Paul Keating: A Memoir

Some years after leaving the Treasury I was asked about my former minister, Paul Keating. Innocently, I said that I “had had the best of Paul Keating”. The words were hardly uttered before I realized their unintentional double entendre, and I then had to convince my interlocutor that they did not mean what he thought.

Mr Keating (I never addressed – or even spoke of – him as “Paul”) was Treasurer from March 1983 to May 1991, when (having become Labor’s longest-serving Treasurer) he resigned to contest Labor’s leadership. He had become shadow Treasurer only a fortnight before the 1983 election was called. For seven years previously he had won golden opinions from the business community in his shadow Minerals and Energy portfolio.

Keating has since criticized me personally, particularly but not only via his major contributions to books by Paul Kelly (1992) and John Edwards (1996).[1] I have dealt with some more glaring untruths in earlier Quadrant articles, Floating the Dollar: Facts and Fiction, and its follow-up, Floating the Dollar: More Facts and More Fiction.[2] During 1985-1998, in weekly columns for The Melbourne Herald, The Australian, The Sunday Telegraph and The Australian Financial Review, I addressed aspects of his performance as Treasurer and Prime Minister. In the Senate (July 1987 – February 1990) I was also critical of him as Treasurer. So far as I recall, those criticisms were analytical, as distinct from personal.

In what follows, I look back over the 18-month period when I served Keating as Secretary to the Treasury, until my resignation from that post, and from the Commonwealth Public Service, on 14 September 1984.

First, I recall the days immediately following Labor’s election on 5 March 1983. I then traverse the remainder of 1983, and the early months of 1984, up to a conversation between us in our Paris hotel on 2 May. I briefly mention two differences with him in May-June 1984 and August 1984. Finally, I discuss the nature of our parting – both the events of 15 August 1984, when I informed him of my intention to resign, and the shenanigans that followed. 

Early Days: On the Monday after the election I dictated five Notes for File[3] recording events of the previous day, beginning with a phone call from Hawke about 1.45pm and ending with a phone call from Keating around 7.30pm. Hawke, after asking how soon the Treasury could brief him on the1982-83 budget outlook, “then confirmed to me that Mr Keating would be the Treasurer in his new Government….”. That note concluded with the following paragraph (recurring, more or less identically, in its four successors): “At no time during this conversation did Mr Hawke refer to the various apparently heavily backgrounded reports in the press regarding my own future under the incoming government, nor did I seek to raise that matter with him”.

That needs a little explanation. As noted elsewhere, “as the 1983 election campaign drew to a close, and Labor’s impending victory became increasingly certain, newspaper stories began to appear predicting that one of the new government’s first actions would be my sacking”.[4] During the campaign, Craig McGregor had written that “Stone, of course, is both detested and feared by large sections of the Labor Party”, such that “when Willis was Shadow Treasurer…it was accepted that Stone would have to be moved”.[5] Edwards says that John Langmore, on Willis’s staff, believed that “there were people in the world who did wrong because they had bad beliefs, and… the worst of them, he believed, was John Stone”.[6] Similarly feverish opinions were recorded by such journalistic eminences as Michelle Grattan and Kenneth Davidson (both of The Age), Maximilian Walsh (The Bulletin) and numerous others.[7]

I had had little to do with Keating previously, although I recall sharing some convivial beers with him in May 1982 at the then Lakeside Hotel in Canberra following an Australian Mining Industry Council dinner. My attitude towards him, however, was straightforward. He was to be the Treasurer, and (should I survive all those knives aimed at my back) I would owe him the respect, the professional advice and the personal loyalty to which his office entitled him. So when, just before our Sunday meeting, he telephoned me and “indicated that he would propose to have attending that meeting Dr Peter Sheehan (Director-General, Department of Management and the Budget, Victoria) and Dr Barry Hughes (Institute of Labour Studies, Flinders University)”, and asked “whether I saw any problem in that”, I said that “I saw no problems whatsoever and that the matter of attendance for a meeting with him was one entirely for his decision”.[8] I was of course fully aware that both gentlemen were contenders for my job!

As to that, it was some time before Keating revealed his hand. Edwards says: “On Monday morning he visited the Treasury building… alone… He decided not to take John Langmore with him… [because] although Hawke and Ross Garnaut… both thought Stone should be promptly sacked as Treasury head, Keating had already decided to keep him on”.[9]

My Note for File of 10 March 1983, however, says: “Mr Keating visited the Department on the afternoon of Monday, 7 March 1983. He was accompanied by Mr Langmore…”. As to his intentions regarding myself, it concludes with a similar non-committal paragraph to that quoted earlier.

