1979 Cabinet records: The historical context and issues of interest

The following paper was prepared by Dr Jim Stokes, National Archives historical consultant.

‘You must have noticed that there is concern over the image of our Prime Minister. He is showing up as insufficiently jolly, friendly and lovable. Earlier Prime Ministers such as Stanley Bruce and RG Menzies rather enjoyed being detested, but apparently this outlook is no longer acceptable in the electronic 70s.’ Keith Dunstan, The Bulletin, 13 March 1979

‘There are far too many people who believe you can have low taxation and high government spending.’ John Howard, Treasurer, The Bulletin, 29 May 1979

The Government

Prince Charles and the Frasers
His Royal Highness the Prince of Wales with Prime Minister and Mrs Fraser (A8746, KN3/4/79/7)

The year 1979 was the middle year of the second term of the Fraser Government. Fraser had a comfortable majority in the House of Representatives and control of the Senate, but the opinion polls were less encouraging. A Morgan Gallup poll held in November 1979 gave Bill Hayden’s Australian Labor Party (ALP) 48 per cent of the vote, the Government parties 43 per cent and the Australian Democrats 5 per cent. Fraser’s approval rating was only 35 per cent, with Hayden at 43 per cent. A potential rival to both Fraser and Hayden appeared in October 1979, when Bob Hawke made his long-awaited move into federal politics by winning ALP preselection for the Melbourne seat of Wills.

In Cabinet, the National Party leadership group of Doug Anthony (Deputy Prime Minister and Minister for Trade and Resources), Ian Sinclair (Primary Industry) and Peter Nixon (Transport) were close to Fraser and tenacious advocates for their constituencies. John Howard in Treasury and Eric Robinson in Finance were equally tenacious advocates of budgetary restraint and fiscal reform. Indeed, the Finance response to spending proposals of ‘cut it, postpone it or scrap it’ became so standard that the Cabinet Office hardly needed to ask for Finance’s comments on submissions. One of the economists’ main targets was the big-spending Social Security portfolio, although its minister, Senator Margaret Guilfoyle, proved a substantial antagonist. Phillip Lynch in Industry and Commerce also had to navigate industry’s desire for continued support and tariff protection and Treasury’s desire for tariff reform and a freer economy. Tony Street in Industrial Relations had a challenging year as the Government battled with industrial strife and wages breakouts.

Two ministers resigned during 1979. Eric Robinson resigned in February, apparently over concerns about Fraser’s dominant leadership style; he was persuaded to resume his portfolio four days later. Ian Sinclair resigned in September after an investigation of his family companies commissioned by the New South Wales Attorney-General. He returned to the ministry in August 1980 after being cleared of all charges against him. Fraser was incensed by what he saw as the injustice of misconduct allegations being dealt with by an ‘inquisitorial body’ rather than by ordinary criminal or civil processes, thus prejudicing the right of the person accused to a fair trial. Cabinet considered but rejected setting up a joint Commonwealth/State inquiry into principles and procedures to be followed by inquiries involving the conduct of persons.

In November, Fraser contracted pleurisy and pneumonia and was ill for several weeks. His recovery was not helped by having to attend a meeting of the Victorian state council of the Liberal Party to argue – successfully – against a proposal to run a Liberal candidate against Peter Nixon in the seat of Gippsland. Fraser marked his return to work with a ministerial reshuffle on 8 December; among the changes were Peter Nixon moving to Primary Industry, Ralph Hunt to Transport, Michael MacKellar to Health, and Ian MacPhee to Immigration.

Finance and the Budget

In the early months of 1979, Treasury and Finance mounted their annual campaign to keep the Budget deficit within reasonable limits. Eric Robinson told Cabinet on 13 March that the Government must either cut expenditure or face a permanent increase in taxation. If the Government chose the latter option it would have to abandon tax indexation and also its fundamental objective of a significant reduction in the size of government. John Howard’s main concerns were rising inflation and an excessive growth in money supply. The 1978–79 Budget had predicted inflation would fall to 5 per cent by mid-1979, but it was in fact running at more than 9 per cent. The growth in money supply had been predicted to fall within the 6 to 8 per cent range, but it was running at nearly 12 per cent in mid-1979.

Howard tried once again to convince Cabinet of the need for a broad-based consumption tax. He pointed out that by the standards of other advanced economies Australia depended heavily on income tax, the percentage of tax revenue derived from personal income tax having risen from 35.6 per cent in 1960 to 55.7 per cent in 1978. Australia’s indirect tax base was too narrow, with about 80 per cent of the revenue coming from the four main categories of goods subject to excise and the sales tax on motor vehicles and parts. The Commissioner of Taxation had considered both a value-added tax and a retail turnover tax, but preferred the latter as being simpler. However, Cabinet was not persuaded of the need for either tax.

