Background to the 1980 Cabinet records: The historical context and issues of interest
The following paper has been prepared by Dr Jim Stokes, National Archives historical consultant.
'As Malcolm Fraser continues to wend his way around the world in ever-decreasing circles looking to a third-world-war-led recovery, the loyal opposition is finding itself more and more at a loss.
Should they take a firm stand on principle? Can they find a principle on which to take a firm stand? Can they in fact even stand?'
–Mungo MacCallum, National Times, 3–9 February 1980
Internationally 1980 was a year of tension and foreboding about the future. 1979 had seen the Vietnamese invasion of Kampuchea, the Iranian revolution, the taking of American hostages in Teheran and the Soviet invasion of Afghanistan. In September 1980 Iraq invaded Iran. Some feared that Afghanistan was the first stage of a major Soviet push into the Middle East and Indian Ocean that might conceivably end in a third world war. Vietnam was seen as a Soviet surrogate potentially threatening the ASEAN states, although the Sino-Soviet split increased Australian interest in improving relations with China. The election of Margaret Thatcher as United Kingdom Prime Minister in 1979 and Ronald Reagan as United States President in November 1980 also marked the transition from the post-Vietnam détente of the later 1970s to confrontation with what Reagan branded 'the evil empire' in the early 1980s. In Australia Prime Minister Malcolm Fraser took a strongly anti-Soviet position, although his campaign to boycott the 1980 Moscow Olympic Games proved unsuccessful.
Domestically the economy was travelling reasonably well. Inflation was around 10 per cent and unemployment over 6 per cent, but these were significantly better outcomes than in some of the other major economies. The Government spoke hopefully of a coming $29 billion boom in resource projects, although Treasury warned that if this was not managed carefully there would be dangerous pressures on wages and inflation. Frequent industrial disputes and demands for wage increases beyond the inflation rate were also concerns. Oil supplies from the Middle East were still threatened by price rises and political instability and the Government tried to encourage alternative energy sources, such as coal-fired power stations.
The Fraser Government faced the electors for the third time on 18 October 1980. The campaign began with an assumption that Fraser would be returned, but a lacklustre campaign and a better than expected performance by opposition leader Bill Hayden closed the gap and three of the four national polls ended up predicting a victory for the Australian Labor Party (ALP). The ALP election platform included resource rent and capital gains taxes, a prices and incomes deal with the unions, a one-year freeze on petrol prices, and free health care for children, students and expectant mothers. The Coalition countered with tax concessions, an improved home savings grant and a promise to build the Alice Springs–Darwin railway.
In the end the Government survived a 4.2 per cent swing and won a 23-seat majority in the House of Representatives. In the Senate the balance of power passed to the five Australian Democrats and Tasmanian independent Brian Harradine. Optimists in the ALP felt that the election result positioned the party well for the 1983 election; pessimists said that the Coalition could hardly be relied on to produce such a dreadful campaign twice running. The ALP also faced the prospect of an eventual leadership change with the election of Bob Hawke to the House of Representatives.
Fraser retained the Liberal Party leadership unchallenged, but some felt that his absolute authority was starting to weaken. One sign of things to come was that Andrew Peacock, who had clashed with Fraser on a range of issues, challenged Phillip Lynch for the deputy leadership. Peacock appears to have been motivated in part by a desire to assert his claim to the succession against the rising star of the Treasurer, John Howard. Lynch, who was supported by Fraser, retained the deputy leadership by 47 votes to 35. In the new Cabinet Peacock, who had sought a domestic portfolio, moved to Industrial Relations. Tony Street replaced him at Foreign Affairs.
The battle between the economists and the big spenders continued. The economists, led strongly by Treasury, argued that the Government's top priorities must remain the fight against inflation and reduction of the Budget deficit. This could only be achieved by rigorous control of Commonwealth and state spending. Treasury also urged restraint in the growth of wages and money supply, a reduction in tariffs and an end to the policy of holding down interest rates for political reasons. The Government urged the Conciliation and Arbitration Commission to minimise wage increases, but with limited success. National Wage Case hearings increased wages by 8.7 per cent during 1980, while additional 'work value' rises of $8 to $10 per week continued to spread through the workforce.
Within the Liberal Party a small group of free market reformers was emerging, centred on John Hyde and Jim Carlton, but they still faced formidable opposition from the National Party heavyweights and the industry portfolios. Fraser himself took a cautious approach to reform and was obviously aware of the political dangers of job losses that could be attributed to tariff cuts and price rises that could be attributed to new indirect taxes.
