his motives were in question, his policies were disregarded. Because voters suspected the why of Howard’s politics, they gave no credence to the what of his policies. In Howard’s seat of Bennelong, Labor’s Maxine McKew reported that ‘everything he did was too late and was greeted with great cynicism— on water, on climate change, on Aboriginal constitutional recognition’. The three biggest issues in the electorate were Work Choices, climate change and education, according to McKew, ‘plus the general cost-ofliving question’. But overhanging everything was the fact that each of these issues was seen as a symptom of Howard’s leadership. The election had become a referendum on Howard himself. McKew watched the Prime Minister put in a mighty final effort campaigning in his seat of thirty-three years, only to see his efforts rebound on him: ‘The more he turned up, the more it worked against him.’ He started appearing at local events he had never attended before, like the annual Granny Smith Festival in honour of the local originator of that variety. ‘He looked too much like he was on the make.’ In earlier elections, most voters thought that Howard

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was acting in large measure in the national interest. But now most electors evidently considered that he was ‘on the make’. The essential trust—the compact between ruler and ruled—had been broken. And Bennelong, according to McKew, was ‘a microcosm of the general electorate’. Howard had one final chance to frame the terms of the election— during the campaign itself. The best opportunity to frame it was at the start, when he sought the Governor-General’s agreement to call an election, announced its date and launched the campaign. At this moment he was certain to get the media’s full attention. Howard wanted to leave the election until the last possible moment, hoping that, given enough time, he could somehow recover the lead. As he put it afterwards, ‘Because we weren’t travelling all that well, I wasn’t in a hurry to go [to the polls].’ He was required by law to call the election by 19 January 2008. But as a practical matter, he could not wait that long. It is an unwritten rule of Australian politics that an incumbent who calls an election during the Christmas holiday season or on the day of a great sporting contest will suffer the wrath of a people being called away from the real business of the nation to be forced to attend to a mere administrative detail. So Howard avoided the weekend of the Rugby League and AFL grand finals, and decided that all of December and January was a no-go zone. It was ironic that the man who thought it was fine for Australians to be required to work on public holidays or weekends without the traditional extra pay was afraid to ask them to vote within a month either side of Christmas Day. For months Howard had been weighing either 17 November or 24 November. Ultimately, he chose the latter. He decided on a lengthy campaign of six weeks for the same reason—attrition. So he announced the election on 14 October. This would be the best moment to frame the contest. The term ‘framing’ is taken from cognitive science. One of its foremost proselytisers is George Lakoff, Professor of Cognitive Science and Linguistics at the University of California, Berkeley, and author of the book Don’t Think of an Elephant: Know Your Values and Frame the Debate. In the US, Lakoff has advised the Democratic Party on

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how to defeat Republican efforts at framing. In Australia, Labor’s top organisational figures had studied Lakoff, too. Frames, he says, ‘are mental structures that shape the way we see the world’. The opening passage of his book describes the first exercise he gives new students in his course, Cognitive Science 101: ‘The exercise is: Don’t think of an elephant! Whatever you do, don’t think of an elephant. I’ve never found a student who is able to do this.’ And that leads to one of his key conclusions—‘When we negate a frame, we evoke the frame.’ An example from US politics is Richard Nixon’s unfortunate framing of himself as the Watergate scandal unfolded. ‘I am not a crook,’ he told the nation. So everyone thought of him as a crook. By trying to negate an idea, he had evoked it. From March 2007, when he appeared on the stage at Labor’s National Conference, Kevin Rudd had been promoted under the label ‘Fresh Thinking’. Then, on 17 August, as the party prepared its campaign slogan, Gartrell suggested ‘New Leadership’. His proposal argued: ‘A slogan frames the election. It is the ground on which we most believe we can fight and win. It should take a deeply held and salient belief and give it a memorable form.’ The slogan should logically complete the thought, ‘John Howard has been there too long and Australia could do with . . .’ The slogan ‘New Leadership’ would form the backdrop to all Rudd’s campaign appearances and be the theme for much of Labor’s advertising. Gartrell’s pitch continued: ‘It would be impossible for the Coalition to use this line and [it] is a constant reminder that Mr Howard has been there eleven years and that he is not going to stay around. It comes directly from the core of our strategy, i.e.: Future vs past; Old vs new; Fresh vs stale.’ The risk with this slogan and the strategy behind it was that Howard would stand down in favour of Peter Costello. But it turned out to be a safe bet. And Labor moved fast, launching ‘New Leadership’ and pre-emptively framing the election a month before Howard called it. The Liberal campaign team had discussed their own framing strategy. It needed to be good: the Government went into the campaign twelve percentage points behind Labor, according to Newspoll, and

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fourteen in the Nielsen poll, based on the two-party preferred vote. The Howard team agreed that the best frame to use would be the risk Labor posed to the economy. Economic management was seen as Howard’s greatest strength and Labor’s greatest weakness. And when Howard stood in the Prime Minister’s courtyard in Parliament House and announced the election, he did promise to keep the economy strong and he did point out the danger of a Labor government. But his campaign team was in despair when he delivered what he evidently intended to be the speech’s signature line: ‘I believe this country’s best years lie ahead. It does not need new leadership. It does not need old leadership. It needs the right leadership.’ This concept of ‘right leadership’ had not been discussed with the campaign professionals who were supposed to run the Liberal election effort. It did not reframe the campaign, it simply invoked Labor’s frame of leadership. Howard continued with the other line that made it on to the TV news that night: ‘Love me or loathe me, the Australian people know where I stand on all the major issues of importance.’ This emphasised Howard as the central issue and set him in the past tense. It was exactly the way Labor had hoped to position Howard. He had walked right into their frame.

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The Prime Minister was excited by his idea for a big election initiative. He had come up with a single measure that would accomplish two grand political goals. It would hit Kevin Rudd hard right in his ‘education revolution’. And it would transfer a vast sum of money into the pockets of the swing constituency known as ‘working families’. The idea? A tax rebate for school students. Howard’s initial proposal to his election strategy group was to give parents $5000 for each school student. For a family with a child at primary school in the NSW Catholic system, where the annual tuition fees in 2007 were $804, this would cover the fee and still leave enough change to pay for a laptop computer, a new plasma TV and 300 middies of beer—or three months’ repayments on an average mortgage. Put another way, for the average male full-time worker earning $47,600 a year after tax, this would be the equivalent of a 10.5 per cent pay rise. For a typical ‘working family’ with two children and an after-tax income of $65,000, the rebate would amount to a 15.4 per cent boost. This was nearly four times the average annual wage rise of 4 per cent. In other words, it was a big chunk of money. If the $3000 baby bonus had been enough to change the reproductive behaviour of some Australians, would a $10,000 244

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payment to a family with two kids be enough to produce a change in their political behaviour? John Howard certainly hoped so. He only needed a few per cent of the voting population to change their minds and he would be back in business. The giveaway would be presented as an ‘education rebate’, although it would do nothing to improve the quality of education. It was a political bribe masquerading as an education measure. To the very end, Howard believed that if you just gave the Australian voter enough cash he or she would swing your way. The cost of this rebate was calculated by the Treasury to be $10 billion a year, Peter Costello said. This was three times as much as the total Federal spending on roads, three times spending on the agricultural sector, six times spending on Aboriginal health. From another perspective, it was the equivalent of the annual economic output of Jamaica or Georgia. Costello argued that this was not affordable or responsible. He negotiated the proposed rebate down from $5000 to $2000; then to $800 for older students and $400 for younger ones. And that was the proposal that Howard ultimately announced at the Liberal Party campaign launch—a rebate of $800 for each secondary student and $400 for each primary student. Even this stripped-down plan would cost $2 billion a year. Another big spending proposal that Howard championed was a ‘greenhouse grant’ to households. It would be enough to pay for home insulation. The idea came from Malcolm Turnbull, but Howard thought it a good way of giving money to voters and at the same time addressing one of his biggest political vulnerabilities—his image as a climate-change denier. Paying for the insulation of every house in Australia would cut energy usage, lower household power bills, and reduce carbon emissions. It was plainly an expensive proposal. But Costello did not even pause long enough to find out how expensive. ‘This would go to every house in the country?’ he asked incredulously. ‘To every Point Piper mansion, Malcolm?’—a caustic reference to Turnbull’s wealth and a challenge to the idea that the grant should not be means-tested. ‘Why