On 24 May the Government got some of the Budget bad news out of the way by announcing various measures to reduce the deficit, including postponing the reintroduction of full tax indexation and removing the Commonwealth rebate for medical bills of less than $20. The Budget itself was brought down on 21 August, predicting a deficit of around $2.2 billion, compared with an actual deficit of nearly $3.5 billion for 1978–79. The 1979–80 deficit broke with recent tradition by actually coming in slightly below estimate, aided by revenue from higher oil prices. The unemployment rate also fell, from 7.1 per cent in December 1978 to 5.4 per cent in November 1979, although it was to climb again in 1980. Good news in the Budget included the lifting of the personal income tax surcharge from 1 December and a return to six-monthly adjustment of pensions and benefits in line with changes in the Consumer Price Index (CPI). The 1978 Budget had reduced CPI adjustments to once a year as a savings measure. This had incensed Tasmanian House of Representatives members Michael Hodgman and Bruce Goodluck, who attempted in February 1979 to introduce a private member’s bill to restore six-monthly adjustments.

Budget restraint extended even to the Justices of the High Court, who were due to move to Canberra in 1980. In May, Cabinet considered a request from the Chief Justice, Sir Garfield Barwick, for an official residence in Canberra of a style and location appropriate to his office. This would enable him to exchange hospitality with the diplomatic corps and leading citizens. Sir Garfield expressed a preference for a large, homestead style of residence located outside the city limits. Cabinet, however, was not disposed to build him any sort of residence. In December, Cabinet pondered the fact that none of the existing Justices, other than Sir Garfield, proposed to actually live in Canberra. In consequence they looked to the Commonwealth to pay travel expenses for themselves and their spouses whenever they visited Canberra and to maintain chambers for them in their home cities. Cabinet agreed that all future Justices would be appointed on the understanding that they were based in Canberra. Existing Justices would not be provided with chambers in their home cities, but the Commonwealth would pay their travel expenses.

Industrial disputes and wages policy

Public servants demonstrate
Public servants demonstrate about the Commonwealth Employees (Redeployment and Retirement) legislation, Civic Square, Canberra (A6135, K30/7/79/39)

The year 1979 was notable for a series of disruptive industrial disputes. Most of these were due at least in part to tension between the Government’s desire to fight inflation by minimising wage increases and the unions’ desire to achieve full CPI-indexed increases, if possible supplemented by additional ‘work value’ increases. The Conciliation and Arbitration Commission found itself stranded unhappily between the two camps. It granted full CPI-based increases in December 1978 and June 1979, but in its June decision said that it was on the brink of abandoning indexation because the major players were not committed to it. In the Commission’s view, the unions wanted indexation without restraints and the Government wanted restraints without indexation, while many employers agreed to increases beyond indexation to buy themselves industrial peace. Discussions between the main players during the second half of 1979 failed to reach consensus.

The longest dispute was at Kurnell oil refinery in Sydney and originated in bitter rivalry between the New South Wales and federal branches of the Australian Workers’ Union (AWU). The latter had succeeded in having New South Wales oil workers transferred to a federal award in 1976, but workers at Kurnell imposed bans in January 1979 in support of a return to more generous state coverage. In June the workers voted to strike, with AWU state secretary Charlie Oliver saying that nuclear energy would be available in Australia before Kurnell would be allowed to reopen. However, crisis talks produced a compromise under which the federal award was suspended for three months. The truce remained an uneasy one, but in December it was agreed to legislate for joint sittings of federal and state industrial tribunals dealing with oil industry issues.

In April truck owner–drivers mounted a nine-day blockade of the Hume Highway at Picton Razorback. The drivers’ spokesman Ted ‘Greendog’ Stevens achieved national prominence. The drivers’ demands included higher freight rates, the abolition of road tax and an end to compulsory union membership. Cabinet decided on 9 April that the blockade was deplorable but that it was a problem for the New South Wales Government to fix. The Commonwealth might assist with technical resources, as long at it was indemnified.

The Commonwealth’s own employees were also restless. In May, Australia Post and Telecom unions submitted a 20 per cent wage claim and in June the unions imposed a range of bans and limitations. In July, Commonwealth public servants refused to handle ministerial correspondence in protest against the Commonwealth Employees (Redeployment and Retirement) Act 1979. These campaigns led to the proclamation of the Commonwealth Employees (Employment Provisions) Act 1977 on 13 July, giving the Government the power to stand down employees who imposed work bans or who could not be gainfully employed because of work bans. However, the Government continued to use other legal options to apply stand-downs and ended payroll deduction of union dues for Commonwealth employees. The disputes ground on through the arbitration process for the rest of the year.