The Government was given more room for Budget manoeuvre by a windfall revenue gain from import parity oil pricing. As the Organisation of Petroleum Exporting Countries (OPEC) raised the price of oil so the Government's coffers filled, to the extent of around $2.5 billion in 1979–80. Treasury welcomed the oil revenue as a means to reduce the Budget deficit and hence pressure on the money market. However, the Government was aware of voter concern about rising fuel prices and decided that some of the money should be given back. On 6 March Howard announced that from 1 July personal income tax would be indexed to half the rate of inflation and the dependant spouse rebate would be increased to $800. The Budget itself was brought down on 19 August, although Laurie Oakes had revealed its main points on television two days earlier. Howard forecast a deficit of around $1.5 billion, nearly half a billion lower than the previous year, and GDP growth around 3 per cent.
In December Howard briefed Cabinet on possible tax reforms. He noted that the oil levy windfall would diminish, tax avoidance was a constant problem and the Government had ruled out measures such as a resources rent tax or gold mining tax. Australia relied more heavily on personal income tax than most other advanced economies, so that a broadening of the indirect tax base was one of the few options still available. A broad-based indirect tax could be achieved by extending the existing wholesale sales tax or by introducing a general value-added tax on retail sales. An extended wholesale sales tax would be quicker and easier to implement, but it would raise less revenue and it would be more difficult to apply to services. However a value-added tax would have to include food, clothing and services to keep the percentage rate as low as possible, which would require measures to protect pensioners and others on low incomes. Cabinet appeared less than enthusiastic about new taxes.
Cabinet also grappled with pressure from Treasury and the banks to ease controls on interest rates. This was a difficult issue: a rise in interest rates would help to restrain the growth in money supply, but with housing loan rates already at 10 per cent further rises were not an attractive prospect in an election year. In July Howard told Cabinet that the more attractive interest rates being offered for semi-government loans was significantly reducing savings bank deposits, which in turn reduced the amount of money available for housing loans. The National Bank was now rejecting almost half the applications it received for housing loans. Cabinet agreed to raise housing loan rates to 10.5 per cent.
Howard took up the issue again after the election. A Treasury memorandum argued that artificially low bank interest rates were diverting funds to the non-bank sector and further fuelling growth in the money supply, while the decline in savings bank deposits and hence in funds available for loan was diverting borrowers to higher cost options such as personal loans. On 2 December the Government announced that the maximum interest rate on overdrafts of less than $100,000 would be raised from 10.5 per cent to 12.5 per cent and the maximum rate for owner-occupied home mortgages of less than $100,000 would be raised to 11.5 per cent.
The Review of Commonwealth Functions
Immediately after the election the Cabinet set up a committee led by Phillip Lynch to identify Commonwealth functions that could be reduced, abolished or transferred to the states. The committee, which came to be known as the Razor Gang, was given a wide range of possible targets. Functions suggested for sale included Commonwealth food and accommodation services, Medibank, the Commonwealth Bank, pipelines and some government factories. Functions that might be left to the states included secondary schools, regional development, repatriation hospitals, child care, aged accommodation, railways and non-national roads. Other suggestions included the abolition of the Prices Justification Tribunal and the National Capital Development Commission, merging the Special Broadcasting Service with the ABC, reintroducing tertiary fees, reducing foreign aid, consumer protection and arts funding, and confining pharmaceutical benefits to pensioners and the chronically ill. In the finest traditions of reform processes, the decisions that Cabinet finally endorsed early in 1981 were only a pale shadow of what the more ardent reformers had hoped for.
Industrial unrest was an almost constant feature of 1980. There was a long dispute over fuel deliveries in Sydney when tanker drivers employed by the oil companies attempted to stop deliveries by drivers working for distributors, even though both groups were members of the Transport Workers Union (TWU). The dispute centred on distributor Leon Laidely, who obtained an injunction under the Trade Practices Act against an agreement between the oil companies and the TWU to deny him supplies. The President of the Conciliation and Arbitration Commission, Sir John Moore, brokered a settlement in March, but the Government was concerned that this did not guarantee supplies to Laidely and urged Moore to try again. Moore was not happy about being told what to do, but he reconvened the parties and Laidely agreed to withdraw his legal action in return for a resumption of fuel supplies.