I have written elsewhere about Keating’s latter-day untruthfulness on this topic, including Dr Paula Higgins’s testimony regarding Keating’s phone call to her husband, the late Dr Chris Higgins, in Paris soon after the election, when Chris declined Keating’s offer to succeed me.[10] I can now say, from my manuscript note of 11 March 1983, that on that date Keating himself told me that he had phoned Higgins the night before and that Chris had “said immediately that he did not regard himself as qualified to head the Treasury”. In that same conversation Keating also said of Ian Castles (then heading the Department of Finance, but being touted for the Treasury by Gareth Evans) that he “was not favourably impressed”, citing Castles’s “lack of leadership qualities”.

During that conversation Keating first indicated that he would seek to retain my services, although “the job in the days ahead will be to pull you through” over the objections of some colleagues. He had two questions. First, “when this election was called, did you believe that if the then government lost, you would go?”. Second, recognizing that “our policies are different, how do you feel you could go in working for a government with such policies, with which I know you don’t agree?”. My answers were, respectively, “Certainly not”, and “I have been doing so for about the past five years!”.

Events then moved quickly. My manuscript note of 14 March records that on that date Keating took me to see the Prime Minister. Hawke said he wouldn’t “beat about the bush”, that he would “expect public servants to be able and willing to give effect to our policies”, but also that, “I don’t want sycophants”. He then asked me whether I had “any difficulty” with two questions along lines similar to Keating’s three days earlier. I said, “No, not at all”, and the conversation ended.

Two days later Cabinet (with the addition of the Minister for Finance, John Dawkins,[11] and the exclusion of all officials) discussed my position. My16 March manuscript note records Keating’s phone call conveying the outcome. Hawke had opened the discussion and “spoke along the lines he had indicated at our meeting on Monday”. Keating had supported his views. Gareth Evans (“Red” Evans, Keating called him) had asked, “Why can’t we just move Stone and put Ian Castles in his place?”; to which Hawke had replied, “Don’t be bloody stupid, Gareth. How would we go with a house mouse in charge of the Treasury?”. Bill Hayden had then “spoken up in support of Stone”. Discussion went around the table and, without giving me “a blow by blow account”, suffice to say that “there were fourteen people in the room and, in the end, you finished up in front on the numbers”.

Thus, eleven days after an election in which virtually the entire press gallery (and many Labor Party people briefing them) had been clamouring for my blood, I had great reason to be grateful to Keating. Whatever his original intentions, he had, in the end, “pulled me through”. 

John Wheeldon’s Warning: A few days after this outcome became publicly known, I had a phone call from my old friend John Wheeldon, with whom, for our first three years at Perth Modern School, I had shared a classroom.[12] John, after an arts/law degree at the University of WA, and having been “converted” to the Labor Party, in 1965 became a Senator for Western Australia. Appointed by Whitlam as Minister for Repatriation and Compensation in 1974, and then as Minister for Social Security in July 1975, he had left the Parliament in 1981 and was now an Associate Editor and chief editorial writer for The Australian. Although, since university days, we had not seen much of each other, we maintained a warm personal relationship of the enduring kind that young people fashion in their school days.

After the usual exchange of greetings, John referred to my retention as Secretary to the Treasury. He had, he said, some advice to give me, based on his Labor Party background. “John”, he said with great vehemence, “don’t you ever trust that bastard Keating!”.

This was embarrassing. While it would have been extremely interesting to draw him out further, it would obviously have been improper for me to enter into such a discussion (even with an old friend) about my new minister, and particularly so given the personal gratitude I now owed him. So, while thanking John for his concerns, I did not prolong the conversation. In retrospect, I probably should have paid more attention to this “insider’s” warning. 

“Events, Dear Boy, Events”: As Harold Macmillan rightly said, politician’s lives are chiefly dictated by “events, dear boy, events”. The same, I suggest, is broadly true of those who serve them. So what, during the next 14 months (until that Paris conversation referred to earlier) were the “events” bearing upon Keating’s and my relationship? While space does not allow a detailed account, I may list a few of them.