At times, industrial disputes encroached on foreign policy. In Sydney airport workers stranded a Malaysian Airlines DC10 for nine days in March in protest against Malaysia’s arrest of unionists. The Government saw this as a serious threat to relations with Malaysia and arranged for the plane to refuel at Richmond RAAF base. In Western Australia employees of Hamersley Iron struck in support of a 40 per cent wage increase. The situation was complicated by the arrest of unionists for attending an ‘unlawful assembly’ at Karratha on 11 June, and unions twice threatened a three-day national blockade of Western Australia. The dispute caused Japan, China and South Korea to question Australia’s reliability as a supplier of iron ore.

The Government struggled not only to deal with the immediate consequences of these upheavals but also to find legislative ways of discouraging them. In February, Cabinet considered a range of options to encourage or compel the Conciliation and Arbitration Commission to give more weight to the economic consequences of its wage decisions. The options included seeking ‘a more balanced mix of expertise’ in appointments to the Commission, a statutory ceiling on wage increases, and a Commonwealth takeover of State wage-fixing powers by either referral or referendum. In April, Tony Street suggested a number of possible options, including a media campaign against ‘irresponsible’ union actions and pressure on the Commission to order secret ballots of strikers, insert ‘bans clauses’ in awards and refuse to hear cases while industrial action continued. The Government should also press employers to resist wage claims and to stand down employees affected by strikes. Cabinet was particularly concerned that in two recent settlements builders’ labourers had induced employers to reimburse their members for wages lost while they were on strike. Cabinet decided that this practice amounted to ‘extremist industrial roguery’ and must be resisted in every way possible.

In June the Government suggested to the State premiers that they might refer their industrial relations powers to the Commonwealth for a trial period. The only issue agreed upon by the end of 1979 was that there should be legislation for joint sittings of Commonwealth and State industrial tribunals. Nor did the Commonwealth see some of the State governments as reliable allies in the battle to control wages: in March Cabinet attacked the New South Wales Government’s ‘irresponsible’ decision to grant electricity workers a 37.5-hour week, with the prospect of a further reduction to 35 hours.

Foreign affairs and defence

Fraser in Lusaka, Zambia
Malcolm Fraser and Commonwealth Secretary General Shridath (‘Sonny’) Ramphal at the Commonwealth Heads of Government Meeting, Lusaka, Zambia (A6135, K6/6/79/35)

Australian foreign policy concerns in 1979 were dominated by events in Indo-China, Zimbabwe and Iran. Vietnam had invaded Kampuchea (Cambodia) on 25 December 1978 and the Pol Pot regime collapsed rapidly. China showed its displeasure by attacking northern Vietnam on 17 February, but withdrew again in March. Australia continued to recognise the Pol Pot regime, not because of any regard for it, but because it feared the regional influence of an expanded Vietnam backed by the Soviet Union. It also wanted to keep in step with China and the Association of Southeast Asian Nations (ASEAN) countries on the issue. Australia was concerned at the ‘apparent lack of United States’ willingness or capacity to be involved’ in the region and was determined to maintain a dialogue with both the Soviet Union and China, avoiding the adoption of a ‘moralistic attitude’ with China over its incursion into Vietnam.

Australia’s relations with ASEAN countries could also be sensitive. Australia’s attempt in 1978 to gain cheaper international airfares by restructuring services and pricing was received by ASEAN with a level of hostility apparently not foreseen by the Department of Transport. Singapore was particularly incensed by a proposal to reduce Singapore Airlines’ flights to Australia. By early 1979 ASEAN was threatening to retaliate against Qantas and Australian exports generally. ASEAN economic ministers complained that the Australian proposals were ‘a manifestation of the tendency of developed countries to change the rules as soon as the developing countries have mastered their old rules and overcome the obstruction posed by them’. ASEAN members demanded that their airlines be allowed to participate in the new low fares between Australia and Europe, regardless of whether passengers made a stopover in an ASEAN country. They opposed any cut in ASEAN airlines’ access to Australia and in fact wanted increased access for countries other than Singapore. Australia gave sufficient ground for agreement to be reached in October 1979.

Indonesia remained sensitive about East Timor.  On 5 November Cabinet was told that 200,000 East Timorese needed urgent food and medical aid and many more were malnourished. Indonesia was unhappy about Australian media coverage of East Timor, and Foreign Minister Mochtar had given the Australian embassy in Jakarta a dressing-down over what he called ‘sensational’ reporting, complaining that Australia was ‘noisy and sanctimonious’. Cabinet agreed to provide an extra $2 million in aid, although Finance tried to reduce this to $1 million and to have it taken from existing aid allocations. Treasury was unhappy about making public donations for relief in East Timor and Kampuchea tax deductible. Cabinet decided that aid should be channelled through the Red Cross, which had good relations with Jakarta, rather than the Australian Council for Overseas Aid, which Jakarta regarded as actively pro-Fretilin.