Other disputes included campaigns by Queensland power workers for a 37.5-hour week and by journalists for a pay loading for working with computers. Storemen and packers closed the wool stores for 18 weeks, Victorian meatworkers campaigned against live sheep exports, Commonwealth public servants held a series of stoppages in support of a 20 per cent wage claim and Queensland coal miners struck for 10 weeks to fight off a Tax Office assault on subsidised housing. There was also a more general campaign for a 35-hour week spearheaded by the strongest unions.
One of the more bizarre disputes stopped the construction of the Omega navigation tower in Gippsland. The Builders Labourers Federation (BLF) had originally refused to build the tower because Omega had been developed for US military aviation and was thus anti-Soviet. The work was therefore given to the Federated Ironworkers Association. However the BLF supported the Beijing-aligned faction of the Communist Party, and when the Sino-Soviet split intensified the BLF decided that it did want to build the tower and picketed the site to force the ironworkers off. The contractor was forced to close the site in April 1980 and the issue went as far as the High Court. The picket line was eventually broken in February 1981.
On 30 March Fraser was the object of a violent demonstration by the Unemployed Workers Union and others while opening a Melbourne City Mission nursing home in North Fitzroy. One demonstrator said 'Lots of people are now heavily into throwing food. There was a run on eggs at the local milk bar…'. Cabinet endorsed Fraser's view that he should have the right to move round the country freely, but it was agreed that Mrs Fraser should not accompany him on occasions where there was a possibility of violence.
1980 was a year of drama and inquiry in organised crime. The final report of the Williams Royal Commission into Drugs identified significant weaknesses in coastal surveillance and in the training and management of Customs staff. It recommended major changes to the law and better coordination between Commonwealth and state police forces. Cabinet had already decided on a cautious approach to the report, apart from confirming that the ban on cannabis would not be relaxed. 'In principle' decisions were made to adopt a national strategy on drug abuse and to establish a national system of forensic science laboratories and criminal drug intelligence centres.
On 27 January 1980 Frank Nugan, one of the founders of the Nugan Hand merchant bank, was found shot dead at Lithgow. His business partner Michael Hand later gave evidence that the bank was insolvent and had massive debts. Subsequent inquiries linked the bank to large-scale money laundering and drug trafficking. Hand, a former US soldier with links to the Central Intelligence Agency, then left the country. In September Cabinet agreed to discuss with the states the establishment of a joint Commonwealth/State judicial inquiry to investigate the activities of specific drug-related organisations. Issues of immediate concern included the findings of the two Woodward inquiries in New South Wales and the murder of drug couriers Douglas and Isobel Wilson in Victoria. The inquiry was eventually established in 1981 with Donald Stewart as Commissioner and its terms of reference were extended in 1982 to include an investigation of Nugan Hand.
In early 1980 The Bulletin ran a series of articles alleging corrupt practices by the Federated Ship Painters and Dockers Union on the waterfront and at the Williamstown naval dockyard. The union had a formidable reputation for violence, intimidation and dubious work practices: its ethos was summed up by its Federal Secretary, who said 'We catch and kill our own!' The union had been investigated by the Sweeney Royal Commission in 1974–76, although not all of Sweeney's recommendations had been adopted. The Government was not happy that the Navy and the Australian National Shipping Line (ANL) were among the organisations allegedly being fleeced by the union, and the ANL did itself no favours when one of its senior staff was reported to have told The Bulletin 'I cannot see any problem in employing criminals, when we know they are criminals'. Cabinet decided that another royal commission was necessary and Frank Costigan QC was appointed as joint Commonwealth–Victorian Royal Commissioner in September.
Australia reacted very strongly to the Soviet invasion of Afghanistan in December 1979. Fraser and Peacock said that the invasion was totally without justification, a violation of everything that the United Nations stood for and a mode of behaviour that made normal relations between nations totally impossible. A major element of Australian foreign policy during 1980 consisted of looking for ways to express our extreme displeasure at the invasion, without unduly prejudicing Australia's economic and strategic interests.
At the end of January Fraser set off for Washington and European capitals to discuss the implications of the Soviet invasion. Fraser told Cabinet all leaders shared the United States' concern about Afghanistan and there was considerable support for President Carter's call to boycott the Moscow Olympics. The United States had welcomed Australia's public support, but this support would need to be demonstrated further by increased defence cooperation and assistance, including the provision of facilities in Australia for US forces and a more active Australian defence effort in the Indian Ocean.