(1)     Keating’s Office Staff: Pre-Whitlam, Ministers’ offices were almost wholly staffed by public servants seconded to them. Under Whitlam (and continued under Malcolm Fraser) there grew up a cadre of private office staff appointed principally for their political allegiances. A 13 March Note for File records a lengthy conversation with Keating on 11 March in which, inter alia, this issue was canvassed. I stressed “the importance for his handling of the portfolio of establishing from the outset good, sensible working relationships between himself and his Private Office staff on the one hand, and the Department on the other. Without going into detail, and without wishing to denigrate in any way my former Minister, I simply put it on record, in confidence, that Mr Howard’s performance as Treasurer had, in my clear judgment, suffered from his (and even more, some of those around him) distrust of the Department, and the continued efforts to create divisions between the then Treasurer (and his Private Office) and the Department. I had personally made many attempts to rectify that situation but without, in the end, any real success whatsoever. I very much hoped that…he would not make that same error”.

Even before this, however, Keating had already told me he “was disposed to have a Treasury officer as his Principal Private Secretary, and he asked me… to let him have…two or three names”.[13] I was happy to supply, shortly thereafter, the services of Tony Cole (himself later to become Secretary to the Treasury). During our 11 March conversation he also told me that “he was currently disposed not to give Mr Langmore [who had sought it] the job” – a disposition confirmed to Langmore personally later that day.

Keating did retain Barbara Ward’s services, and on 11 March he “also told me that he was contemplating the employment….of Dr Barry Hughes…”. I said that, “although I was aware that he [Hughes] had been strongly critical of the views of the Treasury (and of myself personally) over the years”, nevertheless I thought “Hughes was a person with whom it should be possible for the Department to work….”. All in all, therefore, things were off to a good start.

(2)     The National Economic Summit: My own attitude to the proposed April 1983 National Economic Summit was one of extreme skepticism – an opinion Keating seemed largely to share. Still, it had been one of Hawke’s major election policy promises, and clearly had to be accepted. Accordingly, the Treasury pitched in with a will to prepare the technical background papers. Afterwards, my conclusion was that, whatever I might think of the economics of this national extravaganza, it had undoubtedly been a political success.

(3) Responsibility for Taxation Matters: When Hayden appointed Keating as Shadow Treasurer in early 1983 he made the seemingly inexplicable decision to leave responsibility for taxation matters in the hands of his predecessor, Ralph Willis. When, after the election, Hawke formed his new Cabinet, he (also inexplicably) transferred that responsibility, not to his new Treasurer, but to his Minister for Finance, John Dawkins (not even, then, a member of Cabinet).

One of those aforementioned Notes for File records that on 7 March I raised this matter with Keating – making the simple point that it was conceptually impossible for him to be seen publicly as “Treasurer” if responsibility for taxation matters lay elsewhere.

Dawkins (and at the bureaucratic level, I regret to say, Ian Castles) fought to hang on to the taxation responsibility. In the end, however, Hawke was persuaded by Keating’s increasingly powerful advocacy, and a revised Administrative Arrangements Order restored the function to its rightful place in the portfolio of (I judged) an appreciative Treasurer.

(4) The Americas Cup: In September 1983 Keating was to attend the annual meetings of the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (IBRD) in Washington, DC. Those meetings were preceded by a meeting of Commonwealth Finance Ministers. Keating took the view that this gathering was not worth his time, so he delegated to me the leadership of the Australian team – a mark of confidence that I appreciated.

Meanwhile the Americas Cup, where Alan Bond’s yacht was challenging the US contender, was underway in Newport, Rhode Island. As I arrived in Washington to meet Keating, Australia leveled the score at 2-all, with the fifth and deciding race to be sailed shortly.

Since the week-long IMF/IBRD meetings that year had nothing really important on their agendas, I put it to Keating that he should absent himself for a day or so, fly up to Newport, and watch the final race. Our then Ambassador to the United States, Sir Robert Cotton, to whom I confided this thought, then offered to find three places (for Keating, Tony Cole and me) on the private plane taking him to Newport. Next morning, therefore, we all found ourselves on the commodious motor launch hired by the Bond team to track the yachts around the course.

I do not know whether, before accepting my suggestion, Keating may have telephoned Hawke to tell him of his intentions. What I do know is that, for the first time in Americas Cup history, the US yacht was beaten. So after an uproarious party at the Alan Bond headquarters that evening, our not-in-the-least-guilty group flew back to Washington next morning to the tedium of the IMF/IBRD meetings.[14]

Let me pause here to offer some assessment of my relationship, up to that time, with Keating. It had been thoroughly enjoyable. As Edwards says, “he was charming, funny, intelligent, alive….”.[15] True, to quote Edwards again, “he was above all a performer….”.[16] But while always maintaining the formality that befits the relationship between Ministers and public servants, I nevertheless enjoyed his company. Meanwhile, however, more serious events had been shaping.