During 1979 events in Zimbabwe moved through a series of crises towards a resolution. Fraser took a prominent role in these events, assisted by Foreign Minister Andrew Peacock and senior officials. The so-called ‘internal settlement’ reached between the Smith regime and Bishop Abel Muzorewa in 1978 was followed by an election in April 1979 which made Muzorewa prime minister. However, the army, police, judiciary and civil service remained under white control and the new government was disowned by the Patriotic Front of Robert Mugabe and Joshua Nkomo, which continued to wage war against it. It was also condemned by the United Nations and the Commonwealth Secretary-General Sonny Ramphal. The situation was further complicated by the election of the Thatcher Government in May, raising the prospect that Britain would recognise the Muzorewa Government and end trade sanctions against it. This would split the Commonwealth Heads of Government Meeting to be held in Lusaka in the first week of August and threaten the survival of the Commonwealth itself.

Fraser undertook an intense round of personal diplomacy with Thatcher, her Foreign Secretary Lord Carrington, Jamaican Prime Minister Michael Manley and leaders of the so-called African front line states. He also visited the Nigerian leader General Obasanjo on his way to Lusaka. At Lusaka Fraser played a major part in the difficult process of finding a formula acceptable to both Britain and the African leaders, culminating in his leaking the substance of the final communiqué to the press to ensure that all leaders were locked in to it. The communiqué confirmed a commitment to genuine black majority rule, with free and fair elections and appropriate safeguards for minorities. Britain would convene a constitutional conference to advance these objectives. The conference began in London in September, and after prolonged negotiations the Lancaster House Agreement on the future of Zimbabwe was signed on 21 December. Australia had already agreed to contribute to a Commonwealth force to monitor a ceasefire in Zimbabwe.

The year 1979 was one of major upheavals in the Middle East. In January the Shah of Iran appointed Dr Shapur Baktiar as prime minister and then left the country with his family for what was described as a ‘holiday abroad’. Ayatollah Khomeini returned to Iran in February, the Baktiar Government collapsed and Iranians voted on 1 April to become an Islamic republic.  On 4 November militants seized the US Embassy in Tehran and took 53 Americans hostage; it would be over a year before they were released. Cabinet was told that the crisis posed a major dilemma for Australia. On the one hand, Australia must be seen to give the United States strong political support, which might also involve a measure of tactical military support if the United States struck against Iran. On the other hand, Iran was emerging as a major market for Australian wheat, meat and steel and was currently seeking a further 400,000 tonnes of wheat. Cabinet was concerned that if Australia became involved in a trade embargo against Iran the nation’s trading position in the whole Middle East might be threatened. It was also concerned that if the wheat sale was blocked Australians might be taken hostage. Against this there was a risk that the United States would be annoyed at Australia putting its trade interests ahead of concerted action against Iran.

Cabinet was also uneasy about the diplomatic consequences of an American punitive strike against Iran if the hostages were harmed. The use of Australian facilities for staging US forces would be unpopular in the Middle East and South-East Asia and might also provoke domestic dissent. Cabinet was particularly concerned not to involve the Cocos Islands in any military operation, since this might prejudice United Nations approval to integrate them into Australia.

On 24 December 1979 the Soviet Union invaded Afghanistan in support of its Marxist government. The invasion excited considerable media attention in Australia and the Soviet Ambassador subsequently visited Fraser’s home at Nareen in western Victoria to brief him on the Soviet position. The Government’s deep suspicion of Soviet expansion had already been demonstrated in July, when Cabinet expressed concern that a Russian cruise ship was likely to be the mother ship for the next Sydney to Hobart yacht race. Cabinet agreed that the Government would offer a ship, probably free of charge, to act as mother ship instead.

On 11 December Cabinet endorsed a strategic analysis prepared by Defence and the Office of National Assessments. The analysis found that, short of the outbreak of global war, a major assault on Australia was unlikely. However, by the year 2000, countries in South and East Asia would have developed very large concentrations of military strength. In addition, there was always the possibility of military difficulties with Indonesia. At present this possibility was remote, but if in the future Indonesia applied military pressure to Papua New Guinea, Australia might face a formidable political and military problem. Australia’s defence effort must therefore be visibly serious and competent and capable of responding effectively to low-level pressure and military attacks. It must also have the capacity for timely expansion to respond to more serious threats.

The analysis found that the ANZUS alliance remained central to Australia’s strategic interests. However, US support could not be assumed if Australia became involved in a limited regional conflict which did not threaten major US interests. In consequence, Australia’s defence effort should concentrate on building a more independent capacity to defend the nation and its direct interests. Military support for US activities in areas remote from Australia would be a lower priority.