The campaign against the Soviet Union was advanced on a number of fronts. Firstly Australia strongly supported moves to boycott the Moscow Olympics. Australia supported a US proposal for an alternative 'free world games', to be shared between several cities. Australia's share might include hockey in Perth and shooting in Brisbane, although the Victorian government suggested Melbourne as a venue for the whole games. However expectations of major alternative events gradually diminished as it became clear that most countries would go to Moscow.
From February the Government urged the Australian Olympic Federation (AOF) not to send a team to Moscow and it also approached the controlling bodies of individual sports. In the end the hockey, shooting, yachting and equestrian teams withdrew, but the AOF decided on 23 May by six votes to five that it would send a team to Moscow. Fraser made a personal appeal to AOF members, in the course of which he is reported to have said that there might be a world war within three years. There were 120 Australian athletes competing in 17 sports who went to Moscow. The Bulletin, which had strongly opposed sending a team, predicted that they would be lucky to win 30 pieces of silver. In fact they won two gold, two silver and five bronze medals, the gold going to Michelle Ford in the women's 800 metre freestyle and to the Brooks/Kerry/Evans/Tonelli team in the men's 4 x 100 metre medley.
The Government also looked for ways to frustrate Soviet interests in Australia. Measures included inducing the Royal Agricultural Society to stop Soviet participation in the Royal Easter Show, refusing the Soviets a new embassy site in Canberra, suspending scientific and cultural collaboration, and halting Soviet cruise ship and fishing operations out of Australian ports. The fisheries decision upset the Tasmanian government, which had been looking forward to the delivery of a Russian floating dock as part of a joint fishing venture.
The most delicate decisions lay in the trade area, particularly in relation to Australia's substantial wheat and wool sales to the Soviet Union. Australia was keen to support strong US action, but concerned that it did not lose its wheat export markets. In January Cabinet decided that the US ban on wheat sales did not apply to Australia's existing 1979–80 contract. Australia also wanted assurances that other countries would not fill the gap left by an Australian ban and that the 17 million tons of US wheat withheld from the Soviet Union would not find its way into Australia's traditional markets. On 3 June Cabinet considered a US request that major grain exporters halve their exports to the Soviet Union in 1980–81. The request had not been well received by other exporters and the European Community had suggested instead that exports merely be held to 1979–80 levels, which in Australia's case was 3.9 million tonnes. Cabinet favoured the latter solution provided that all exporters adhered to it and that US wheat withheld from the Soviet Union did not distort markets elsewhere. On 18 November Cabinet agreed to maintain the 3.9 million tonne limit for 1981–82, but expressed concern about a large US contract to sell grain to China and noted that President-elect Reagan had expressed 'progressively vaguer' views on the Soviet trade embargo.
The campaign against the Soviet Union extended to the Government's new intelligence evaluation agency, the Office of National Assessments (ONA). The compulsory transfer of an ONA officer in March was followed by allegations of improper handling of classified documents and the existence of a 'soft on the Soviet Union' group of former Foreign Affairs officers at ONA. Fraser was also incensed that Hayden had used ONA material in a speech. ONA and its alleged ideological bias received major media attention and in April Fraser and the head of ONA, Bob Furlonger, gave a joint press conference to calm down the situation. The allegations were investigated by Mr Justice Woodward and by ASIO. Woodward recommended improvements in ONA procedures, but found no credible evidence that any ONA document had got into the wrong hands or that there had been any serious breach of security.
The Iran hostage crisis continued throughout 1980. Iranian militants had taken 53 American embassy staff hostage in November 1979 and a rescue attempt in April 1980 failed, with the loss of eight lives. The hostages were eventually released in January 1981. Australia found itself in a delicate position, seeking to balance support for the United States with the protection of Australia's $250 million agricultural export trade to Iran. In January 1980 a Security Council resolution calling for sanctions on all exports to Iran other than food and medical supplies was vetoed by the Soviet Union. The United States then asked other countries to apply the sanctions anyway. However Australia was not prepared to do this, fearing the loss of export markets to countries that did not apply sanctions and noting that even if western countries generally supported sanctions Iran could still obtain supplies elsewhere. The Government was very much aware that Iran had asked to buy another 400,000 tons of Australian wheat and that Australian staff were still at the embassy in Teheran
On 20 April officials from the main policy departments told Cabinet that the dispute between the United States and Iran was deadlocked by powerful domestic political imperatives on both sides. Further sanctions would harden rather than soften the Iranian position, but Australia would soon be under great pressure from the United States to apply sanctions, including on food, to demonstrate our commitment to the alliance and to head off a resort to military force. Four days later the attempted military rescue of the hostages failed and US Secretary of State Cyrus Vance resigned. The food issue remained very delicate. Australian wheat and meat provided a large part of Iranian food imports, so that any international embargo would have a disproportionate effect on Australian trade. On 25 April officials warned Cabinet of the dangers of agreeing to a US request for a food embargo. They noted that Soviet bloc countries would be likely to fill the gap, Australia's reputation in the Middle East as a reliable supplier would be damaged and that Australia had always held to the principle that food should not be used as a political weapon. They also complained that the United States had shown 'scant regard' for consultation with Australia and on occasions had made ill-defined and erratic approaches to Australia. Cabinet decided on 29 April to impose a total embargo on exports to Iran other than food and medical supplies.