(5) Chairmanship of the Public Service Board: I devote some space to this episode, not only because of its intrinsic importance, but also because it shows Keating in what I regarded then (and still do) as an excellent light.

An 11-page Note for File dated 4 September 1983[17] commences: “I learned late on Friday 26 August, 1983 that on the previous Monday the Prime Minister had asked ….Sir William Cole to come to see him….What follows ….is an account of subsequent events ….pieced together from several different sources including, but by no means principally, from ….Cole himself”.

I cannot detail the long chain of events recorded both in that document and its 5-page successor dated 18 September. They began when Hawke told Cole that, when his term as Chairman of the Public Service Board expired on 1 November 1983, and although the government “and he personally had ‘no complaints’ to make about Sir William’s discharge of his duties” during the past five years, nevertheless the government would not reappoint him. He asked “whether he would be interested in appointment to (say) a departmental head position or to any statutory office”. Cole having said that “he did not think it would now be appropriate for him to move to posts of that kind”, Hawke then said that if he would be interested in appointment as High Commissioner to New Zealand, that post (shortly becoming vacant) “would be made available to him”.

On 25 August, as a Cabinet meeting was ending, the Prime Minister mentioned that “Cole’s appointment as Chairman of the Public Service Board was about to expire; that ‘it had been decided’ not to reappoint him; and that the proposal was to appoint as his successor Dr [Peter] Wilenski”. He asked “whether there were ‘any objections’ to that course”. To this, “the Treasurer…immediately said that he personally had very strong objections to the whole matter and, in particular, to the proposal to appoint Dr Wilenski”. The matter was therefore left unresolved, but later that day, in “a discussion involving the Prime Minister, the Treasurer, Peter Barron[18] from the Prime Minister’s Office and Graham Evans[19] ….the Treasurer and Barron strongly criticized the Prime Minister for both his handling of the matter and for the individual judgments concerned”. The Treasurer concentrated his own criticisms “on the supposed choice of a successor in…. Dr Wilenski”, and was “strongly supported by Peter Barron” in that regard.

“On Saturday 27 August I telephoned the Treasurer… expressing… my utter disgust both at the treatment… being accorded… Cole and, if anything even more strongly, my repulsion at the very thought of Dr Wilenski as… ‘Head of the Commonwealth Public Service’”. Keating agreed to come in to the Treasury on Sunday morning “to discuss the matter more fully”.

During that discussion “I pointed out that Sir William was a distinguished public servant who had given his life to successive governments… He had been…Director of the Bureau of Transport Economics; Commonwealth Statistician; Secretary of the Department of Finance; and finally Chairman of the Public Service Board; he had … also served many years…. in the Treasury. I had known him personally for over 25 years and I knew him to be a person of the highest character and unimpeachable integrity… I regarded [the decision not to reappoint him] as a wanton act and a disgraceful one…As to the offer… of the High Commissionership in New Zealand”, I “expressed… my profound contempt that such a position should have been offered” to him.

On Wilenski, “I said that without in any way disguising my personal contempt for Dr Wilenski …I wished to contain my comments about him within the framework of his fitness and qualifications for….appointment as Chairman of the Public Service Board… While I had no doubt that [his] appointment would be hailed as a kind of Second Coming by that small coterie of would-be politicians masquerading as public servants,….within the great bulk of the bureaucracy his appointment would be treated with shock and dismay….. As to [his] qualifications for the post…, so far as I was aware he had none”. True, he had become a department head late in the life of the Whitlam government, but only because “the then Prime Minister had by that time come to see through [him] and wanted to get rid of him from his Private Office[20].…In short, prior to his political appointment as head of the Department of Labour, [he] had done nothing (other than to ingratiate himself in powerful political quarters) to qualify him to head a major government department. His subsequent career had been all of a piece with what preceded it. He had flitted from branch to branch… [He] had absolutely no ‘track record’ as an administrator; his whole career illustrated the key point that administration simply bored him….”.

In response to all this, “the Treasurer told me that he agreed with everything I had said about Dr Wilenski, and he told me of the very low esteem in which the latter was held by the Premier of New South Wales, with whom he had discussed” the matter.

On 29 August Cole told Hawke that “he did not wish to accept” the High Commissionership, “and that he would, therefore, simply retire from the service as from 1 November next”. However, on the evening of 1 September, “the Treasurer told me that, earlier that day, Graham Evans [with whom I had met (twice) the previous day] had given the Prime Minister what the Treasurer called ‘a very good minute’ addressing the whole topic…[which] indicated that, assuming that Sir William was not to be reappointed, it was clearly vital that ….he be offered a fitting appointment instead….”. On 8 September Hawke offered, and Cole accepted, appointment to the major post of Secretary of the Department of Defence.