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don’t we just nationalise the housing stock?’ Costello sneered. He vetoed the proposal on the spot. Turnbull thought that the cost could be contained by applying a means test, and by giving the money only for older houses with poor insulation. But the idea got no further and Turnbull didn’t realise Costello had killed his idea. With 7.5 million households, and assuming an average $1000 grant towards the cost of insulating each one, the total would have been about $7.5 billion. Costello had another reason for trying to contain Howard’s spending—he wanted to keep enough in reserve to hand out big tax cuts. And he did. On the first full day of the campaign, Howard and Costello announced cuts worth $34 billion over four years. It was a big announcement, designed to get attention as well as build support. It got attention. Because the tax cuts were big and, contrary to the normal convention, announced early in the campaign, some commentators gushed over them. But, like the tax cuts in the May Budget—and the ones in the Budget before it and the Budget before that—these won the Coalition no discernible support in the opinion polls. Costello later called it a ‘shock and awe’ tax policy. Labor was neither shocked nor awed. Shadow Treasurer Wayne Swan described his reaction: ‘The so-called genius of their Day 1 tax policy was a disaster for them. They showed us all their economic parameters. We’d normally have to wait two weeks to get those and go into the campaign blind.’ And a senior Labor figure explained the party’s response: ‘We had a look at their tax cuts, gave them a haircut at the top end, took that $3 billion and used it for an education tax rebate instead.’ Costello complained that Labor copied 91 per cent of his tax cuts. True. But Labor decided against replicating the tax cuts for upper-income earners, leaving it $3 billion to spare for the education rebate—$350 for a primary-school student and $700 for one at secondary school. Howard’s spending urges illustrated his fiscal frenzy. He was a cash campaigner. It was pure pork-barrel populism motivated by political panic. And it was part of the great churn of Federal finances that was

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one of the central features of the Howard era—he taxed Australians with one hand and returned the taxes as Family Benefit or other payments with the other. One consequence was that while almost all households paid taxes, 60 per cent of them got back the same amount—or more—in Government handouts. Only 40 per cent of Australian workers paid any tax in net terms, the Bureau of Statistics reported in June 2007. The average household paid total taxes of $360 a week but received $375 in both rebates and government services. Why not just lower taxes? This would avoid the costly and complex administrative process of collecting the revenue and then recycling it as payments. Howard didn’t want to cut taxes because he calculated that regular cheques from Canberra would make voters feel grateful to the Government. And indeed, Labor’s focus groups showed that some ‘working family’ swinging voters knew they received money from the Government and did connect this with Howard. But by 2007 that was no longer enought to buy their political loyalty. And it was a matter of consternation even within Howard’s Cabinet. Howard’s Finance Minister, Nick Minchin: ‘The Family Tax benefits system is essentially a good one. The tax system should recognise the cost of raising children. How do you do that? I’m sympathetic to the churning argument—we take money from them as tax and then we send ’em a cheque. Governments like to send out cheques. The residual troubling element is that a good and important system is subject to attack as middle-class welfare, which it is.’ Minchin added, ‘I personally think we should get back to using the tax system,’ lowering taxes rather than taking and then rebating them. ‘We had lots of internal debates about it. There were a number of us who thought we were exposing ourselves to the criticism that it was middle-class welfare. But John Howard, quite properly, proclaimed it as one of his great achievements.’ Labor quietly committed to continuing the system. The rort known as the Regional Partnerships Program grew from the same mentality. It was supposed to deliver economic support to rural and regional areas. Yet it gave a grant to the biggest city in Australia, $221,000 for a marine discovery project at Bondi in Sydney, simply

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because it was in a Liberal seat—Malcolm Turnbull’s Wentworth. And other payments went to causes unrelated to ‘economic support’. Indigo Cheese, in the Victorian Liberal seat of Indi, went bust in May 2005. Three months later it was paid $22,135 to make specialty cheeses. Coonawarra Gold, in the South Australian Liberal seat of Barker, wanted a grant to process grapeseed oil. The Department of Transport and Regional Services advised that this request failed to meet the program’s basic guidelines. The Minister overruled the department and in October 2005 Coonawarra Gold was paid an instalment of $43,000. A month later, the firm went out of business. Its general manager was Pat Trainor, the Liberal candidate for the seat of Florey in the 2006 State election. On South Australia’s Eyre Peninsula, the tiny town of Lock, population 290, was paid $60,000, or $206 per capita, to build a toilet. Lock happened to be in a Liberal electorate, Grey. The grant was approved a month before Howard called the 2007 election. In total, the program cost the taxpayer $409 million, enough to pay for an extra 125,000 hospital admissions a year. Three-quarters of all RPP grants went to Coalition-held seats. In 88 per cent of cases where the Department of Regional Services recommended against a project in a Coalition electorate, Howard ministers went ahead with it regardless. Only when the department found against a project in a Labor seat did they take its advice—in 91 per cent of cases. Labor vowed to dismantle the program, though only to create its version, Better Regions. The Regional Partnerships rort embodied three assumptions: that voters are greedy dupes who will vote for you if only you spend enough money on them; that voters are too dim to grasp that the money being spent on them comes from their own taxes; and that voters will not understand that if a government is unscrupulous enough to do this for one type of voter or one area, then it’s corrupt enough to do it for many. What seems at first to be a clever little local payoff is soon understood to be part of a broader pattern of improper use of taxpayers’ funds. The realisation sets in that systematic misuse of the national revenues is in nobody’s

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interests. Howard’s election-buying strategy was condescending and cynical. Bennelong is in suburban Sydney, but Howard applied the Regional Partnerships approach there, too. One example was the proposal to upgrade Leichhardt Oval, home ground of the Tigers rugby league team. This facility is not, strictly speaking, in Bennelong, but it is used by thousands of kids from the electorate and is thus effectively an extension of it. The club lobbied both parties for funds for the $7.8 million upgrade. During the election campaign, Labor’s Anthony Albanese and Maxine McKew grandly announced that a Labor Government would provide $3 million. The State Government and the club would have to finance the rest. Then Howard weighed in. He phoned the editor of one of the two local papers, the colourful John (J.B.) Booth of The Weekly Times, to offer him a scoop for his paper: a re-elected Coalition Government would provide more than twice that sum—$7 million, nearly the entire cost of the redevelopment. Over the phone, Booth brazenly asked Howard to add an extra million, according to the Sydney Morning Herald’s Phillip Coorey. Howard immediately agreed. The Government did not officially announce the deal. Howard went into the 2007 election campaign on the straight-line trajectory to defeat that he had been following for over a year. The Coalition was weighed down by the three critical vote-losing burdens that Howard had insisted it carry. First was the person of Howard himself, for so long an asset and now a liability. Second was Work Choices, as amended. Third was Howard’s image as a climate-change recalcitrant, largely the result of his shunning of the Kyoto Protocol. Taken together, they were the components of a Government seen as old, tired and out of touch. Rudd Labor lacked these big negatives, and instead offered direct counterpoints—the younger, fresher Rudd against the ageing, familiar Howard; a vow to tear up Work Choices and abolish AWAs; and a pledge to ratify Kyoto. These counters emphasised the Government’s negative points. Yet Labor still needed to assure voters that there was no risk involved in acting on their desire for change. The entire thrust of

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its campaign was to allow Howard to gently expire, without undue aggression, while promoting a safe, conservative image for Rudd and the alternative government. The expression that many participants, Labor and Liberal, used was that Labor needed to ‘give the voters permission’ to vote for change. The Liberals had essentially given up on trying to make the Howard Government seem attractive or appealing—their campaign was designed to fuel doubts about Labor. The Liberals wanted to frighten voters into opting for the apparent security of the status quo, into voting for ‘the devil you know rather than the devil you don’t’. About eight of every ten Liberal campaign ads were attacks on Labor. When Mark Textor, the Liberals’ pollster, listened to his first ‘soft voters’ focus groups after Rudd took the leadership, he reported in a confidential five-page memo that ‘soft voters do not expect a change to a Rudd-Labor government will result in much change, but concerns if any tend to centre on potential economic consequences, such as rising interest rates or unemployment’. Textor’s work with two groups in Brisbane led him to observe that ‘this gives insight into the biggest over-riding concern about Labor, regardless of whether or not Rudd is leader, and that is the economic impact of the election of a Labor government’. It was a long-running historical association: ‘Concerns about Rudd and Labor’s inexperience manifest in memories of poor past decisions and failures (high interest rates, over-spending) by Labor, going back as far as Whitlam, Hawke and Keating.’ So this was the overarching political task for Howard in the 2007 campaign—he needed to make voters worry about Labor’s capacity to precipitate higher interest rates and to overspend. Instead, he did the exact opposite. Howard’s cash campaigning created worries not about Labor’s effect on interest rates and overspending, but about his own. His fiscal recklessness made it a simple task for Labor to appear responsible and reassuring. The Coalition’s entire re-election effort was undermined by Howard’s cash campaigning strategy and by Labor’s carefully considered response. It was in the 2007 campaign that the limitations and liabilities of Howard’s traditional approach