In June Cabinet reviewed Australia's relations with Indonesia. Andrew Peacock reported that there were still tensions over East Timor and misunderstandings that flowed from our differing cultural backgrounds. The Australian media, and in particular Radio Australia, were resented in Jakarta as negative and inaccurate. The strength of the Indonesian government's dislike of Radio Australia was demonstrated by its refusal to renew the visa of the ABC's Jakarta correspondent Warwick Beutler, who had also serviced Radio Australia. On the Australian side there was concern about the slow implementation of the East Timor family reunion program and obstructions faced by journalists visiting Indonesia. Australian civil aid needed to be improved in quality and targeting, while defence aid was not giving Australia the access to policy makers that were hoped for. Cabinet agreed that there was no immediate panacea for improving relations, which were dependent on resolving outstanding issues relating to East Timor. It decided to continue existing initiatives and to try to increase the number of private Indonesian students coming to Australia.
Kampuchea (Cambodia) remained a difficult problem. The Vietnamese invasion in December 1978 drove Pol Pot's Khmer Rouge regime out of most of Kampuchea and established the Peoples Republic of Kampuchea under Heng Samrin. The new regime was recognised by Soviet bloc countries, but China, the ASEAN states, the United States and many other countries continued to recognise the Khmer Rouge regime, both as a mark of disapproval of the Vietnamese invasion and in the hope that a more acceptable anti-Vietnamese party might emerge in Kampuchea. The Australian Government was aware of public outrage at the atrocities committed by the Khmer Rouge, but felt that it could not break ranks with its main allies and friends. In July 1980 Cabinet confirmed that it would continue to recognise the Khmer Rouge as the government of Kampuchea and as the holder of the Kampuchean seat at the United Nations.
The issue further strained the uneasy relationship between Fraser and Peacock. In July Fraser was displeased by Peacock's public comments on Kampuchea and Peacock came close to resigning. In September Peacock told Cabinet that 'domestic revulsion' at the Khmer Rouge regime and increasing international support for Heng Samrin would make it difficult to maintain Australia's existing stance. Cabinet decided on 23 September that Australia would recognise the Khmer Rouge's credentials at the next United Nations General Assembly, but would announce publicly that this recognition was short term only and in deference to ASEAN's hopes that a more acceptable alternative government not including Pol Pot would emerge in Kampuchea. Just before the election Peacock announced that Australia would withdraw recognition from the Pol Pot government. This was eventually done on 14 February 1981.
Chinese Vice Premier Li Xiannian, who ranked third in the Chinese hierarchy, visited Australia in May 1980. Li was a powerful veteran of the party who had been close to Zhou Enlai and had a reputation for speaking frankly. This prompted a ministerial review of relations with China, which emphasised how much attitudes had changed. China was now seen as a high priority in Australia's foreign relations, due to its need for western skills and technology to further economic reform and its current hostility to the Soviet Union and Vietnam. China was also one of Australia's largest trading partners, although a four to one balance of trade in Australia's favour was a problem. Australia's policy was to further develop bilateral trade, information and cultural links, while at the same time avoiding identifying too closely with China on issues such as the Soviet Union and Vietnam. Australia would also discourage China from supporting subversive movements in South-East Asia.
The Anglo-French condominium of the New Hebrides gained independence as Vanuatu on 30 July 1980. This coincided with a brief insurrection led by Jimmy Stevens on the island of Espiritu Santo that became known as the 'Coconut War'. Cabinet was told on 17 June that the insurrection was supported by French officials and colonists and also by an American libertarian organisation known as the Phoenix Foundation. Their objective was to frustrate the independence process, in part to discourage the prospect of independence in New Caledonia. The French had vetoed the dispatch of police to Espiritu Santo, but the British had sent a company of Royal Marines to Vila as a 'calming influence'. However Vanuatu was virtually the last British territory in the South Pacific and Britain was unlikely to maintain long-term military support for the new Vanuatu government of Father Walter Lini.