As for Wilenski, the outcome was much less happy. On 11 September, Keating told me that Wilenski had come to see him in Sydney two days earlier, where he “had been full of penitential self-abasement. It had been…an extended mea culpa performance. Wilenski had acknowledged that, earlier…,he had offended many people in the Public Service….(including myself)” and that, as Chairman of the Board, “he would have ‘a lot of fence-mending to do’. He expressed his sincere (sic) intention… to seek out Sir Geoffrey Yeend and myself with a view to ‘making his peace’ with us”. (As to that, “I immediately told the Treasurer that… I would as soon make peace with a cobra.…Wilenski was a destructive force in relation to those things in which I personally believed – not least, the apolitical nature of the Commonwealth Public Service”). Keating said that “he personally still felt that Wilenski’s appointment would be a mistake”, and that “he had subsequently conveyed those views…to the Prime Minister and Mr Dawkins”.

In a 17 September telephone conversation with Keating, “he confirmed that he had spoken to the Prime Minister following our last conversation” on 13 September, and told him that he “still believed that [Wilenski’s] appointment would be a grave error of judgment”. While he would “go along” with Hawke’s decision, he “reiterated his own deep sense of misgiving….”.

In the end, of course, despite his Treasurer’s warnings – backed up by strong written objections conveyed to him both from the two other Public Service Board Commissioners[21] and from the head of his own department – Hawke was unable to resist the pressure being applied from Gareth Evans, John Dawkins and others (as well as, characteristically, lacking the courage to reverse his own earlier decision).

At this point, then, relations between Keating and the department (including myself personally) were excellent. As Paul Kelly says, we had “found in Keating a clever novice but fast learner who possessed both personal candour and Cabinet clout”.[22] Nevertheless, the constant anti-Treasury drumbeat from Labor’s Left, only too readily amplified by their many media collaborators, continued to resonate. To quote Kelly again, “in the Labor lobbies Keating was the victim of a whisper [growing, I interpolate, to a roar] that he was ‘John Stone’s puppet’”.[23]

I pass over quickly the two major events of subsequent months – floating the Australian dollar in December 1983 and enactment, some time later, of the Wilenski/Dawkins Public Service Reform Act 1984, both of which I have written about earlier in Quadrant.[24] Both events – the former, marginally, the latter, importantly – were to play some part in my subsequent resignation decision. Meanwhile, however, on 31 January 1984 I had turned 55.[25]

In April 1984 my wife[26] and I accompanied Mr and Mrs Keating to the Asian Development Bank annual meeting in Amsterdam. We then drove down to Paris, where I was to lead the Australian delegation to the meeting of the OECD’s Economic Development Review Committee in considering the draft secretariat report on Australia.

On 2 May the Treasury alerted me to the publication of a particularly nasty article canvassing my removal from the Treasury and which, to my eye, had the fingerprints of the Treasurer’s office all over it. I immediately sought a meeting with Keating, and we met that afternoon in his hotel room. My note of that discussion records that Keating professed to be unaware of the article but, having read my copy, went on to say that, although he was in no way seeking my replacement, “such is the regard in which both the Prime Minister and I hold you, that if you did wish to leave you could have anything you want”.[27]

Looking back on the events leading up to my resignation, this was a turning point. I did not then take any irrevocable decision to resign, but from then on the idea was never far from my mind. At the time, however, I merely thanked Keating for his expressions of esteem, while saying that, so long as I possessed his personal confidence, I was happy to stay in the Treasury.

Matters thus proceeded to their denouement. En route, however, two minor, but in some sense also significant, incidents occurred. The first concerned membership of the National Income Forecasting Committee (NIFC). It was initiated by Barry Hughes, who (according to Edwards) told Keating that “there is a strong suspicion that the NIFC had overstated” the forecast slowing in growth by mid-1985. He “called…the whole NIFC process into question, leading to the suggestion that….he himself should sit in on the meetings that produced the forecast”.[28] In a minute to Keating dated 29 May I said: “We [Treasury] (and I in particular) had never had much faith in forecasting. Not infrequently, our forecasts turn out to be seriously wrong…We simply do the best we can, in as professional a manner as we can”. Given what I foresaw as the first step towards politicizing the official forecasting process, I declined to invite Hughes to join the NIFC, but provided several options for the Treasurer’s direction. In his written response of 13 June, Keating effectively confirmed my forebodings, saying that he was “not prepared to see the confidence this government has nursed back into the economy dashed by excessively pessimistic prognostications by Treasury”. As to the committee, the option chosen would expand its membership and include Hughes.