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to election spending were exposed. He misread the changing times— he misread the economics, he misread the way the Reserve Bank would react to the economics, and he misread the politics. By doing so, he made it a simple step for Labor to achieve the chief strategic aim of its campaign—to reassure voters and make them feel good about voting for change. The fundamental point that Howard missed was that by 2004, Australia’s economy had grown continuously for thirteen years. This was almost twice as long as the average expansionary period in postwar Australia of seven years. And a resources boom had begun as well. With so much growth for so long, the economy was running at near-full capacity. The country was running out of everything from workers to wharf space. Fuelled by the imbalance of demand over supply, inflation was starting to break out of the Reserve Bank’s limit of 2 to 3 per cent. The Bank responded by raising the price of money—by raising interest rates. When Howard and Costello spent more billions or handed out more tax cuts, they added to the pressure on the central bank to raise those rates. Howard had campaigned heavily in 2004 on the issue of interest rates. It was the main theme of the Liberal campaign—Howard was a proven economic manager who would keep interest rates low; voters shouldn’t risk Labor’s Mark Latham because he was dangerously inexperienced and rates would surge if he took power. ‘Keeping interest rates low’ was the promise blazoned behind Howard every time he spoke during the campaign. Didn’t everyone know that the Reserve Bank, not the Government, set interest rates? A Nielsen poll after the election found that 27 per cent of respondents had believed the Liberals’ promise. So it was very awkward for Howard when the Reserve Bank executed a staccato of rate rises after the 2004 election. Did Howard’s fiscal policy contribute to these rate rises? The Government swore not. A number of economists argued that it did. The director of Access Economics, Chris Richardson, said: ‘As the secretary of the Treasury, Ken Henry, reminded us recently, if you throw money around while we have an economy running at full capacity, it’s inflationary. We will regret it. Look at the big

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picture. The Government is throwing money into the economy and the Reserve Bank is trying to take it out again. We have one foot on the accelerator and one on the brake. No wonder we’re blowing smoke.’ The Reserve Bank itself generally avoided the subject and, when pressed, said that fiscal policy had not been a significant factor in its decisions in recent years. The final Howard Budget, however, was one of the most expansionist in modern history. The Government denied that it increased pressure on the central bank to raise rates. But, even giving it the benefit of the doubt, the Budget certainly did not help to contain interest rates. In any case, Howard had promised to keep rates low. In one iteration of the pledge, a Liberal ad went so far as to promise to ‘keep interest rates at record lows’. After he was re-elected they rose—five times in rapid succession. Labor pounced on the opportunity to post billboards of John Howard as Pinocchio, his nose growing longer with each rate increment. By the 2007 election campaign, the Reserve Bank was clearly signalling that all the inflation indicators were flashing red. It raised rates in August 2007, and said plainly that it stood ready to do so again. By leaving the election until 24 November, Howard had chosen a campaign period that included a scheduled meeting of the Reserve Bank board. There was a real risk that the bank would decide to raise interest rates again, smack in the middle of the campaign. This had never happened before. Howard supposed this was because of convention, and that the bank would postpone any rate rise. But the Reserve Bank took its job seriously. On 7 November, it raised official interest rates for the sixth time since the election at which Howard had promised to keep rates low. Labor was thrilled. It immediately ran a TV ad to capitalise on Howard’s discomfort. Howard was surprised, even shocked, by the bank’s decision. And he was deeply unhappy. ‘I don’t think any violence would have been done to pure economic management if the decision had been put off until December, let me put it that way,’ Howard said in 2008. ‘The Reserve Bank had demonstrated its independence by

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lifting interest rates in August, and I thought the interest rate increase in the middle of the campaign was unnecessary and provocative. I think a more worldly view would have been to have held it off . . . Would it have altered the result? I’m not suggesting it would have, but it wouldn’t have hung over the campaign all those weeks.’ Howard had signally failed to learn the lesson of the preceding three years. He had fuelled demand in the economy, adding to inflationary pressure. Yet he then took exception when the Reserve Bank fulfilled its mandate—given to it by the incoming Howard Government in 1996—to contain inflation. Still Howard failed to rethink his approach. Five days later he was due to launch the Liberal Party campaign. Even as the Brisbane Town Hall started to fill for the event, the Reserve Bank issued one of its regular statements on monetary policy. It pointed out that ‘in the near term, given tight capacity conditions in many sectors, the recent inflation pressures are likely to persist’, and that the key measures of inflation ‘are likely to rise above 3 per cent on a year-ended basis over the next two quarters’. It was as clear as if the bank’s governor, Glenn Stephens, had held up a big ‘Stop’ sign. Just two hours later, Howard stood on the Brisbane stage with ‘Go for Growth’ stencilled on the wall behind him. Unable to change his tactics to suit the times, he went on an old-fashioned spend-a-thon. Instead of acknowledging that the country was in the midst of an inflationary outbreak and that it was time for restraint, he splurged. He announced $9.5 billion in new commitments over three years. This took the Coalition’s election promises to a stunning total of $65 billion, an extraordinary 6 per cent of national GDP. It was the size of Vietnam’s economy. Howard had misjudged the economics, and he had misjudged the Reserve Bank’s reaction to the economics. It now emerged that he had misjudged the politics, too. Labor outmanoeuvred Howard—not by spending more, but by spending less. This was a key decision that gave substance to Rudd’s claim to be an ‘economic conservative’. It was not a snap decision. In previous elections, Labor had essentially mimicked Howard’s big-spending approach. But after

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losing the 2004 election, Labor had asked its veteran Victorian rightwing power-broker, Senator Robert Ray, to review the party’s polling. Ray conducted an exhaustive study of Labor’s multi-million-dollar program in 2004 and gave the ALP National Executive seventeen recommendations. One was struck from the list before it made it to the executive. Ray said in 2008 that Recommendation 17 had been: ‘If the leader is not going to take any notice, cancel the polling and save $4 million.’ It was censored, according to Ray, to protect Mark Latham’s sensibilities. But another of his findings galvanised Labor into rethinking its approach to election spending promises. ‘One of the things we analysed was the tracking polling we did in 2004.’ This is a nightly sampling of some hundreds of voters in key seats for the duration of an election campaign. It is designed to show which messages are working and which are not, to allow for tactical corrections during the campaign. Both parties do it as a matter of course. On the question of which party was more credible on spending commitments, ‘we were 28 per cent worse off, even though we made no more promises than the Liberals’, said Ray. ‘But after John Howard’s policy speech in ’04 [in which he announced a $6 billion spend-a-thon], our disadvantage came down to 4 per cent. Yet that week we went on to commit to another $2 billion to $3 billion in spending. My view, and the view of Mike Kaiser [former Assistant National Secretary of the ALP] was that we should have said, Hang on, we will spend less and we’ll be more responsible. It was one of the lessons learned by me and by the national secretariat.’ So that’s exactly what Labor planned to do now in 2007. ALP National Secretary Tim Gartrell said, ‘We worried that Howard might not do it,’ that the Prime Minister at the Liberal campaign launch might restrain himself in recognition of the economic realities. ‘Then we’d have less room to move.’ Gartrell needn’t have worried. Howard not only repeated his behaviour at the 2004 launch by announcing a splurge, he added 50 per cent to the total. It was another gift to Labor. Two days later, Kevin Rudd took the stage at Labor’s campaign launch, also in Brisbane, and declared: ‘Mr Howard spent nearly

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$10 billion on Monday. Trying to buy his way out of political trouble. And he did so little more than an hour after the Reserve Bank of Australia issued its monetary policy statement warning of rising inflationary pressures. How irresponsible can you get? ‘Mr Howard has already presided over ten interest rate rises in a row. Six interest rate rises since the last election when he promised working families they would remain at record lows. A broken promise now costing first homebuyers nearly $3000 a year more on an average mortgage. He has ignored twenty separate Reserve Bank warnings on Australia’s skills shortages and infrastructure bottlenecks. And now with this latest irresponsible and desperate pre-election splurge, Mr Howard is putting his own interests ahead of working families by risking further increases in their mortgage rates . . . Today I am saying loud and clear that this sort of reckless spending must stop.’ Improbably, this line brought a spontaneous cheer and applause from the Labor crowd—one of the biggest responses of the entire launch. It was, as a number of commentators observed, perhaps the first time any political campaigner had won the approval of the crowd by offering them less money, not more. Rudd went on: ‘We’ve learnt from the experiences of the 1980s. But it seems, from Mr Howard’s irresponsible spend-a-thon on Monday, he has now forgotten them.’ Rudd made new spending commitments worth a net $2.3 billion, only a quarter the size of Howard’s. In a single act, he snatched the title of ‘economic conservative’ away from Howard. Instead of touting the wonders of his handouts, Howard was forced on to the defensive for the next two days, denying that he was an economic vandal. He was now seen as a source of risk, not of reassurance. Rudd had deftly repositioned Labor as the party of responsibility. The former National President of Labor, Stephen Loosley, remarked that this was the moment in which the transfer of power from Howard to Rudd took place in voters’ minds. Gartrell said later, ‘It was the moment I started to feel confident, started to think that we were actually going to win.’ Of course, Labor was not pure. It announced total campaign commitments of $56.5 billion, smaller than the Coalition’s by

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$8.5 billion. But in a two-party system, all things are relative. Breaking out of its stereotype as the profligate party, Labor was now the party of economic responsibility. For a party looking to reassure voters that it was conservative and safe, it was nothing less than a coup.