By the end of June the British had made a number of concessions in return for an end to French support for the insurrection. A joint Anglo-French force secured the main town on Espiritu Santo, but Peacock told Cabinet on 15 August that it was unlikely that the British or French would take effective action against the secessionists before they withdrew from Vanuatu. In consequence the Lini government had asked Papua New Guinea (PNG) for help. On 7 August PNG had agreed to send 300 troops, two patrol boats and four aircraft to Vanuatu, but this force would require some Australian non-combat support to operate effectively. Australia was concerned that the PNG government had not fully thought through the logistical requirements of its Vanuatu force, but agreed that non-combat support would be provided. Australia's main concern was that if Vanuatu was allowed to fragment, instability might spread to the Solomons and that there would be a proliferation of small, unviable states in the South Pacific. It would also exacerbate relations with France. However the insurrection collapsed at the end of August and Stevens was imprisoned.
The Soviet invasion of Afghanistan prompted a review of defence strategy and a substantial increase in defence spending. Cabinet decided on 18 February that Australia's main objectives were the capability to independently defend our territory and direct interests and to maintain a manifestly advantageous defence capacity vis-à-vis our neighbours. Australia intended to support the United States in the Indian Ocean through increased surveillance, patrolling, visits and training, and the provision of supporting equipment and facilities. The support facilities included home-porting ships at Perth's Garden Island naval base as soon as possible and construction of the first stage of the Curtin air base at Derby. In January 1980 Fraser offered the US government base facilities for their ships in Perth and landing facilities for B52 bombers in Darwin. Guam-based B52s were already flying low-level training runs over Cape York. In June a US evaluation team visited Perth to see if it could house a carrier task force and accommodate up to 10,000 US personnel. Negotiations over B52 landing rights continued at the end of the year, although Australia was concerned that the planes should fly Indian Ocean surveillance missions rather than use Australia as a staging point en route to a Middle East war.
The strengthening of operational ties with US forces prompted some public concern that Western Australia might become a nuclear target if it hosted US weapons control systems. However, Defence Minister Jim Killen told Parliament on 25 March that as a US ally, Australia was a potential nuclear target regardless of what facilities it might be hosting. In August Killen warned Cabinet that Australia might get involved in US operations not to its liking and also that Perth could conceivably become a nuclear target. Australia had already demonstrated its wariness of open-ended commitments at the ANZUS Council meeting in February when the US military unexpectedly asked if Australia would contribute to a rapid-deployment force to counter any Soviet threat to the Middle East oil fields. The Australian response was not enthusiastic.
Major equipment decisions included approval to purchase a fourth FFG guided missile frigate from the United States and to build two more at Williamstown. Cabinet considered options for replacing the aircraft carrier Melbourne, which would reach the end of her economic life by the mid-1980s. Navy wanted a smaller carrier for helicopters and Sea Harrier short-takeoff fighters. Defence planners agreed that anti-submarine helicopters and fixed-wing tactical fighters were needed to defend Australia's sea lanes, but differed as to whether these should be land or ship based. There was also concern about concentrating the aircraft on a single carrier. Cabinet decided in principle to acquire a purpose-built carrier for helicopters, with the potential to also carry short-takeoff fighters, but deferred a decision on purchasing the fighters until 1983.
Cabinet grappled with the problem of finding a new generation of fighter planes to replace the three existing Mirage jet squadrons, two of which were still based at Butterworth in Malaysia. The choice had been narrowed in 1979 to the F-16 and F/A-18, with an inclination towards the latter because of its greater capability, although this came with a substantially larger price tag. Cabinet conceded that an immediate decision would be the more comfortable course politically, but there were disturbing reports from the United States about design problems with the F/A-18, while the F-16 design was being improved to address some of the limitations that had concerned Australia. Cabinet finally decided in 1981 to buy the F/A-18.