The second incident stemmed from essentially similar motivations. Ever since the mid-’60s (when I initiated it), Treasury had produced each year a document, for inclusion in the principal Budget paper, that delivered (within the bounds of official propriety) a “Treasury view” of the state of, and outlook for, the economy. This document, originally designated Statement No. 6, became over time the better known Statement No. 2.

I have among my papers a copy of the near-final Treasury draft of Statement No. 2 prepared for the 1984-85 Budget. To this draft, sent to Keating’s office in the normal clearance processes, he and his office staff now objected.

Keating was of course correct in saying that, since his name was on the Budget papers, he had every right – should he choose to exercise it – to “sanitize” them however he pleased. To cut the story short, on 20 August (the day before Budget day) I sent him a minute entitled “Statement No. 2 – Changes made at your Direction”, recording in detail the changes enforced by him and his staff between that earlier Treasury near-final draft and the version to be published next day. Given after events – epitomized, soon afterwards, by Keating’s famous May 1986 “banana republic” admission – it makes for interesting reading.

As to that Budget itself, I have recently written about it elsewhere.[29] Suffice to say that, in a 7 August minute to Keating surveying the outcome of the Budget Cabinet process, I described it as “a major failure of policy”. (However, that minute “is not presented as criticism of your own efforts, without which…the result would… have been very, very much worse”).

Decision Time: I had by now made up my mind on my own position. That 2 May Paris “turning point” conversation; the steady “drip” of inspired media stories claiming (falsely) that the Treasury, and I personally, had opposed the dollar float decision; enactment of the Wilenski /Dawkins Public Service Reform Act, which I foresaw as setting in train the politicization of the Commonwealth Public Service; further evidence of that in the two otherwise minor incidents mentioned above; and the Budget policy failure – all these things meant it was time to go. I was, however, concerned that I should do so without the slightest recrimination. I wished not only to maintain the civility of my relationship with Keating, but also, and above all, to avoid damaging the continuing relationship between him and the great Department I would be leaving.

I realized that, as soon as I told Keating of my intentions, they would immediately become public knowledge, and I acted accordingly. Over the weekend of 11-12 August my secretary, Anne Baker (sworn to utter secrecy) typed my proposed 5-page letter to Keating, to be dated 15 August, and at 9.45 am on that date, by appointment, I met him in his Treasury office and gave it to him – with a draft press release for his consideration announcing his receipt of it.[30] At 10.00 am my personal assistant, John Langoulant, brought in on a silver tray a bottle of Veuve Cliquot Ponsardin (1979 vintage) champagne and two glasses. At 11.00 am, we having disposed of that (with some help from Tony Cole), I met with my three deputies and gave them (on a Not to be Copied basis) copies of my letter to Keating, and at 11.30 I met with all Second Division[31] officers to inform them also of my decision. That evening in my office I hosted drinks with senior officers to mark completion of 30 years in the Treasury.

My letter to Keating, far too long to detail,[32] began by noting that, as Secretary or Deputy Secretary, “I shall have been closely associated with no less than thirteen successive Commonwealth Budgets”; that “it is in any case time to go – and that is the decision I have come to”. However, “there are… other reasons for my decision…”.

First, “as long ago as 16 September 1983 I told you, in personal confidence, that in the event that the government were to proceed with the appointment of Dr Peter Wilenski as Chairman of the Public Service Board, I should be compelled to consider whether I wished to remain a member of a Public Service presided over by a man entirely lacking that respect” required of such an appointee. Given Wilenski’s subsequent appointment, and passage of the Public Service Reform Act, “I believe that over the months and years ahead” the consequences will be “to produce a perversion of those qualities which, for me, have made the Commonwealth Public Service worthy of devoting to it 30 years of my life…I have no wish” to see its “inevitable decline, as dedicated men (and, increasingly I am glad to say, women) come to understand that there will be no real future in the Service-to-be for those not prepared to commit themselves to one political colouration or another”.

“During the course of our conversation last May in Paris…. you were good enough to say….that if at some future time I should decide to move….then such was the regard in which both you and the Prime Minister held me that I ‘could have anything I wanted’….Nevertheless,… I have no desire either to remain within the public sector in some other capacity or…to accept….some piece of personal patronage….I believe that such a course would place me in….a false position”.