... While all the attention at the Labor launch was on anointing Australia’s next prime minister, John Faulkner was making a special effort with past prime ministers. Paul Keating had been humiliated at the 2004 campaign. While the then leader, Mark Latham, ostentatiously hugged Gough Whitlam and acknowledged Bob Hawke, Keating had been led in by a back door and kept out of range of all cameras. Terrified that the Liberals might use him to invoke 17 per cent interest rates under past Labor governments, the party had deliberately shunned Australia’s most important economic reformer of the twentieth century. Since then, Kim Beazley had begun the political rehabilitation of Paul Keating. He had made a point of highlighting Keating’s reform record. And he had fought back against the Liberal ‘17 per cent’ mantra by simply reminding Parliament that the highest interest rates in Australia’s modern history were not the 17 per cent mortgage rate under Keating’s treasurership but the 22 per cent bank-bill rate under John Howard’s. Unbelievably, Labor had been so fearful of confronting Keating’s unpopularity that it had taken the party a decade to claim ownership of his economic reforms. Faulkner thought it was important to reverse Keating’s dismal treatment in 2004. He wanted Labor to be proud of its history—to be proud of its former prime ministers and, by bringing them together at the launch, to make a point about Labor’s unity. However, this fine sentiment ran smack into the reality that the three former PMs were less than friendly with each other. Hawke and Keating were not even on speaking terms. Their rivalry over the Labor leadership sixteen years earlier had left them mutually hostile.

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But, through careful duchessing and diplomacy, Faulkner managed to get the three to agree to sit together at the 2007 launch. Having successfully manoeuvred the three huge egos into the same backstage room at the launch, he was delighted. But, as they waited for the launch to begin, Faulkner found it awkward trying to make small talk with the Labor giants. The event was late starting, and Faulkner grew increasingly uncomfortable among three men who so obviously disdained each other. As Tim Gartrell walked past the door to the holding room, a frustrated Faulkner emerged into the corridor. ‘Can someone else have a go in the fucking ice-box? I’m sick of it!’ he announced with feeling. Julia Gillard and several others valiantly took turns trying to warm up the walk-in freezer that held Labor’s heroic history.

... Even after its bruising experience at the hands of the Reserve Bank, even after its exposure as the party of profligacy, the Howard Government was incapable of changing its spendthrift ways. On 15 November the Auditor-General, Ian McPhee, delivered a damning 1200-page report on Howard’s Regional Partnership Program. He found that it did not meet the standards required of public administration. The report made big—and bad—news in the final phase of the campaign. Once again, Howard’s cash campaigning had misfired. Yet two days after the report, the Deputy Prime Minister and Leader of the National Party, Mark Vaile, had the gall to announce another two unapproved grants totalling $900,000—for his own electorate. The final setback for the Government was even more spectacular. This was a sensational incident in the western Sydney seat of Lindsay during the last week of the campaign. The Liberals had held the seat since 1996—it was the archetypal ‘Howard battler’ seat. By winning it then, Kelly had become a Liberal hero and a Howard favourite. She was retiring now and a new Liberal candidate, Karen Chijoff, was running.

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On the night of 20 November, alerted by a tip-off, Labor organisers ambushed a group of Liberals stuffing letterboxes with a bogus electioneering pamphlet. The husband of the outgoing Liberal candidate and the husband of the incoming candidate were accompanied by a member of the Liberal Party’s state executive, Jeff Egan, conducting a black propaganda operation in the streets of Lindsay. They were distributing leaflets purporting to be from a nonexistent outfit, the Islamic Australia Federation. The pamphlets were full of praise for the Grand Mufti of Australia, the controversial Taj el-Din al-Hilaly; they supported the construction of a new mosque and called for clemency for the Bali bombers. And they strongly urged a vote for the Labor Party. It was an ugly episode of race-baiting. The Liberals immediately disowned the operation. But it was the big story of the day, just four days before voting day. It completely drowned out Howard’s final attempt to appeal to the electorate in his address to the National Press Club the next day. It was a huge embarrassment for the Liberals, virtually at the eleventh hour. Some commentators described it as a neat book-end to the Howard years. Lindsay had been the trophy seat—a former Labor stronghold gloriously won for the Howard Government by Kelly—and now it was lost in ignominy in a blast of race baiting. It was an extreme and juvenile version of the xenophobic politics that Howard’s ministers were playing right to the end. The persecution of the Indian doctor, Mohammed Haneef, on contrived suspicion of complicity in terrorism, plus the last-minute demonisation of Somali refugees, were presented as arguments for robust vigilance at the national borders. In fact, the decision to elevate these matters on the eve of the election was an instance of dog-whistle politics—an act designed to send a special signal to those voters whose ears are attuned to a particular frequency, in this case the politics of xenophobia. A voter did not need to have especially keen hearing to pick up the signal in these cases. But it turned out that it was all for naught. The fatal damage to the Coalition had been done long before the campaign. The campaign served principally to assure voters that Kevin

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Rudd was an economic conservative, a safe alternative. The Labor candidate in Howard’s seat of Bennelong, Maxine McKew, repeated an observation by her campaign manager, Michael Butterworth, that ‘quite a few people said they voted for me because I looked like a Liberal’. The electors of Australia had been ‘given permission’ to vote for Labor’s Kevin Rudd, to vote for change, because the self-proclaimed economic conservative looked more conservative than the Liberal leader himself. And the man who had done most to make Rudd look like the safe alternative was none other than John Howard.

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23 The Victorious Principle of Similar Difference

John Howard did not give up until the very last hour. He gave his final interview on ABC Radio at 5 pm on polling day. Even though the polls closed at 6 pm, he still hoped to influence voters in Western Australia, which was three hours behind. In Bennelong, his seat of the past 33 years, he tried to visit as many of the 43 voting booths as possible. His Labor rival, Maxine McKew, restricted herself to a more measured five. As the Prime Minister dashed from one school hall to another, he knew that he was in trouble. ‘Actually, my hopes lifted in the last week. It probably wasn’t until election day, probably in the afternoon, that I had a feeling that I was going to, that we were definitely going to lose, as I went around my electorate.’ What gave him this feeling? ‘Some sort of body language things,’ he said. As Howard moved among voters shaking their hands at one booth, McKew said she overheard some of the exchanges. ‘People were saying things like, Thanks Mr Howard, enjoy your retirement. It must have been very hard for him.’ ‘Oh Ahab,’ cried Starbuck, ‘Not too late is it, even now, the third day, to desist. See! Moby Dick seeks thee not. It is thou, thou, that madly seekest him!’ Even in mid-September, less than 260

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a month before the election was called, Peter Costello stood ready to take the leadership of the Liberal Party. It is impossible to know whether he might have salvaged the election for the Coalition. What would he have done differently? First and most importantly, he would not have been John Howard. He was of the same generation as Kevin Rudd, even the same age, fifty. Merely by becoming the new leader he would have neutralised Labor’s principal theme, ‘New Leadership’. He would have offered change of leader within continuity of government. And he would have represented change without the risk of inexperience. And with a new leader the government could have credibly changed policy. Specifically, Costello told political intimates at the time he would apologise to Aboriginal Australia, ratify the Kyoto Protocol and ‘put a new gloss’ on Work Choices, although he did not specify what this might be. These were all at the top of Kevin Rudd’s agenda. On this account, he would have robbed Rudd of his principal appeal and much of his agenda as well. Labor’s planned alternative campaign would have reminded voters that Costello was not fresh, but an architect of Work Choices. Should the Liberals have made the switch? Most of Howard’s Cabinet thought so. So did his pollster, Mark Textor. But in the face of Howard’s personal determination to stay on, even in the likelihood of defeat, the party lacked the will and the means to bring about the ‘smooth transition’ that Costello had been promoting within the party since 2001. On the tenth anniversary of his election, a reporter asked Howard about his 1996 remark that every leader should have a ten-year succession plan. His response: ‘Did I say that?’ He appeared to be genuinely surprised. Howard’s commonsense and good judgment deserted him in his last term. Unconstrained by the Senate, unchallenged by his Cabinet colleagues and unchecked by any mechanism of Liberal Party accountability, he allowed his personal preoccupations to override his larger duties. He pursued his industrial relations agenda to the point of self-destruction; he put Australia’s climate change policy at the disposal of his great and powerful US friend; and he indulged his resentment of Peter Costello and his

