Shrewd investors will welcome new political landscape
Monday, December 3, 2007/
The average length of tenure of an Australian government is about the same as that of an average Australian marriage. Between business and elected officialdom, there is time for considerable interpenetration. When governments change, accordingly, it is like a change of spouse, full of new rules and new expectations.
Investors gave Kevin Rudd a ringing endorsement on Monday by marking up the S&P/ASX200 index 141.2 points to 6471.4 – the most decisive such market move in decades. A long period of Labor poll leadership minimised the shock, leaving just the euphoria of a new beginning.
Like any short-term response to a long-term phenomenon, markets seldom get their assessments exactly right. While the dismissal of the Whitlam government is remembered as a great political betrayal, it was a frabjous day on a stock exchange buffeted by years of bad news. Having lunched at the Melbourne Club that day, John Elliott, then the go-ahead chief of Henry Jones IXL, was among those who bustled on to the floor of the Melbourne Stock Exchange to buy with both hands.
The Fraser government, however, disappointed expectations. It failed to deliver industrial peace, and long government inquiries, such as Keith Campbell’s into the financial system and Justice Russell Fox’s into uranium mining, became the precursors to the minimal actions it took and permitted.
Disillusionment was bitter. In describing another fruitless journey to Canberra in his book Jabiluka (1994), Tony Grey (now a director of Toronto-listed global uranium miner, Mega Uranium) issues a judgement for the uranium industry that could stand in for all of business: “I left Canberra deeply disturbed. In a way I could understand Rex Connor better. He was an enemy; his position was at least declared. Now I was dealing with friends, people on the same side of the ideological divide, people supposedly trying to help.”
Sometimes, however, expectations are exceeded. The Hawke government’s election in March 1983 was greeted with considerable apprehension: the All Ordinaries Index advanced one tentative point. After all, had it not been Hawke, at the head of the Australian Council of Trade Unions, who had wrung such riches for workers in the 1970s as to push many businesses to the brink? Yet Hawke, older, wiser and more sober, turned out to harbour a pragmatic streak reminiscent of Groucho Marx: “Those are my principles. If you don’t like them, I have others.”
When the Business Round Table, a chief executive talk shop, merged with the Australian Industry Development Association in May 1983 to form the Business Council of Australia, Hawke was the guest of its inaugural meeting, acclaimed its “unique position and flavour”, and honoured it with two positions on the board of his Economic Planning Advisory Council.
Hawke’s apparent personal conversion to a belief in the efficacy of capitalism gathered him converts with remarkable speed. Just before the election, for instance, the legendary financier Sir Ian Potter wrote his son-in-law: “I know Bob Hawke, the Labor leader, quite well, but I am not too happy about some his pals, who could create a good deal of upset in the economy generally.” Deciding that Hawke’s post-election approval ratings could not be all bad, however, he wrote a friend in April 1983 that the prime minister was “probably the kind of leader Australia needs at the present time”.
Knowing the way the wind is blowing is a crucial commercial intuition, and the grandee of Australian finance suggests that political risk can be hedged like any other investment variable. In Peter Yule’s excellent biography Sir Ian Potter (2006), he emerges as the most skilful of political operators, able to assimilate changes of landscape like a veritable chameleon.
Potter was one of the chief founders and financiers of the Liberal Party – a banker to Sir Robert Menzies, a confidant of Billy McMahon, a Queen’s College contemporary of Harold Holt. But his connections on the left were robust. Whitlam had no reservations about reappointing him chairman of the Australian Industry Development Corporation aged 70, waiving the statutory retirement age of 65. He also formed abiding friendships in the public service, ranging from conservative Frederick Shedden to left-leaning “Nugget” Coombs, during a spell as private secretary to assistant treasurer Richard Casey, which enabled him to say: “I’m not anti-bureaucrat, because I used to be one.”
It is not often that business has exerted a perceptible influence on the election of a new government, but there are certainly instances of it placing pressure on an old. When the Labor caucus rounded on “the money power” 60 years ago and mooted the restrictive Banking Act, it incited a fierce response from the National Bank. In an unprecedented and still unusual step, on 13 November 1944, it issued a 600-word leaflet to all customers rebuking the government; the Bank of Adelaide and Commercial Bank of Australia followed suit.
The defeat of the Banking Act in the High Court in August 1947 upped the ante, and Labor created a rod for its own back by carrying bank nationalisation into the 1949 election campaign. The Sydney Morning Herald described the absorption of the “small army of penpushers, salesman and others” into electioneering: “It has dragged thousands of men out of their nine-to-five routine and sent them tramping the streets for hours distributing leaflets, put hundreds on soap boxes and platforms to speak for the first time in their lives.” Chifley complained bitterly about paid agents of the banks “swamping the country to canvass against Labor”; in truth it was the amateur expression of a self-interested principle.
The campaign, of course, provided useful traction for Robert Menzies’s inchoate Liberal Party. “I have a deal with Menzies that if he can hold the argument on the positive side, we bank officials can defeat Chifley and his crowd on the banking issue,” recorded National Bank chief Sir Leslie McConnan – a pact revealed in Geoffrey Blainey’s Gold and Paper (1958). And if Menzies was later seen as the embodiment of conservative senescence, his first administration was one of youthful aspiration – the average age of the 39 new Liberal members elected at the December polls was 43, and a dozen were in their 20s.
Media tycoons, of course, have always fancied their ability to influence the electoral cycle, and some campaigns have taken on an almost legendary bitterness. When Sir Frank Packer set his attack dog Alan Reid on John Gorton, the result was Australia’s first prime ministerial resignation – and also one of its most acid telegraphic exchanges.
Packer had the nerve soon after to send Gorton a peace-making telegram from his holiday home: “In the lake … stop … clean clear and exhilarating … stop … why don’t you join me, regards Frank Packer.” Gorton’s reply, contained in Ian Hancock’s He Did It His Way (2002), read: “Hard to believe description of lake accurate under the circumstances described, John Gorton.”