Being asked to write a chapter about Whitlam’s ‘assault on protection’ for a book commemorating the 50th anniversary of his Government, was an offer I could not refuse (in a good way). Labor’s historic victory on the 2nd of Dec ‘72 (my 23rd birthday) and Whitlam’s bold moves against The Tariff the following year not only had major implications for Australia’s economy and society, they had a big influence on my own life and career.
I had arrived in Canberra earlier that year to pursue post'-graduate study at ANU, on the advice of Brian Brogan, one of the lecturers in my Honours Year at Monash University (and a key player later in the Tariff reforms). Having been ‘conscripted’ in my second year, the desire to further postpone National Service was, I confess, a prime motivator. (I wonder how many young blokes like me ended up doing more study than otherwise thanks to Conscription?) Fortunately the Draft Board not only accepted my application, but considered two years a reasonable period to complete a Masters Degree. This allowed me to do it part-time concurrently with a full-time junior research position at the Tariff Board, which at that time was striving to build up its modelling capabilities.
Whitlam’s win at the end of the year brought an end to National Service — the best birthday present I have ever received! It also saw the Tariff Board move (literally) to the centre of Government and acquire a new lease of life as the Industries Assistance Commission (IAC). So I avoided having to don khaki, and was so taken with the transformed organisation I had fallen into, that I ended up devoting much of my working life to it and its successors.
Whitlam’s bold initiatives
I begin my chapter in the book by observing that there are few better examples of Whitlam’s idiosyncratic approach to policy-making than his efforts to bring much needed institutional transparency to industry protection policy in Australia by creating the IAC, while at the same time progressing in secret this country’s largest single reduction in import tariffs.
Whitlam ‘owned’ these dramatic and somewhat contradictory initiatives. Neither would have happened without him. Indeed an unloved Tariff Board could well have been abolished if Jim Cairns had had his way. That said, Gough didn’t dream up these reforms by himself. They were the product of a few remarkable individuals who had gained his trust: Alf Rattigan, Fred Gruen and ‘Nugget’ Coombs. All three were from outside mainstream government, which may partly explain Whitlam’s trust in them. He was perhaps understandably suspicious of the bureaucrats he’d inherited from the long-lived Coalition Government, many of whom were aligned with the McEwenist orthodoxy that Whitlam sought to destroy.
The replacement of the Tariff Board had been foreshadowed before the Election — though only in broad terms — but the 25 per cent tariff cut came as a bolt out of the blue. It was a classic instance of Whitlam’s ‘crash through or crash’ approach. The Tariff Cut was accordingly far from copybook policy-making. It is doubtful that it could have got up if it had been, given the prevailing attitudes to protection, including within his own party.
How things turned out
While the IAC gained respect and influence over time, the Tariff Cut lost much of its initial support during the economic downturn that followed the Oil Crisis a year later. The global shock could not have been anticipated. Nevertheless, it’s hard to disagree with Paul Kelly’s assessment of the 25% Tariff Cut as ‘political suicide’.
The economics are another matter. With the benefit of hindsight it is clear that the impacts on unemployment were greatly overstated (opportunistically in many cases) and longer run efficiency gains underestimated. Moreover the commonly expressed view that Whitlam’s Tariff Cut was responsible for an enduring resurgence in protection is hard to sustain. Rather, in retrospect this looks more like the product of the Fraser Government itself and how it chose to respond to special pleading from powerful industry interests. Fraser was no free trader. It is hard to imagine that there could have been greater liberalisation had the Tariff Cut not taken place. Indeed there would likely have been less.
The Hawke Government proved from the outset more amenable to protection reform. However in not venturing to undertake another ‘across the board’ liberalisation until its second term, it had learnt some important lessons about building support in advance, ‘hastening slowly’ in implementation and making special arrangements for ‘difficult’ industries like PMV and TCF. That said, Hawke had it easier than Whitlam in a number of respects, not least the lesser resistance within his own party.
Lessons for policy makers today?
Are there more general lessons from Whitlam’s ‘bold reforms’ that remain relevant today? One that has proven timeless (and borne out internationally) is the need to secure a ‘mandate’, particularly for changes that are radical and controversial. If not sought before an election - the case for the Tariff Cut - approval needs to be gained after it. That requires not only a good case, but also appearance of positive results (or at least not negative ones). Whitlam had a good case for his Tariff Cut, even if he did not use all of it. Where he fell down was in relation to the results, or at least how these were portrayed and perceived.
Are we seeing a replay?
While preparing these remarks it struck me that the Albanese Government’s recent IR legislation, passed in a hurry before Christmas, had a number of things in common with Whitlam’s tariff initiative. Like the Tariff Cut, key features of the ‘Secure jobs, better pay’ initiative involve changes that are both radical and lacking in an electoral mandate. Such a mandate remains elusive a couple of months later (by this time the Tariff Cut had gained much support). Moreover, in contrast to the Tariff Cut, the economic case is weak, despite the legislation’s title. The new ‘multi-employer bargaining’ powers for unions have been especially criticised, including by the Productivity Commission (descendant of the IAC) for their potentially detrimental impacts on jobs, productivity, inflation and ultimately real wages.
Whether Albanese’s bold initiative hurts his Government electorally will hinge on the outcomes in practice and how these are perceived. But it is relevant that Whitlam’s demise cannot be attributed to the Tariff Cut alone. Rather it reflected a broader loss of public trust resulting from the continuation of policy ‘surprises’, among which the Loans Affair was clearly the last straw. Whether the Albanese Government is destined to suffer a similar fate, therefore, may hinge — among other ‘events’ — on its own subsequent actions. That the unprecedented and controversial price controls for gas and coal came out of left field (literally?) with no real consultation or even a regulation impact statement to support them is not a good start! It gives meaning to the PM’s announcement, on the steps of Whitlam’s home no less, that “you aint seen nothing yet!”. If so, the policy area where further surprise moves would be most damaging is taxation, especially if it means reneging on election promises that few will have forgotten.