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personal obsession with power to the exclusion of concern for his government and his party. In the face of his unreasoning wilfulness, his colleagues were powerless. ‘John Howard wasn’t only our leader; he was like our father,’ Tony Abbott explained. ‘You can’t kill your father.’ On election night, Howard huddled in the study at Kirribilli House with Janette, their sons and a handful of staff, watching his computer screen for the results tallied on the Australian Electoral Commission website and listening to the coverage on TV. Kevin Rudd went to Suncorp Stadium in Brisbane and drifted in and out of the back room where John Faulkner, Rudd’s adviser Alister Jordan and the longtime Labor apparatchik and future Rudd chief-of-staff David Epstein kept a running count of results on a whiteboard. Peter Costello watched the results coming in at his electoral office in Melbourne. Julia Gillard was on the ABC-TV panel, sitting in the tally room in Canberra with the Liberals’ Nick Minchin and anchor Kerry O’Brien. Labor needed a uniform national swing of 4.8 per cent to give it the sixteen seats it needed to unseat the Howard Government. It got 5.44 per cent. The Liberals lost twenty seats and the Nationals three. Labor gained 23 seats. This gave the new Rudd Government a majority of seven in the 150-seat House of Representatives. It was a decisive move away from the Coalition, the third biggest swing against an incumbent government since two-party estimates began in 1949. Yet while the ebb tide was strong enough to push Howard out decisively, the flood tide was not big enough to carry Rudd very far above the electoral water line. Indeed, Rudd’s majority of seven seats was the smallest margin of victory for any newly elected government since Gough Whitlam won with a four-seat margin in 1972. This left Rudd with a fragile first-term hold on power. A uniform swing against Labor of 2.9 per cent would be enough to put the party back on the Opposition benches at the next election. It was one of the characteristics of the 2007 election that while the conservatives were emphatically rejected, Labor was not solidly entrenched in their place. During a break in the ABC broadcast, Gillard leaned across to Minchin and gave him a sympathetic pat on the hand. ‘It must

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have been very difficult for him but he was incredibly gracious,’ she explained later. Although Labor needed sixteen seats to win John Faulkner, in his capacity as Rudd’s personal scorekeeper, was not prepared to declare victory when the sixteenth seat fell its way. The reason was that there was a real prospect that Labor could lose a couple of its Western Australian seats later in the evening as the results came in. It would be an irretrievable misjudgment to declare victory only to later have to concede defeat. Faulkner insisted on waiting until Labor could safely put eighteen new seats on its list. Around 9.30 p.m. Rudd, cup of tea in hand, walked from the election party into Faulkner’s back room curious to see how the tally was going. As he did, Faulkner marked the northern Brisbane seat of Petrie down as a win in the ‘ALP’ column. It was the eighteenth new seat of the night for Labor. He turned to Rudd and said, ‘Kevin, I think I can inform you that we have enough seats to form the next government.’ Rudd was still absorbing the news when his mobile phone rang. It was Howard calling from Kirribilli House to concede defeat and congratulate him. The interval between Faulkner’s declaration and Howard’s call was estimated at between 30 and 90 seconds, according to Faulkner. ‘I couldn’t see any point in hanging around; it was obvious and I rang him,’ said Howard. ‘I told him he’d won and congratulated him. He said, Thank you very much, and we talked about the transition arrangements. I told him I could get out of the Lodge within two days, move out of the houses as soon as possible. He said there was no great hurry to get out, to take our time. That was it. And I said, I am going to go into the Wentworth Hotel in Sydney and make a speech,’ his concession speech to several hundred Howard loyalists. While Howard was chauffered across the Sydney Harbour Bridge on the short trip to the Wentworth, his phone buzzed. Malcolm Turnbull was calling to commiserate. Turnbull, who was about to make remarks of his own and wanted to keep them consistent with Howard’s, also wanted to know how his leader was characterising the situation in Bennelong. The outgoing PM later told confidants that Turnbull had started to talk about the public address that

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Howard was about to give. He knew what he wanted to say and wanted no advice from the younger man. A rumour circulated weeks later that the ambitious Turnbull wanted to ask for Howard’s public endorsement for the Liberal leadership, an attempt to trump Costello. But if he did, Howard gave him no opportunity. He cut Turnbull short with a pre-emptory, ‘We’ll talk later’. Turnbull later told political intimates that he and Howard had not discussed the Prime Minister’s planned remarks at all. Howard went on to make a gracious speech: ‘This is a great democracy and I want to wish Mr Rudd well,’ he said. ‘I believe very profoundly that Australia’s best years lie ahead of her.’ Howard had overstayed his welcome and was now briskly unsentimental in moving on. In the upper reaches of the Liberal Party it was commonly held that Janette Howard was the essential reason that Howard had been unable to stand aside, that his wife’s steely determination to stay on and fight had overridden Howard’s own better judgment. Certainly, Howard did not deny that his wife had been his main counsellor in his decisions to stay on in office. And Arthur Sinodinos told a John Howard tribute dinner in 2008 that the woman he called Howard’s ‘focus group of one’ had regularly played ‘an unbelievably important role in putting John back together again after another shattering week in Canberra’. As Alexander Downer observed, whatever Janette Howard might have said or done at any juncture, ‘you can’t separate them’. In the midst of the longest and strongest economic boom in the nation’s history, the leader who had presided over eleven and a half years of it had been dismissed. It was the first time in postwar Australia that a national government had been voted out of office at a time of unambiguously strong growth, according to HSBC economist and political historian John Edwards. After the election Labor’s national secretary, Tim Gartrell, told the National Press Club: ‘I want to begin by exploding the notion that oppositions don’t win elections but that governments, for whatever reason, lose them. In 2007, this is an argument that cannot be supported or sustained. Kevin Rudd and Labor won this campaign

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outright—with a clear message about new leadership and a long-term plan for Australia’s future.’ Rudd was certainly an immensely popular Opposition Leader and new Prime Minister. In both incarnations he broke all the popularity records in the 36-year-old Nielsen poll. The Howard Government had targeted Rudd, personally, brutally, relentlessly through most of 2007. When this hostility seemed only to make him stronger, the Liberals changed tack. In the election campaign the attacks were instead aimed at the Labor team with emphasis on their union backgrounds. In the prelude to the campaign, Liberal ministerial staff in Parliament House were instructed not to criticise Rudd. He was so well regarded in the electorate that his political enemy was obliged to declare him sacrosanct. In private, Howard had earlier dismissed Rudd as unelectable because he came across as the class swot. By the time of the campaign he had gone from unacceptable swot to untouchable saint. And Labor’s campaign, complemented vitally by the ACTU’s effort, was intelligent and highly effective. Yet the Howard Government was already in a sustained poll slump before Rudd rose to the leadership. The reasons for Howard’s loss were the results of his own political misjudgment. His insistence on forcing Work Choices, his recalcitrance in refusing to ratify the Kyoto Protocol, and the person and tenure of Howard himself were the toxic ingredients in his government’s self-administered poisonous draught. Even the ACTU’s research did not support the claim that Work Choices alone was enough to have brought down Howard. It was necessary but insufficient. Research by both political parties and the independent Australian Electoral Study all supported the conclusion that Howard lost chiefly for that combination of three reasons. At the centre of this Gordian knot of electoral unacceptability was Howard himself. None of the elements could be credibly changed by Howard because they were implacably bound up in his own persona, as the amendment to Work Choices demonstrated. Peter Costello stood ready with the sword of Alexander to slice through the knot, but lacked the support and the strength to wield it. Rudd’s strategy was to accentuate Howard’s three negatives by offering contrasting positives, and otherwise to