Agent Orange became a significant political issue. Concern had been growing that the massive use of the defoliants 2, 4, 5-T and 2, 4-D in the Vietnam war had caused major health damage to veterans and their children. In Australia the issue had been taken up by the media, Parliament and the newly-formed Vietnam Veterans Association. On 7 January 1980 the Government announced that an independent epidemiological study of Australian veterans and their children would be undertaken by the Commonwealth Institute of Health. The Vietnam Veterans Association opposed the study, demanding instead that the Government establish a judicial inquiry. In May Australian veterans launched a class action for compensation in the United States. Australian farmers, however, were concerned that agricultural use of the two pesticides might be banned. Future MHR Michael Cobb drank a glass of 2, 4, 5-T at the NSW National Party conference in June to demonstrate its safety.
The political difficulties increased during the year as it became evident that there were significant problems in designing a workable epidemiological study. Cabinet was told in December 1980 that the main study was unlikely to be completed before the end of 1982 and would cost much more than the original estimate of $2 million. The Government could abandon a local study and rely on US findings, but this would be strongly criticised. Another option would be a judicial or parliamentary inquiry, but this could be very expensive and end up merely recommending an epidemiological study. A further complication was that a veteran currently had a damages claim in the High Court and the Government had agreed not to block this by claiming the Statute of Limitations.
OPEC crude oil prices more than doubled in 1979. Prices had eased by March 1980, but OPEC was expected to restrict production to ensure that prices rose faster than inflation. In Australia oil supplies were threatened by various industrial disputes, while the Iraq–Iran war increased concerns about supplies. In addition Australian crude oil production was expected to decline from 60 per cent to 35 per cent of national needs during the 1980s. The possibility of a major war in the Middle East was also a potential threat to oil supplies.
Cabinet looked at ways to speed up the construction of coal-fired power stations to avoid the need for oil-fired stations and ensure that there was sufficient energy for new industries such as aluminium smelters. Major new coal-fired power stations had been approved in the eastern states in 1978–79, together with the Pieman hydro scheme in Tasmania. A further Commonwealth call for new schemes at the end of 1979 had produced proposals for two more coal-fired stations in New South Wales and one each in Victoria, South Australia, Western Australia and the Northern Territory. Tasmania was planning another big hydro scheme that would dam the Franklin and Lower Gordon rivers, although a protest march by 10,000 people in Hobart was a sign of conflict to come. In Queensland the promoters of the Rundle shale oil project aimed to be producing on a trial basis by 1985 and predicted that Rundle would eventually have output three times that of the North-West Shelf.
Treasury was uneasy about encouraging state demands for more loan funds and suggested that the private sector should take a larger role in power development, however, Cabinet seemed happy with the way things were going. Paul Kelly commented 'That Malcolm Fraser has assumed the mantle of Rex Connor without so much as a peep from either his own party or the ALP is testimony yet again to his pragmatism, his political skills and that well known Liberal Party trait of being able to say one thing and do another'.
Cabinet wrestled once again with the difficult problem of reducing tariff protection for the clothing, textile and footwear industry. While the general level of tariff protection had fallen significantly during the 1970s, protection for clothing, textiles and footwear had risen to rates between 50 and 80 percent. Politically the Government was between a rock and a hard place. The high level of tariffs and import quotas needed to keep Australian manufacturers operating drove up clothing costs and irritated countries in East and South-East Asia. However, the industry employed large numbers of people, many of them migrant women, in areas where there was little alternative employment. In Canberra there were divisions in both government and the bureaucracy, but Cabinet essentially decided to extend high levels of protection for another seven years.
The Government renegotiated the two airlines agreement, which gave Ansett and Trans Australia Airlines (TAA) a tightly-regulated monopoly over domestic aviation. A review in 1978 had found that the market could support only two major carriers, but recommended various reforms, including removing freight from the policy and allowing small operators onto some trunk routes. The 1980 agreement essentially maintained the two-airlines policy, but the Government did have the discretion through its control of the importation of new planes to allow other operators to expand into freight and regional operations.
The Government reiterated that Qantas was Australia's only international airline, but Ansett, which had recently been taken over by Rupert Murdoch and Sir Peter Abeles, tried hard to fly overseas. An Ansett request to fly from Townsville to Singapore was countered by a Qantas request to carry domestic passengers to Perth and Darwin with fares a third lower than those of Ansett and TAA. In the ensuing conflict a senior Ansett manager said that Qantas chairman Sir Lenox Hewitt was in his dotage. Ansett tried to buy Air Niugini, of which it already owned 11 per cent, but was blocked by the PNG government. At the end of the year Ansett and TAA were permitted to start services between Hobart and Christchurch, thus taking the two-airlines policy international.