Refugees and migration

Vietnamese refugees at Canberra airport
Vietnamese refugees arrive at Canberra airport from camps in South-East Asia (A12111, 2/1979/46A/1)

The accelerating exodus of refugees from Indo-China presented the Government with a major problem. In January Cabinet was told that there were 10,000 departures from Vietnam each month and resettlement offers were quite inadequate. ASEAN countries were considering establishing an international reception centre, but Immigration Minister Michael MacKellar was concerned that ‘Under no circumstances should Australia offer to provide such a centre on its territory because as an affluent, lightly populated, migrant-receiving country, Australia could expect no assistance in resettling persons whom it might accept for first refuge.’ This was also a domestic political problem: a Morgan Gallup poll in February found that 61 per cent of Australians wanted to limit the intake of refugees and 28 per cent wanted to stop it altogether.

The refugee crisis became more acute as the year progressed. By July, departures from Vietnam were running at 50,000 per month, while many Kampucheans were trying to enter Thailand. Only 2000 refugees had actually managed to reach Australia by boat since 1975, but it was feared that ASEAN countries would start turning boats away and they would continue to Australia. On 15 May, Cabinet agreed to offer the UN High Commission on Refugees $250,000 towards the cost of a holding centre in Indonesia, with the proviso that Australia should be able to send to it refugees who had arrived in Australia. On 7 June Cabinet agreed to the drafting of legislation to allow the prosecution of the owners and crews of boats bringing refugees into Australian waters.

In July, Cabinet was warned that if the refugee problem got out of control ‘it would impose very serious strains on the unity and character of Australian society’. It could also cause a head-on collision between domestic public opinion and Australia’s foreign policy interests and remain a dominant political issue for the rest of the century. With the possibility of at least a million more people leaving Vietnam, the crisis was far beyond solution by resettlement alone. The only realistic option was to apply intense international pressure on Vietnam to stop actively encouraging the departure of people that the regime disliked. Cabinet agreed to increase Australia’s Indo-Chinese refugee intake to 14,400 for 1979–80, in part because to do any less might turn international opinion against Australia. Discreet contingency planning would be undertaken to handle an influx of direct refugee arrivals, including using the Darwin quarantine station as a holding centre.

In anticipation of refugee issues being raised at the Commonwealth Heads of Government Meeting (CHOGM), Cabinet endorsed a confidential statement of Australia’s policy. The statement argued that Australia had to strike a difficult balance between humanitarian obligations and its capacity to absorb refugees. This was complicated by the erroneous view that Australia was a country of limitless space and potential and the fact that some refugees lacked the personal characteristics and qualifications expected of other migrants. The best solution to the refugee question was to address the problems in countries of origin that were driving people to become refugees, although this was far from easy. In addition to Indo-Chinese refugees there was already massive displacement of people in Africa through conflict and hunger and the prospect of an exodus of Europeans and Asians from Rhodesia (now Zimbabwe). An influx of white Rhodesians might cause political division in Australia.

The refugee issue influenced migration policy generally. Cabinet decided on 20 August to maintain its migration target of a net annual gain of 70,000 migrants. MacKellar told Cabinet that there were compelling reasons to encourage population growth, despite economic constraints. The birth rate had fallen steadily since 1971 and was now below replacement level. Overseas experience suggested that measures to increase fertility were unlikely to succeed. There would be continued pressure for Australia to accept more refugees, particularly from Indo-China and Eastern Europe, and the ‘significant public disquiet’ about the scale of refugee migration could be borne more easily if it was seen to be balanced by a substantial migration from ‘traditional’ sources.

Security and law enforcement

Appointment of first AFP Commmissioner
Appointment of the first Commissioner of the Australian Federal Police – Sir Colin Woods (left) receives congratulations from Deputy Commissioner Reg Kennedy (formerly Commissioner of the ACT Police) and Assistant Commissioner Don Davies (formerly Deputy Commissioner of the Commonwealth Police) (A6180, 11/9/79/10)

Cabinet was briefed from time to time on possible threats to Australia. In January the Australian Security Intelligence Organisation (ASIO) delivered a comprehensive assessment of countries and organisations it saw as having potential for terrorism, espionage or at least disruptive activities. They included the various domestic communist and radical socialist groups, the intelligence services of the Soviet Union, Eastern Europe and China, and tensions within émigré communities.  There was also a continuing threat of harassment and violence from the Ananda Marga sect. Anarchist groups were a less serious threat because of their ideological rejection of effective organisation.

ASIO saw the most serious potential terrorist threat as coming from the Palestinians and their supporters. Al Fatah and the Popular Front for the Liberation of Palestine were established in Australia and, in 1977, 43 Arab volunteers had gone to Libya ostensibly to celebrate the anniversary of the Libyan revolution. However, when they arrived they were told they had been selected to serve in the Libyan army. They underwent basic training, but most returned to Australia disillusioned. In October, ASIO told Cabinet that the likelihood of Australia being used as a base for a terrorist attack abroad had increased. Israeli, Egyptian and US establishments and supporters in Australia might also be targets. However, ASIO conceded that of an Arab émigré population of around 150,000 in Australia, only about 40 or 50 people were assessed as willing to support a terrorist operation.