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minimise the differences. Kevin Rudd constructed himself to be John Howard without the nasty bits. Some commentators accused Rudd of ‘me-tooism’. More apt was the appraisal by the video satirist Hugh Atkin that Rudd was operating under the ‘clever principle of similar difference’. Looking wistfully at the election results, Kim Beazley decided that Labor hadn’t needed Rudd to win. ‘If you look at the reasons Howard lost—Work Choices, Kyoto, and Howard himself, none of them was a Rudd-dependent variable. Kevin coming in as leader did offer the opportunity to argue for a generational change factor. If I had been leader I would not have done as well as Kevin. There were probably four or five Queensland seats I would not have won; but there were three more in Western Australia that I would have won. So I think Kevin would have done better by a net two or three seats. I would have had a more modest margin but a workable margin.’ This is, of course, a self-serving and counterfactual assessment by Beazley. Yet Rudd himself acknowledged in mid-2007 that the driving strand of public sentiment was the rejection of Howard rather than the embrace of Rudd: ‘They don’t mind me; they are very critical of him.’ One of the seats Labor won was Bennelong. The swing against Howard was 5.53 per cent, almost identical to the national shift. In Maxine McKew, Labor had put one of its best candidates into the fight. It spent a huge sum, about $600,000, to campaign there. The Liberals spent even more to protect their leader’s seat—over $1 million, according to senior Liberals. The victorious McKew did not claim that she had won the seat so much as Howard had lost it: ‘Howard sealed his own fate.’ For only the second time, a serving Australian prime minister was voted out of his own seat. The only precedent was the 1929 election in which the people of the Melbourne seat of Flinders voted by a wafer-thin margin of 305 votes to reject the conservative prime minister of the day, the war hero and aristocratic, Rolls Royce-driving Stanley Melbourne Bruce. Peter Costello contended, however, that Howard’s humiliation was actually unique. ‘Bruce came back. Bruce came back in a big way. It was all considered a terrible mistake and they brought him back

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at the first opportunity. We didn’t mean to kick him out, let us right the wrong.’ There were no opinion polls in that part of the century. The contemporaneous newspaper accounts do portray Bruce’s loss as an inadvertent act by his electorate. He was re-elected to Flinders at the 1931 election. Remarkably, he was not in Australia before or during the election. He campaigned from London, where he was attending to the family company’s business. Yet he was returned resoundingly— with 68 per cent of the vote and a margin of 24,300 votes. Costello contrasted Howard’s position with that of Bruce: ‘The thing about Bennelong was that it was a national focus of the campaign. Every Sunday Howard would go out there and campaign and every Sunday night the TV would carry footage of him and Maxine in Bennelong. Then there were the opinion polls on the situation in Bennelong. No one was under any misapprehension—everyone knew that Howard was in trouble in Bennelong.’ His point is clear. The voters’ dismissal of Bruce in Flinders was an accident, soon apologetically reversed; the voters’ removal of Howard in Bennelong was a premeditated, coldblooded political killing. In the phone conversation on the Monday after the election, Costello was struck by one of Howard’s remarks. Inviting Costello to join him at the Lodge for the Last Supper, the outgoing prime minister told him that, having lost government, he was glad he had lost Bennelong too. Howard later said he did not recall making this comment. The implication of this statement was that Howard did not want to have to sit in the Parliament as a defeated former prime minister. He had, before the election, promised to serve the full three-year term as the member for Bennelong if he had been re-elected but the government had lost. When Costello put down the phone, he was fuming. Costello had held his seat of Higgins with a modest swing against him of 1.8 per cent. He and all the other Coalition members who had managed to keep their seats were obliged to stay on in Parliament to suffer the indignities of opposition while the man who had put them there walked away. The bitter rivalry between a dominant prime minister and an ambitious, younger treasurer was a significant feature of the Hawke

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years and the Howard era. Is it fated to repeat? Rudd’s Treasurer, Wayne Swan, argues not: ‘There will never be any such problem between Kevin and me. I’m older than he is. And if I get to serve half as long as Peter Costello did as Treasurer, I’ll die a happy man.’ Indeed, the Rudd Government is different. The main alternative power pole in 2008 is not Swan, but Julia Gillard. It was Gillard who brought the essential bloc of Caucus votes, principally from the Left faction, to the joint Rudd–Gillard ticket that allowed Rudd to ascend to the leadership. She came with at least as many votes as Rudd, both sides concur, and probably more, according to key Gillard lieutenants, although Rudd’s intimates dispute this. Previous deputy prime ministers also represented voting blocs within the ruling administration. In the Hawke years, the Left’s Brian Howe served as deputy, appointed as part of a factional power-sharing agreement. But he lacked the skills and the ambition and the power base to succeed Hawke. He stayed on as deputy when Keating took the leadership. In the Howard years, the deputy was always the leader of the National Party, the junior Coalition partner, by convention. Again, none of these men—Tim Fischer, John Anderson or Mark Vaile— had the skills, ambition or power base to be a credible alternative leader. In the structure underlying Rudd’s government, however, the deputy prime minister is a much more prospective candidate to be an alternative leader. Gillard said that there was no succession understanding between the pair, and disavows any such ambition: ‘There is no Kirribilli equivalent’, alluding to the secret succession pact that Hawke made in Kirribilli House to hand power to Keating, a pact which Hawke later abrogated. ‘My working assumption,’ said Gillard, ‘is that I will be deputy prime minister and Kevin will be prime minister and the only way that arrangement will be terminated will be on the day that the Australian people decide to terminate it.’ Had her discussions with Rudd ever touched on the question of succession? ‘Never.’ Just as Howard congratulated Rudd on winning the 2007 election and Mark Textor complimented the ACTU’s George Wright on the union campaign against Work Choices, the Liberals’ adman, Ted

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Horton, phoned his rivals after the election in the same sporting spirit to congratulate them on a first-rate advertising campaign. Horton reflected later: ‘I’m sure that Labor did their research and when they talked about Howard being old, tired and out of touch you’d have to assume it wasn’t because they made it up—it’s something they would have found in their research among the electorate. They were holding up a mirror to the Australian community. I would like to think they got it wrong, but, as John Howard always said, the Australian people always get it right.’

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Note on Sources

The author conducted on-the-record interviews in 2008 for this book with, among others, Tony Abbott, Kevin Andrews, Mark Arbib, Kim Beazley, Julie Bishop, Ian Campbell, Greg Combet, Peter Costello, Alexander Downer, Tony Douglas, John Faulkner, Tim Gartrell, Julia Gillard, Joe Hockey, Ted Horton, John Howard, Brian Loughnane, Maxine McKew, Ian McLachlan, Brendan Nelson, Robert Ray, Andrew Robb, Kevin Rudd, Arthur Sinodinos, Wayne Swan and Malcolm Turnbull.

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Acknowledgments

The catalyst for this book was Richard Walsh at Allen & Unwin. He suggested the project and followed through with good guidance and great patience. But he didn’t equip me for the task. That was done by my mother, Tess, who gave me the essential tools by teaching me a love of reading and writing and schooling me in critical thinking. My father, Norm, implanted in me an interest in politics, a sense of humour and a capacity for outrage. I am centred, however, by my kids, Kate, Dylan and Nina, though none is a child any longer. I think of them whenever I am tempted to treat politics as an expensive joke or a mere spectacle and I remember that our national politics, like it or not, shapes our national destiny. I am sustained by the love and fathomless support of my partner, Mindanao. And thanks to Carla and Thomas for helping me keep my perspective. I would not have attempted the book without the support and encouragement of my employer, the then editor of the Sydney Morning Herald, Alan Oakley. Gabrielle Hooton is a researcher of formidable powers—utterly relentless and hugely resourceful in pursuit of information. No fact, however well hidden, ancient or obscure, can elude her reach. I also offer two unconventional, indeed unfashionable, acknowledgments. The Federal Parliamentary Press Gallery is much maligned, but it is, by and large, staffed by dedicated, hard-working men and women whose work forms our essential understanding of our system and our leaders. And for our Federal parliamentarians, who make impossibly large personal sacrifices for middling money and even less credit, the country owes you a debt of gratitude. Well, most of you.

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INDEX

Abbott, Tony canvasses opinion on Howard’s exit, 12–15 Medicare safety-net thresholds, 51–2 opposed to Howard’s retirement, 22, 24, 262 proposes Commonwealth takeover of health system, 235–6 resists radical labour market deregulation, 78–81 on Work Choices, 81, 83 Aboriginal communities, intervention in, 200, 219, 224 ACTU; see also Essential Media Communications campaign against Work Choices, 52–3, 59–66, 87–90, 92–100 pre-empts Government’s advertising, 101, 182, 190–1 Your Rights at Work campaign, 90, 97, 190, 221 Albanese, Anthony, 144 Alexander, Dave, 127 Allan, Col, 203 Andrews, Kevin, 20–1, 25, 78–82, 118, 190–1 ANZ Bank, 115 APEC Conference, 5–6, 9, 16–18 Arbib, Mark Crosby Textor research report, 221

on negative campaigning, 183 role in 2007 election campaign, 184 and Rudd’s leadership bids, 144, 158–9, 164–6 Argentina, 112 asylum seekers, 150 Athens Declaration, 123–4 Australian Council of Trade Unions see ACTU Australian Industry Group, 232 Australian Labor Party ACTU and, 86, 87–9 advertising strategy, 3–4, 172–3, 175–7 campaign launch, 256–7 Costello contingency plan, 4, 148–9 election victory, 262 establishes credibility on the economy, 208–10 factional conflict in Victoria, 154–5 ‘framing’ strategy, 241 NSW Right, 158–9 preparation of ‘response ads’, 230–1 ‘wedge avoidance alert’, 214 Australian Medical Association, 52 Australian Workplace Agreements (AWAs), 194 AWB bribery scandal, 150–2 Bamsey, Howard, 75, 188

