The Money Men by Chris Bowen

Author:Chris Bowen [Bowen, Chris]
Language: eng
Format: epub
ISBN: 9780522866612
Publisher: Melbourne University Publishing
Published: 0101-01-01T00:00:00+00:00

The 1975 Budget

Hayden became federal treasurer on 6 June 1975. He had to deliver his Budget on 19 August. Hayden’s staff recall him working in the office until midnight each night and returning early each morning with the paperwork he had taken home fully completed.14 Every treasurer is used to extremely long hours, but for Hayden, the size and urgency of the tasks at hand were particularly acute.

His most important job was to reduce the size of the deficit. Hayden was briefed on coming into office that the projected budget deficit was $4.8 billion. The new treasurer quickly communicated his preferred level of deficit, $1 billion to $1.5 billion, to Sir Frederick Wheeler, the secretary of the Treasury. Wheeler expressed misgivings that this would be too dramatic a turnaround in the public finances to realistically achieve, and that it would have too contractionary an impact, recommending instead a target of $2 billion to $2.5 billion.15 Hayden accepted this advice and informed the Cabinet of the new target. He also told them that ‘the days of imaginative big spenders were over,’16 and warned that the deficit was heading towards an amount that would cause ‘pervasive psychological shock’.17 Hayden said:

Our desire for social and economic reform through redistribution will be discredited for a decade or more. Our record as a Government will be jeered and our capacity to manage the basic affairs of the country ridiculed. If we don’t courageously and responsibly handle the present economic problems successfully, we will be seen to have wasted our chance to fulfil those promises we held out and talked about so articulately for so long.18

Hayden had briefed Whitlam prior to the Cabinet meeting, telling the prime minister that he would resign if the deficit target was not achieved. He was determined not to be a lame-duck treasurer.

In order to bring the necessary rigour to the budget process, once the deficit target was spent, Hayden convened the first Expenditure Review Committee (ERC) of the Cabinet for ministers not only to put forward spending proposals for scrutiny, but also, more relevantly, to present the case as to why their portfolios should not be subject to cuts. To give Whitlam due credit, the ERC process had been established by the prime minister while Cairns was still treasurer in order to lend more discipline to government decisions over spending. Hayden was the first treasurer to use the process to construct a Budget, and it has been used by every treasurer since.

The Cabinet members all agreed on the proposed deficit target, but many argued their own portfolio was too important to make a contribution to the savings task. Hayden formed the view that he needed to win a big, early battle on spending to signal his seriousness and establish his authority, sending a clear message that no-one was immune from the need for savings. So he decided to take on one of the biggest names of the Whitlam government. Kim Beazley Senior was a veteran of Labor’s years in opposition, and had won John Curtin’s seat of Fremantle on his death in 1945.

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