“In our [recent] conversation…,I took the opportunity of telling you how proud I am of the Treasury….In leaving the Department shortly I therefore do so with a deep pride in the people who make it what it is….I trust that in seeking a successor to me you will endeavour so to choose as to give to the maintenance of that resource ‘your best shot’”.

“Let me conclude on a different note. From 6 March 1983… no angry word has ever passed between us. We have had our differences, of course… but…for over 17 months I have given you, and through you the Government, my full personal loyalty….I have, in short, enjoyed my personal relationship with you and I take this opportunity, very formally, of placing that on the record….”.

That, one might have thought, was that; but not a bit of it.

The Standover Attempt: In my 15 August meeting with Keating I had told him that, after time for clearing my desk, I expected to leave the Treasury about mid-September. I added that, “for clarity,…this letter does not in itself constitute my letter of resignation, but only my advice to you that I intend to take that step”. This caution proved advisable.

On 30 August The Canberra Times carried an obviously well informed article by Jack Waterford.[33] It noted that, since the former provisions governing retirement of departmental heads under the Commonwealth Employees (Redeployment and Retirement) Act had been repealed with passage of the Public Service Reform Act, new regulations would now be needed to provide (as formerly) for payment of his or her superannuation contributions to a departmental head now retiring at age 55. Until then, “Mr Stone cannot get his money”. Tongue in cheek, it ended with the hope “that there is no hold up. The minister who will have to sign the instrument is Mr Dawkins”.

My administrative services people had already told me that the Australian Government Retirement Benefits Office and the Department of Finance were “working on this question urgently and hoped to have the regulations ready for approval by the Executive Council” for its 6 September meeting (or at latest, its meeting on 13 September). The “tone” of the Waterford article, however, set some red lights flashing; and they flashed even faster when I learned that, although “the documentation had been completed and was with [Dawkins] for endorsement”[34] in good time for the 6 September Executive Council meeting, he had not signed off on it.

On Wednesday 5 September I spoke to Keating about these matters, saying that I understood that Dawkins (assisted by Wilenski) “was seeking either to deny me [my] superannuation entitlements… or that…. he would be seeking to attach certain conditions to my receipt of” them. I said that “I had no intention of being treated in this shabby manner”, but that I presumed that neither Keating nor Hawke “was aware of these little plots”.[35]

To detail the events of the next nine days would require an article in itself. In brief, on Friday afternoon (7 September) Hawke “telephoned me personally and asked me to come and see him”. After giving me “his personal assurance that I had no reason for any further apprehension” about being denied my superannuation entitlements, he said, as Keating had already done that morning, that what Dawkins had in mind was that, under his new regulations, a departmental head “being retired” by the government could negotiate a retirement package well in excess of his superannuation entitlements. (Keating, incidentally, had “suggested that I should not lightly deprive myself of the possibility of ‘doing better’ in this way”.) I told Hawke, even more emphatically than I had already told Keating, that while these ideas were new to me, I wished to have nothing to do with them. I was not “being retired” by the government, but leaving of my own free will; and while I wanted my entitlements, I wanted “no more than that”.

My Note for File of 12 September records that, following “a substantial discussion of this whole question late last week between Dawkins, Keating and Hawke”, Dawkins had prepared a 14-page document, “forwarded to [Hawke] on Monday 10 September”. Yeend, who saw a copy “by accident”, described it as “horrific”. He had then sent Hawke a minute “in which he not only pointed out the ‘monstrous’ injustice… if the government accepted Mr Dawkins’s proposals, but also… that it would be ‘politically stupid’….In particular, proposals to ‘gag’ retiring public servants would simply not get to first base”. Hawke then wrote to Dawkins “expressing his disagreement with the Dawkins paper and…requesting Dawkins to sign off the necessary regulations for Executive Council process as soon as possible”. This was eventually done, the new regulations were made by the Executive Council at a specially convened meeting (!) on Friday morning, a Special Gazette (!!)[36] was then immediately run off by the Government Printer, with copies couriered to all concerned, and after receiving written assurances that all was now in order, I wrote my formal resignation letter to the Governor-General.

Earlier on that last morning I had called on Keating at his parliamentary office to bid him formally farewell, and to invite him (and his staff) to attend the afternoon tea function that the Treasury was giving me later that day. He said he would be pleased to come; but he never did.