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Index Baume, Michael, 120 Beattie, Peter, 162 Beazley, Kim approval ratings in polls, 149–52, 162–3 elected Labor Party leader, 144, 147 factional support, 156, 158, 166 loses leadership ballot, 168, 170 Rove gaffe, 165 supports Kyoto Protocol, 75 Bennelong electorate Howard’s defeat in, 26–7, 240–1, 260 Howard’s dread of losing, 6, 8, 11, 21 Maxine McKew’s candidature, 192–3, 259, 266 Biggs, Jamie, 191 ‘Billy advertisements’, 194 Bishop, Bronwyn, 130 Bishop, Julie, 20, 131 Blair, Tony, 3 Bowen, Chris, 166–7 Brennan, Geoff, 17–18 broadband internet access, 172, 200 Brough, Mal Northern Territory intervention, 224 seeks Howard’s retirement, 16, 20, 28–9 Bruce, Stanley Melbourne, 193, 266–7 budgets 2007 budget, 197–200, 206 Costello-Howard policy differences, 104–9 Defence spending, 107–8 impact of mining boom, 110–13 surpluses, 110 Burke, Brian, 201, 210 Burrow, Sharan, 59

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Bush, George W. initial impression of Howard, 43–4 opposes Kyoto protocol ratification, 47, 70–1 personal rapport with Howard, 42–8 business lobbies, 231–2 Campbell, Ian advocates carbon trading scheme, 76, 187–9 as Costello supporter, 132 forced resignation, 210 urges action on climate change, 67, 71–6 Captain Ahab, 36–8, 137–9, 260 carbon-emissions trading scheme, 76, 187–9, 200 Carr, Bob, 181–2 Carr, Kim engineers Rudd-Gillard ticket, 155–60 industry portfolio, 154–5, 170–1 cash-campaigning strategy Howard Government, 198–9, 244–9 inflationary consequences, 251–2 Labor’s rejection, 252–6 Chalmers, Jim, 149 Chijoff, Karen, 257 China boom, 113 Citizenship Test, 200, 206 climate change as electoral issue, 4, 48, 148, 204 Howard and, 74, 150, 187, 249 Howard Government schizophrenia on, 73–4, 186–90 Montréal conference, 75 Rudd’s policy commitment, 171–2 Clinton, Bill, 42–3

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Combet, Greg, 52–3, 59–65, 87–8, 90, 95, 99, 194 commodities boom, 110–13 Conroy, Stephen, 144, 154–5, 172 Coonan, Helen, 16, 20, 24 Coorey, Phillip, 203 Costello, Peter; see also leadership transition (Howard to Costello) approval ratings in polls, 23 budget strategy, 104–9, 245–6 and climate change, 74 confirms 1994 handover deal, 129–32 damaged by McLachlan affair, 132–3, 136 fury at Howard’s ‘Athens Declaration’, 123–5 insufficient support, 131, 133–5 invited to Lodge for Last Supper, vii–viii, 267 as loyal deputy leader, 131–2 Medicare safety-net thresholds, 51–2 misreads Howard’s personality, 133–4 prepares to lead Opposition, 11–12, 14 strengths as alternative leader, 23, 25, 261 supports radical labour market deregulation, 77–8 threatens ANZ Bank, 114–15 cost-of-living issue, 209 Crabb, Annabel, 34 Crean, Simon, 155 Crosby, Lynton, 191 Crosby Textor, 221, 226–7 Day, Bob, 134–5 de Crespigny, Robert Champion, 126

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Debnam, Peter, 182–3 Defence spending, 107–8 Denton, John, 18–19 Department of the Prime Minister and Cabinet, 106 Douglas, Tony, 93–7, 205 Downer, Alexander canvasses opinion on Howard’s exit, 6, 8–12, 15–17, 20–9 on Coalition’s loss of purpose, 117 Kyoto Protocol, 70–1 member of election strategy group, 224 Pacific Solution, 150 rudeness, 152–3 Scores strip club story, 203, 211 supports action on climate change, 74 economic management Costello’s budget strategy, 245–6 as credibility issue, 206–8 Labor reframes the issue, 208–10 election debates, 228–9 Ellison, Chris, 20 enterprise bargaining, 56 Errington, Wayne, vii Eslake, Saul, 114–15 Essential Media Communications ACTU’s anti-Work Choices campaign, 59, 92–9, 205 Class Sizes campaign, 92 employee grievances, 102 Eumundi ad, 175 Fairness Test, 193–6 Farr, Malcolm, 203 Faulkner, John, 146, 228, 256–7, 262–3 Feeney, David, 144

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Index focus groups attitudes to Howard, 1, 3 on Beazley’s leadership, 163 on economic credibility, 208–9, 250 on leaders’ policy opportunism, 219–20 on Rudd’s popularity, 185 on Scores story, 212–13 Textor Crosby results challenged, 226–7 on Work Choices, 85, 91–9, 205 ‘framing’ of issues, 241–2 Fraser Government, 54 Future Fund, 112–13 Gartrell, Tim and Beazley’s leadership, 163–5 Costello Transition Project, 4, 148–9 ‘Fresh Thinking’ slogan, 172–3, 242 on impact of Scores story, 212–13 issue framing, 182–3, 208–9 marketing the Rudd image, 175–7, 182–3, 208–9 on Work Choices issue, 102 ‘George advertisement’, 99 Georgopolous, Hellen, 74 Gillard, Julia as credible alternative leader, 268 Heffernan’s attack, 195 joint leadership deal with Rudd, 156–61 Glasson, Bill, 52 Goot, Murray, 93 Gore, Al, 69–70, 171 Gregory, Bob, 112 Guantanamo Bay, 150 Haneef, Mohammed, 200, 206, 258

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Hanke, Ian, 190 Harper, Stephen, 8 Hawke, Bob, 55, 110, 256 Heffernan, Bill, 195 Hicks, David, 150, 200, 205–6 higher education policy, 113, 198 Hill, Robert, 70 Hockey, Joe urges Howard’s retirement, 18–19, 20–2, 29 and Work Choices amendments, 191, 193–6 home insulation grants, 245–6 hospitals, federal takeover, 235–6 Howard, Janette, 26, 28, 35, 234, 262, 264 Howard, John; see also Captain Ahab; leadership transition (Howard to Costello) approval rating in polls, 22, 49, 151, 162, 218 attitude to unions, 57–9 Bill Clinton’s discourtesy to, 42–3 climate change recalcitrant, 150, 204, 249 collapse of Cabinet support for, 24–9 comment on Obama, 186–7 commitment to Work Choices, 56–9, 64–5, 85–7 despair at poll findings, 5–6, 8, 200 discusses Work Choices with Combet, 63–4 election defeat, 262–4, 266–7 election-buying strategy, 244–9 eyes his place in history, 35, 59 fails to reframe campaign, 243 failure to manage leadership transition, 119–21, 216–27, 261–2

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family background, 57 fears Bennelong defeat, 6, 8, 11, 21 and Fraser Government, 54 hosts APEC summit, 9–10, 17–18, 29 ideological commitment to Work Choices, 56–9, 64–6 increases Medicare safety-net thresholds, 50–2 intransigence on Kyoto Protocol, 186–7, 204 loss of Liberal leadership in 1989, 35, 39, 40, 58 loss of public credibility, 219 mood swings, 7–8, 28 ‘out of touch, too old, too tired’, 1, 3, 148, 204, 217–18, 220, 249, 269 political triumphs, 38–49 public’s cynicism towards, 240 rehearsal for Great Debate, 229 relentlessness, 5, 35 retirement; see leadership transition (Howard to Costello) reverses stand on Aboriginal reconciliation, 239–40 ridiculed and insulted, 38–9 self-destructive obsessiveness, 36–7, 40, 261–2 solidarity with Bush, 43–8, 186–7, 235, 238 support for Iraq war, 45–7, 150 truthfulness, 39, 136 underestimates Rudd, 147 Howard Government; see also Work Choices 2004 election victory, 40, 48–9 burden of incumbency, 214–15 cash-campaigning, 244–9

