Gough Whitlam's economic legacy

In memorialising Gough Whitlam, I think it's important to reflect on his economic legacy as well as his political and social policy ones. In an interview for The Australian's website, I explored the key economic achievements of the Whitlam years; here's the transcript.





SUBJECT/S: Gough Whitlam’s economic legacy

JACKSON HEWETT: Shadow Assistant Treasurer Andrew Leigh joins us now to reflect on the economic legacy of the Whitlam Government. Andrew Leigh - one of that government's first economic decisions was to reduce tariffs, what was the impact of that? 

ANDREW LEIGH, SHADOW ASSISTANT TREASURER: That 1973 tariff cut laid the groundwork for the 1988 and 1991 tariff cuts brought in by the Hawke Government. What was striking about the 1973 tariff cut is that it was so different from the bipartisan consensus on protectionism that had existed for many decades. That notion of protectionism all round, of McEwenism, really was costing Australian industry in a way that was hurting consumers but also stopping our firms from being internationally competitive. So it was a breath of fresh air, it shocked a lot of people, and it did a lot of good for the economy.

HEWETT: But that must have been a very radical idea for him to do in the Labor party at that time, where it was so closely tied to the workers and the good wages they were receiving in a protected environment?

LEIGH: It was incredibly radical in Australian politics. The tariff walls had largely been built up by conservatives but many in my party supported them. Gough recognised that the Labor party needed to be driven by a set of values and those values of egalitarianism weren't served well by a set of policies which doubled the price of kids school shoes and kids pajamas - items that working families needed to be able to afford. So with that pro-consumer attitude which he brought to the Trade Practices Act, he really assisted with the opening up of the Australian economy and that process then continued under Hawke and Keating. 

HEWETT: People talk about Gough as an internationalist - how important was his visit to China?

LEIGH: It was very brave, his trip to China. We've just had the condolence motions in the house and Wayne Swan referred to the fact that Gough's trip to China was planned at a time in which the scare campaigns about 'reds under the beds' were running hot. It was said by a senior conservative that Gough had been 'played like a trout' but when Nixon went to China the Australian conservatives had to eat their words. They recognised that Gough - far from making a crazy decision - had actually made a visionary one, engaging with a country which is the most populous in the world and which is a source of economic prosperity in the generation to come.

HEWETT: But of course, it was domestic economics which really was the downfall for Gough Whitlam. The problem was that he really wasn't able to keep control of the country's finances in terms of his massive spending programs. Was he unfairly criticised for the way he ran the economy, or was it fair enough, that he really didn't have a good enough eye on the nation's finances?

LEIGH: The Whitlam Government has the misfortune of taking office just before the global oil shocks. Had Whitlam won in 1969, he would have had an extra three years of easy governing at a time when unemployment was low and the global economy was easy to operate in. The Whitlam Government didn't have that luxury. The oil shocks drove up inflation and unemployment. There was so-called 'stagflation', which many macroeconomists had thought couldn't happen. They had thought there was a trade-off between inflation and unemployment and that you couldn't have them both going up together. It did confound the Whitlam Government, but let's be fair - it confounded the US Administrations of Nixon, Ford and Carter, it confounded the Callaghan Government in Britain. So with the benefit of hindsight, they made mistakes. But at the time many macro policymakers were at a loss as to how to handle stagflation.

HEWETT: Do you think they should have radically cut some of the programs that they had implemented? Might that have got them through? 

LEIGH: In looking back you can certainly see that the Whitlam Government should have hewn more to the global circumstances. The Khemlani Loans Affair, for example, is not something that is going to be well regarded in hindsight. But let's be honest too - for all the errors that Whitlam made, that greatest was his appointment of Kerr. That stands above all else as being a mistake of Whitlam, but of course also an error in Kerr himself.

HEWETT: But in some ways do you think perhaps that the strongly reformist and strong focus on macroeconomics of the Hawke-Keating years was a direct result of the fact that Whitlam's downfall was brought about by his seeming inability to manage the economy?

LEIGH: There was a strong awareness of that. Both Hawke and Keating have spoken about the influence that Whitlam had on them, wanting to be captured by the passion and the desire for Australia to be an even better nation than it had been to date. But also at the same time, a recognition that the Whitlam Government were not regarded as stellar economic managers and that if Labor were to govern for a long period - for a 13-year period rather than a three year period - it had to have economic discipline at its core.

HEWETT: Andrew Leigh, thank you very much.



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