Commonwealth organisations to fight crime and terrorism were strengthened. On 3 May Cabinet decided to establish a specialist counter-terrorism assault team, to be developed by Defence in association with the Special Air Service regiment based in Western Australia. The danger of a high-risk siege or hijack terrorist incident in Australia was low, but existing police and Defence personnel could not be expected to deal with such an incident on an ad hoc basis. In addition, the very existence of a specialised team might be a deterrent. On 19 October, the Australian Federal Police, combining the former Commonwealth and ACT police forces, came into being. On 6 November, Cabinet accepted the major recommendation of a report by Justice Edward Williams’ Royal Commission into Drugs that the Narcotics Bureau should be abolished and its functions taken over by the Bureau of Customs and the Australian Federal Police. The report had found that the Narcotics Bureau was too small, had an inadequate legislative base and could not operate as an effective police agency from within a public service framework. In December, Cabinet confirmed that ASIO headquarters would move from Melbourne to Canberra and agreed that they would be located next to the Defence headquarters at Russell. Defence was not happy about the Russell site, arguing that it would suggest to the ignorant public a closer relationship between the two organisations than in fact existed. It would also make it easier for hostile demonstrators to target both organisations at the same time.

Support for industry

On 6 March, Fraser tabled the report of a study group on structural adjustment led by economist Sir John Crawford. The report concluded that higher levels of economic growth and employment could only be achieved if manufacturers became more competitive both at home and abroad. Substantial Government assistance would be needed to encourage exports, to make industry more capital and skill intensive and to develop large-scale resource projects. The report held out hopes of tariff reductions in the long term, but opposed the immediate introduction of a program to reduce tariffs. 
The Government was not enthusiastic about a report centred on increased government spending and involvement in industry, although it endorsed the report’s broad directions. Opposition Leader Bill Hayden was more enthusiastic, calling the report a ‘general blueprint for action’ and criticising the Government’s ‘quaint but totally unjustifiable faith that market forces will right it all’.

Cabinet did share Crawford’s caution about reducing tariffs. A decision on 1 June produced the following masterpiece of gradualism: ‘The Committee … agreed to indicate a disposition that the Government give a commitment to begin a general program of gradually reducing long-term protection.’ Even this was to be phased in over time, in accordance with employment prospects and the capacity of industry and the economy to adjust.

The basic problem was that general statements of intent on reducing industry protection tended to founder on the political and economic realities of specific industries. In October 1979, the Industries Assistance Commission advised that even with a 57.5 per cent tariff on imported vehicles, import quotas would be needed to meet the Government’s target of reserving 80 per cent of the passenger car market for Australian manufacturers. Cabinet decided to limit imports to 95,000 vehicles in 1980 and to immediately advise Japan of this decision.

In December, Cabinet considered the future of support for publishing. An Industries Assistance Commission report had found that the existing measures were so cumbersome and inequitable that they amounted to a misdirection of public funds. These measures included Literature Board grants, Public Lending Right payments, copyright protection, bounty payments to printers and substantial postal concessions. Treasury and Finance argued that the best solution would be to abolish them all, but Cabinet decided to retain them, subject to a review of funding for the publication of research results.

Even the Queen was not exempt from tariffs. On 29 August, Cabinet noted a complaint that imported photographs of the Queen were subject to duty and sales tax. Cabinet decided to take no action, since Australian-made prints of the Queen were readily available and the removal of taxes on the imported photographs would have required an Industries Assistance Commission inquiry and legislation.

Energy policy

Ranger uranium mine, Jabiru
Truck and heavy mining equipment, Ranger uranium mine, Jabiru, Northern Territory (A6135, K21/12/79/27)

Energy issues in 1979 were dominated by the ‘second oil shock’ precipitated by the revolution in Iran. Cuts in Iranian supplies, production limits set by other members of the Organization of the Petroleum Exporting Countries (OPEC), panic stockpiling and an increase of around 250 per cent in the price of crude oil created an atmosphere of crisis. The situation in Australia was complicated by technical problems, distribution constraints and industrial upheavals in the oil industry. On 26 June, Cabinet approved a range of measures to reduce dependence on imported oil. These included a reduction in fuel octane ratings, suspension of the introduction of tougher standards on lead additives and vehicle emissions, encouragement of the use of LPG and the development of more fuel-efficient vehicles. The natural gas pipeline grid would be extended to connect both the Bass Strait and Cooper Basin (South Australia) gas fields with the major cities. Meanwhile, Victoria was investigating ways to turn brown coal into oil.