Cabinet also decided to give further assistance to Australia's last asbestos mine at Woodsreef in New England, NSW to prevent it being closed down by its bankers at the cost of 460 jobs. The Industries Assistance Commission had recommended against assistance, but the mine's owners had sought government funding to enable it to restructure. Cabinet agreed to defer interest payments on an existing loan for a year and to give the mine a further $1 million in the form of a repayable grant.
Migrants and refugees
Migration was on the rise as the economy improved. In May Cabinet endorsed a migration target to achieve a net population gain of 250,000 over three years. There were 23,500 places allocated to refugee and special humanitarian cases for the year 1980–81. Vietnam had greatly reduced refugee departures, but there were still a quarter of a million Vietnamese refugees awaiting resettlement and as many as one million Kampucheans in Thailand or along the border. Australia was also taking Eastern European and Cuban refugees, Soviet Jews, Assyrian Christians from Iraq, and Timorese people.
The Government also grappled with the estimated 60,000 illegal immigrants already in Australia, most of them overstayed visitors or illegal entrants. Illegal immigrants were estimated to be increasing by 7,000 each year. An amnesty had been offered in 1976, but the opposition had frustrated it by telling people not to trust the Government. The Government did not have the resources to hunt down and deport all the illegal immigrants and even if it did they could access a range of processes to delay or avoid deportation. The Government was under increasing pressure from ethnic groups and the media to either offer another amnesty or adopt very generous change of status criteria. Cabinet agreed to restrict post-arrival permanent residence applications to close relatives of Australians, refugees and people who already held work permits. However, illegal immigrants who had arrived before the end of 1979 could also apply. Rigorous action would be taken to deport new illegal entrants and pre-1980 illegal immigrants who did not apply for residence by the end of 1980.
Tensions continued with Queensland and Western Australia over Indigenous issues. Aboriginal Affairs Minister Fred Chaney told Cabinet that arrangements for the Yarrabah community near Cairns represented the barest maintenance of Commonwealth policy on Indigenous self-management. The present legislation depended on Commonwealth-State cooperation, but if this broke down the Commonwealth faced the heavy cost of actually purchasing the reserves. This might in turn cause Queensland to cut off services to them. A conflict might lead to international calls to boycott the 1982 Brisbane Commonwealth Games.
In Western Australia there was a major conflict over the Noonkanbah reserve in the Kimberley. The Noonkanbah community, backed by the trade unions, strongly opposed the Western Australian government's plan to drill for oil on the reserve. The drill rig was forced to withdraw in April 1980, but in August a convoy of non-union drillers funded by the Western Australian government returned with a large police escort. There was a major confrontation, in the course of which around 50 people, including five clergymen, were arrested. The well was eventually drilled, but proved dry.
Home Affairs Minister Robert Ellicott campaigned persistently for increased sports funding. In July Cabinet rejected his proposal to set up a National Sports Aid Foundation, Treasury and Finance strongly opposing the suggestion that donations to sport might become tax deductible. Cabinet also refused to spend $12.5 million on developing international standard sports facilities, despite the fact that Australian facilities had proved embarrassingly inadequate when alternative venues for the Moscow Olympics were being considered. In November Ellicott suggested a national sports lottery, half of the proceeds being allocated to sports development. This was opposed by Treasury because it would lock in revenue to a specific purpose and it might encourage demands for revenue from the oil levy to be spent exclusively on roads. Cabinet told Ellicott to discuss the scheme with the states, while making it quite clear that it had not yet been approved.
1980 in retrospect
1980 was a year of transition, although not all the changes were readily discernible at the time. In politics potential new leaders were emerging in both the major parties and the ALP was climbing out of the trough into which it had fallen in the mid-1970s. In the Senate governments faced a new world of negotiating with the Democrats and independents. In business and finance the old world of high protection, extensive subsidies and tight government regulation was in gradual retreat, although it still had formidable defenders. In industrial relations strikes, work bans and demarcation disputes still seemed to be an inevitable part of life, but talk of a prices and incomes accord suggested at least the possibility of finding a better way of managing things. Abroad, the invasion of Afghanistan seemed to raise the confrontation between the two super powers to an even more dangerous level. Yet it also accelerated a process that would bring glasnost and a break-up of the Soviet Union. Conversely, the Australian image of China was gradually changing from that of an implacable fomenter of revolution to that of a major regional power with whom it was possible to do political and economic business.