The loans affair, 1974–75 – Fact sheet 239
A plan to develop Australia’s minerals and energy resources
Reginald Francis Xavier (‘Rex’) Connor, Australia’s Minister for Minerals and Energy from 1972 to 1975, saw enormous potential for Australia to develop its considerable minerals and energy resources in a way that retained Australian control over them. With a world energy crisis and a worsening economy, Connor looked to overseas loans through non-traditional sources as the solution. The series of events that occurred as Connor pursued these loans through 1974 and 1975 became known as the 'loans affair'.
In November 1974, through a chain of personalities that included fellow minister Clyde Cameron, Adelaide businessman, Gerry Karidis, and contacts of Karidis in Hong Kong and Amsterdam, Connor was introduced to a London-based commodities trader named Tirath Khemlani. On 13 December 1974 a meeting of the Federal Executive Council gave Connor authorisation to raise loans of US$4,000 million for what was described as ‘temporary purposes’ (this allowed the decision to bypass the Loan Council). Governor-General, Sir John Kerr, was not at the meeting, but signed the minute the next day. This authority was revoked in early January, but on 28 January the Council again authorised Connor to seek loans – this time of US$2,000 million.
Connor’s negotiations with Khemlani proved fruitless. No funds were secured, but the secrecy surrounding the dealings was broken by Opposition questions in parliament. The Executive Council revoked Connor’s authority on 20 May 1975 and a special one-day parliamentary sitting was held on 9 July. In October, the Melbourne Herald published telexes showing that Connor had continued his attempts to secure the loans after his authority had been revoked. He resigned on 14 October 1975.
Several months earlier, Deputy Prime Minister and Treasurer, Jim Cairns, had also lost his front bench position due to loans-raising activities. Cairns had been approached by Melbourne businessman, George Harris, who had offered to secure loan funds for the Australian government. In March 1975, Cairns signed a letter agreeing to a 2.5% commission. Many blamed the disorganised state of Cairns’ office for his misleading statement to parliament in June that he had not authorised any such commission. When the contents of the letter became known, Whitlam dismissed Cairns from the ministry.
The loans affair embarrassed the Whitlam government and exposed it to claims of impropriety. The Malcolm Fraser-led Opposition used its numbers in the Senate to block the government’s budget legislation in an attempt to force an early general election, citing the loans affair as an example of ‘extraordinary and reprehensible’ circumstances.
Records held by the National Archives about the loans affair include departmental records and the personal papers of ministers, opposition members and public servants. A selection of these records is listed below. Commonwealth records become available once they enter the open access period.
Search the collection to identify further records relating to the loans affair. Keyword searches for items using search terms such as ‘loans affair’, ‘overseas loan raising’, ‘khemlani’, and ‘connor loans’ should identify relevant records.