On 25 September, Cabinet considered recommendations for the further development of coal-generated electricity in Australia, in conjunction with encouraging other countries to relocate their energy-intensive industries to Australia. Coal was seen as the most reliable energy source on both cost and security grounds. The Loan Council had already approved funding for five new coal-fired power stations in Victoria, New South Wales and Queensland, together with hydro-electric projects in Tasmania, the electrification of the Brisbane suburban rail system and power supplies for the Portland aluminium smelter in Victoria. Funding had also been sought for the Bayswater (NSW) and Port Augusta (SA) coal-fired power stations. On 5 November Cabinet decided to ask the States to reassess their projected needs for electricity and to submit proposals for additional projects if they wished to. In December, Cabinet agreed to support in principle the electrification of the Melbourne–Sydney railway.

The coal industry made a determined effort to get rid of the export duty imposed by the Whitlam Government. The Fraser Government had announced in 1976 that the duty would be removed in 1979, but the budgetary situation precluded this. Trade and Resources Minister Doug Anthony argued that the present duty of $3.50 per ton for coking coal and $1.00 per ton for other grades of coal discouraged investment in new mines. He recommended that the Government exempt all existing underground mines and all new mines from the duty and also announce its intention to remove the duty altogether when practicable. Treasury was ‘highly sceptical’ of the need to exempt all new mines. In May, Cabinet decided to maintain the existing duty indefinitely, but in July Anthony induced Cabinet to halve the duty for underground mines. In October, the duty was reduced to $1.00 per tonne for coal from open cut mines deeper than 60 metres.

It was a relatively quiet year for the issue of uranium. In January, Cabinet approved the start of construction work at the Ranger mine in the Northern Territory; the Commonwealth sold its 50 per cent share in Ranger to Peko-Wallsend in December 1979. In March, Cabinet approved the development of Queensland Mines’ small Nabarlek deposit in Arnhem Land and the Yeelirrie deposit in Western Australia. Yeelirrie forced Cabinet to reconsider the requirement for uranium mines to have at least 75 per cent Australian equity. Western Mining Corporation advised that it was unable to assume 75 per cent of the risk of the project because of its high level of debt. No suitable Australian partners could be found, and on 22 May Cabinet agreed to amend the foreign investment guidelines to require a minimum of 50 per cent Australian equity, although 75 per cent equity would still be preferred. In September, the Australian Council of Trade Unions reaffirmed its total opposition to the mining and export of uranium, but some unions continued to ignore the policy.

Health and sport

UNESCO International Year of the Child
Australian children participate in a beachside promotion for the UNESCO International Year of the Child, which was celebrated in 1979. (A8746, KN22/5/79/7)

As always, Cabinet deliberations on health policy were dominated by the problem of reconciling financial and political imperatives. The 1978 Budget had set Commonwealth medical benefits at 40 per cent of the scheduled fee, with a maximum patient contribution of $20 per service. In April 1979, Treasury and Finance reported that medical benefits were costing the Commonwealth $750 million per year and recommended that no benefits be paid for services costing less than $20. Health Minister Ralph Hunt strongly opposed cuts on the scale proposed by Treasury and Finance, but Cabinet decided to adopt them.

Health funding was made more difficult by the fact that the Australian Medical Association was pressing for an average increase of 17.4 per cent in doctors’ fees. In addition, life insurance companies and friendly societies were offering cheap health insurance to low-risk clients, leaving the Government-regulated registered health insurance organisations to cope with an increasing proportion of high-cost clients. Hunt suggested either returning to the pre-1975 system of paying Commonwealth benefits only to people with at least basic private insurance or making the registered funds more attractive by increasing Commonwealth benefits. Finance was not enthusiastic and wanted the present policy of free hospital care for the uninsured to be examined. The issue was still being considered at the end of 1979.

Cabinet considered abolishing the Pharmaceutical Benefits Scheme for the general population, but decided instead to increase the patient contribution from $2.50 to $2.75 and to try to cut costs by $20 million by removing non-essential drugs. Finance wanted to end the payment of benefits for oral contraceptives, but in the end Cabinet decided that the identification of non-essential drugs was just too difficult politically. The continued production of penicillin by Australian companies Abbott and Commonwealth Serum Laboratories was guaranteed by the provision of an annual subsidy of up
to $900,000.