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climate change policy, 67–70, 73–4, 186–90, 204, 236–8 creative accounting, 114–15 decline in popular support, 3–4, 148, 150 Defence spending, 107–9 election strategy group, 224–6 fiscal politics and policy, 104–9, 197–9 handling of the mining boom, 110–13 lax fiscal policy, 113–14 loss of policy momentum, 117 ministers discuss Howard’s leadership, 10–12, 15–17, 20–6, 28 NSW election lessons, 183–4 ‘out of touch, too old, too tired’, 1–2, 249 personal attacks on Rudd, 201–4, 210–13 policy twists and turns, 200, 204–6, 218–19 political advertising, 232–3 tenth anniversary dinner, 116–17 use of Senate majority, 50–4 Work Choices policy, 52–5, 77–87, 100–2, 190–1, 193–6, 232–3 xenophobic politics, 258 Howard’s battlers, 93, 102–3 Hunt, Greg, 74 Iemma, Morris, 181–2 incumbency as burden, 148, 214–15, 218 industrial relations reform; see Work Choices interest rate rises, 150, 208–9, 251–3, 255

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Index interest rates, 150 Iraq war, 45–8, 150 Kath and Kim (TV comedy), 18–19 Keating, Paul, 2, 38, 55–6, 110, 256 Keddie, Richard, 98–9 Kelly, Jackie, 149, 257 Kemp, David, 70 King of the Mountain (Ludwig), 119–20 Kovko, Jake, 150 Kyoto Protocol Bush opposes ratification, 47 Howard Government signs, 47, 67–8 Howard’s refusal to ratify, 47, 68–71, 75, 186–7 Labor Party supports, 75 Turnbull urges ratification, 47, 237–8 Labor Forum, 145 Labor Party; see Australian Labor Party Lakoff, George, 241–2 Latham, Mark, 38–9, 40, 48–9, 143, 183, 228 leadership transition (Howard to Costello) 1994 handover deal, 125–36 Costello’s putative strengths, 23, 261 Howard contemplates 2006 retirement, 118–19, 122–3, 134–5 Howard justifies staying on, 30–1, 33, 134–5 Howard moots 2007 retirement, 6–18, 20–35

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Howard stipulates conditions for 2007 retirement, 10, 18 24–6 Howard’s ‘Athens Declaration’, 123–5 Howard’s failure to manage, 119–21, 216–27, 261–2 ‘New Leadership’ as campaign issue, 242–3 leadership transition (NSW Labor Government), 181–2 Leichhardt Oval, 249 Liberal Party denied election oversight, 223–4 ‘framing’ strategy, 242–3, 249–50 Lindsay electorate pamphlet, 257–8 Loosley, Stephen, 182 Loughnane, Brian, 122–3, 191, 204, 224 Ludwig, Arnold, 119–20 Ludwig, Bill, 145 Ludwig, Joe, 145 Luff, David, 168 Macfarlane, Ian, 20, 73 mandatory renewable energy target (MRET), 239 Martin, Nick, 149 McFarlane, John, 115 McKew, Maxine, 192–3, 240–1, 249, 259, 260, 266 McLachlan, Ian, 125–36 Mersey Hospital decision, 235–6 Mills, Stephen, 209 Milne, Glenn, 126–8, 136, 203, 211 Minchin, Nick as climate change sceptic, 73, 74 election strategy group, 224 on need for leadership transition, 13–14, 16, 20, 24, 222–3

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supports Family Tax Benefit rebates, 247 supports radical labour market deregulation, 77–8 mining boom, 110–13 Mitchelmore, Tony, 163 Moby-Dick (Melville), 36–8, 137–9 Murray-Darling Basin policy, 189–90 national debt retirement, 110 negative campaigning, 182–3, 201–4, 210–12 Nelson, Brendan, 20 ‘New Leadership’ slogan, 242 New South Wales 2007 election, 181–4 Newspoll, 7, 12, 22, 33–4, 49, 148, 152, 162–3, 204, 207, 213, 225, 242 Nielsen poll, 22–3, 49, 144, 148, 150, 152, 162–3, 177, 183, 204, 208, 218, 243, 251, 265 Northern territory intervention, 200, 219, 224 Norway, 112 nuclear energy inquiry, 188–9, 204–5 numbers men, 166–7 Nutt, Tony, 8, 211–12 Obama, Barack, 186–97 opinion polls; see also focus groups; Newspoll; Nielsen poll before 2007 election, 148 ANZUS alliance, 47 Australians’ view of America, 46 Beazley’s approval ratings, 149–52, 162–5 cause Howard’s mood swings, 7–8 Costello’s approval rating, 23

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on effectiveness of anti-Work Choices advertising, 99–100 Howard’s approval ratings, 22, 49, 151, 162, 218 on Howard’s truthfulness, 39, 136 impact on political parties, 33–4, 37 Iraq war, 46, 48 Labor Party leadership, 151–2 parties’ relative standing, 7, 22, 148, 185, 199–200, 204, 213 Rudd’s approval rating, 144, 177, 185, 211, 213, 218 tracking polling, 254 Pacific Solution, 150 political advertising, by governments, 100–2, 232–3 power intoxication, 119–21 ‘primate model of ruling’, 120 privatisation, 56 Queensland 2006 election, 162 race baiting, 258 Ramsey, Alan, 35 Ray, Robert, 146–7, 154, 228–9, 254 reconciliation with Aboriginal people, 239–40 Regional Partnerships Program, 247–8, 257 Rein, Therese, 202, 210 Reserve Bank, 114–15, 251–3, 255 retirement; see also leadership transition (Howard to Costello) by political leaders, 119–21 Ridout, Heather, 232 Robb, Andrew on role of ‘Howard’s battlers’, 93

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Index seeks Howard’s retirement, 29, 31–4 Robertson, John ‘Robbo’, 151 Roosters, 155, 165–6, 169 Rudd, Kevin, 161 announces leadership challenge, 167–8 approval rating in polls, 144, 177, 185, 211, 213, 218 Bowen as numbers man for, 166–7 builds media profile, 153 chooses own front bench, 145–6, 169–70 on climate change, 171–2 courtship of the Left, 159–62 as ‘economic conservative’, 175–7, 182, 253–6, 259 electoral strategy, 2–4 embraces ‘working families’ slogan, 173–5 failed leadership bid, 143–5 gives speech in Mandarin, 10 leadership deal with Gillard, 156–61 marketing of, 172–3, 175–7 policy me-tooism, 214, 239 policy priorities, 171–2 rehearses election debate, 228–9 reinforces claim to leadership, 151–2 relations with Labor Party factions, 144–7 response to negative personal attacks, 201–4, 210–13 truthfulness queried, 201–2 wins leadership ballot, 168, 170 Ruddock, Philip, 20–1, 24 Scores strip club story, 203, 211–13 Senate, Coalition control, 50–2 Shanahan, Dennis, 25

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Shergold Inquiry, 189, 200 Shorten, Bill, 144 Sinodinos, Arthur, 7–8, 54, 56, 63, 74, 135, 186, 222, 264 Snowdon, Warren, 203 Svigos, George, 149 Swan, Wayne, viii, 144–5, 169–70, 268 Switkowski, Ziggy, 189 Tampa incident, 219 Tanner, Lindsay, 169, 213 Tasmanian pulp mill decision, 239 tax cuts, 197–8, 224 tax rebates, 224, 244–7 Textor, Mark, 1, 136, 185, 191, 217–22, 226–7, 250, 261 Thatcher-Reagan revolution, 55 ‘Tracy advertisement’, 97–8, 191 Treasury, 105–6 Tuckey, Wilson, 222 Turnbull, Malcolm election night commiserations, 263–4 ‘greenhouse grants’ to households, 245–6 Murray-Darling proposal, 189–90 seeks Howard’s retirement, 22, 23, 216–18, 221–2, 227 Tasmanian pulp mill decision, 239 urges Kyoto Protocol ratification, 47, 237–8 TV advertisements anti-Work Choices, 97–8 Government’s promotional campaigns, 100–2, 232–3 tested in focus groups, 97–8 unions; see also ACTU election expenditure, 232

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Howard’s attitude to, 57–9 US alliance, 46, 47 Vaile, Mark, 15, 73, 224, 258 van Onselen, Peter, vii water policy, 189–90 Watson, Ian, 93 wedge politics, 214 Wiessner, Aileen, 8 Work Choices ACTU’s campaign against, 52–3, 59–66, 87–90, 92–100 big business advertising campaign, 231–2 Cabinet’s consideration, 66, 77–83, 85

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EMC crafts campaign against, 92–7, 205 as factor in Coalition’s 2007 defeat, 4, 19, 102–3, 148, 184 Fairness Test, 193–6 Government’s promotional campaign, 100–2, 232–3 Howard’s ideological commitment, 56–9, 64–5, 85–7 origins, 53–5 policy name-change, 200, 205 role in NSW election, 183–4 ‘working families’ concept, 94–5 Wright, George, 59, 63 Your Rights at Work campaign, 90, 97, 190, 221

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