Hunt also pressed Cabinet to implement some of the more controversial recommendations of a 1977 Senate report entitled Drug Problems in Australia – An Intoxicated Society? Hunt emphasised the high cost to the community of excessive alcohol and tobacco use. He wanted to strengthen the voluntary advertising code on alcohol, align and index excise rates on beer, wine and spirits, and reduce excise on low-alcohol beers by 30 per cent. He also recommended ending Commonwealth financial assistance to tobacco growers and a progressive reduction of tar levels in cigarettes. However, he encountered substantial opposition on both revenue and industry protection grounds. Primary Industry wanted continued support for tobacco growers and opposed the use of increased excises to reduce consumption. It also argued that the connection between tar and nicotine in cigarettes and health impairment had not been irrefutably proven by science. Treasury opposed the budgetary rigidity that would be introduced by a commitment to index excises. The arguments continued well into 1980.

In October, Home Affairs Minister Robert Ellicott tried to interest Cabinet in the long-term development of Australian sport. He noted that current policies were unlikely to do much to improve Australia’s prospects at the 1980 Moscow Olympics, so it would be wise to reassure athletes by an early announcement of long-term support measures. Ellicott’s scheme included the establishment of a national sports foundation to raise funds, the establishment of training institutes based on existing tertiary institutions and nearby sports facilities, and the development of sports facilities and training programs of international standard. He also suggested the establishment of a national sports lottery. Treasury and Finance complained that all this would call for a massive increase in funding and questioned the place of sport in overall Government priorities. Cabinet confined itself to agreeing to a feasibility study on the lottery and noting that the sports hall being built adjacent to Bruce Stadium in Canberra might form part of a national training centre based on the Canberra College of Advanced Education.

Education and training

During 1979 Cabinet considered a comprehensive report on education and training by a committee led by Professor Bruce Williams. Cabinet accepted Williams’ basic conclusions that the education system did not require substantial change and that future growth should be concentrated in an improved TAFE sector rather than in the university sector. University student numbers would be stabilised and universities focused more strongly on research and postgraduate work. Schools would concentrate on teaching basic skills and more attention would be given to helping students make the transition from school to the workforce.

On 23 April, Employment Minister Ian Viner briefed Cabinet on the progress of the National Employment Strategy for Aboriginal people. Eleven Community Development Employment Projects were employing more than 600 people in remote areas and more projects were planned, although growth was constrained by a lack of staff and funding. Training schemes to encourage Indigenous people into the mainstream workforce had also shown encouraging results. However, the Indigenous unemployment rate had continued to rise and in February 1979 was estimated to be more than 40 per cent of the Indigenous workforce. The Commonwealth planned a campaign to encourage employers to hire Indigenous people and to strengthen requirements for Indigenous employment in Commonwealth construction contracts.

In July, Cabinet reviewed policy on overseas tertiary students. The program for sponsored students under overseas aid funding was working well, but there were problems with the much larger intake of private students. Seventy-three per cent of private students remained in Australia as permanent residents, while the numbers and quality of students were affected by the requirement that students could only be accepted for courses not available in their home country. Cabinet agreed that students should be selected on criteria including Australian interests in their country, their academic and English language standards, and the value of their intended course to their home country. Cabinet also decided to charge private students between $1500 and $2500 per year, depending on the course they were undertaking.

The environment

Kakadu National Park
Panoramic view of Kakadu National Park, Northern Territory. The first stage of the Kakadu National Park was proclaimed by the Fraser Government in 1979. (A6135, K24/12/79/12)

The year 1979 saw a number of major decisions on the environment. In March, Cabinet agreed to proclaim the first stage of Kakadu National Park and to ban whaling within Australia’s 200-mile fishing zone. The whaling decision did not please the Western Australian Government, despite the fact that the Cheynes Beach whaling station at Albany had closed in 1978. In May, Cabinet decided to ban oil exploration on the Great Barrier Reef, at least until the results of both short and longer-term research were known. Arguments against the ban included Australia’s diminishing self-sufficiency in oil and the fact that the risk of oil spills would be minimised by the high quality of technology and supervision. However, the dispute with the Dillingham Corporation and the US Government over compensation for the 1976 decision to end sand mining on Fraser Island still dragged on.

1979 in retrospect

Australia was not always an easy country to govern in 1979. The economy was in reasonable shape and the Budget deficit under better control, but inflation was once again on the rise and unemployment was still uncomfortably high. Internationally, the always potent fear of an uncontrollable influx of refugees and concerns about Soviet ambitions in Asia gave further cause for unease. The passions aroused by the 1975 dismissal of the Whitlam Government were gradually receding, but they still tended to embitter conflict on political and industrial issues. Most worrying for the Government was the near collapse of the wage indexation system, which had been central to its attack on inflation. In Cabinet there were tensions between those who wanted more rapid progress towards smaller government and economic reform, in particular by reducing industry protection and welfare spending, and those who feared the political consequences of such changes and who were in varying degrees opposed to them ideologically. Despite the Government’s convincing win in the 1977 election, the opinion polls and the imminent arrival of Bob Hawke in federal politics suggested that victory in the 1980 election could not be assumed.

Copyright National Archives of Australia 2014