So, did I have “the best of Paul Keating”, in the straightforward sense of that phrase? I still believe I did, and I take back nothing from my earlier testimony about having enjoyed his company. Nevertheless, his “best” only lasted about twelve months, and with the advantage of hindsight (aided by his own accounts to both Kelly and, particularly, Edwards) even that may have been an overly generous estimate. From (at latest) May 1984 the downhill slide in his behaviour can be marked – gradually at first, but accelerating later – as his overweening ambitions, and his growing belief that he “knew it all”, prevailed. The recent revelation of his handwritten remarks on press cuttings bequeathed to the National Archives (yes, really) describing Hawke (in 1985) as “the envious little bastard”[37] is merely a tiny indicator that, by that time, “the real Paul” – the Keating that, I suppose, my old friend John Wheeldon had known from the outset – had re-emerged. What a pity.

John Stone, a former Secretary to the Treasury, has contributed to Quadrant over many years.

[1] Paul Kelly, The End of Certainty, Allen & Unwin, 1992; and John Edwards, Keating: The Inside Story, Penguin Books Australia, 1996.

[2] John Stone, Floating the Dollar: Facts and Fiction, Quadrant, January/February 2012; and Floating the Dollar: More Facts and More Fiction, Quadrant, March 2012.

[3] This and subsequent similar references are all to official Notes for File (or, where indicated, my manuscript notes), the originals of which are in my possession.

[4] Floating the Dollar: Facts and Fiction, op. cit., p.21.

[5] Craig McGregor, Treasury’s neo- Grecian decorator, The National Times, 13-19 February 1983.

[6] Edwards, op. cit., p.178.

[7] As mentioned in Footnote 50 of the Quadrant Online version of Floating the Dollar: Facts and Fiction, “I retain among my papers two thick folders of newspaper clippings, entitled ‘Sacking JOS’, put together at the time by my then personal assistant, Ken Page”.

[8] See my (third) Note for File of 7 March 1983. My fourth Note for File records that our meeting was attended not only by those gentlemen (and my senior deputy, Dick Rye) but also by “John Langmore (previously on Mr Willis’ staff) and Miss Barbara Ward, who he [Keating] described as his ‘confidential secretary’ “.

[9] Edwards, op. cit., p.177.

[10] See Floating the Dollar: Facts and Fiction, op. cit., p.21.

[11] Dawkins was also Minister assisting the Prime Minister for Public Service Matters.

[12] In our fourth and fifth years Wheeldon, along with my other good friend Max Newton (and, as it happens, Bob Hawke), had opted for the “Arts stream”, whereas I had opted (perhaps mistakenly) for the “Science stream”.

[13] See Note for File of 10 March 1983.

[14] Curiously, Edwards appears to make no mention of this rather colourful episode in his biography of Keating.

[15] Edwards, op. cit., p.xii.

[16] Ibid., p.17.

[17] Because of the sensitivity of the topic, I made no copies of this Note for File, or of that of 18 September 1983; they constitute a significant element in the archival record of one of the most shameful episodes in the history of the Hawke government. Significantly, Hawke’s own book, The Hawke Memoirs, makes no mention of this episode; and the name of Dr Wilenski (see below) does not appear in the Index.

[18] Barron had been seconded to Hawke’s office by then NSW Premier Neville Wran, for whom he had previously worked.

[19] Evans, a former Foreign Affairs and then (briefly) Treasury officer, became Hawke’s Principal Private Secretary immediately after the 1983 election.

[20] Where, since the election of that government, he had served as Principal Private Secretary to Whitlam.

[21] John Monaghan and Bob Young.

[22] Kelly, op. cit., p.59.

[23] Ibid..

[24] Footnote 2, supra; and John Stone, The Degradation of the Public Service, Quadrant, July-August 2011.

[25] Under the provisions of the then Commonwealth Superannuation Scheme, anyone leaving the Public Service before the age of 55 was only entitled to the return of his or her own contributions (plus a small rate of interest); that is, they forfeited any Commonwealth contributions.

[26] During my 13 years as a Deputy Secretary or Secretary to the Treasury, this was only the second time that Nancy had accompanied me on an overseas mission.

[27] Although of course I never took Keating up on this offer, I have sometimes wondered where it might have led had I done so. After all, some years later Keating sent a quite junior Treasury officer (Don Russell), who had served as his Principal Private Secretary after Tony Cole’s departure, to Washington as our Ambassador to the United States!

[28] Edwards, op. cit., p.242.

[29] John Stone, Labor’s excessive spending led to birth of Keating’s banana republic, The Australian, 1 January 2013.

[30] Although Keating approved that draft press release, Tony Cole later sought my agreement (which of course I gave) to removing from it any reference to my letter because, he said, Keating thought the press would start demanding copies. Until recently, therefore, its existence has ben publicly unknown.

[31] Nowadays known as Senior Executive Service.

[32] Some passages from it, relating to the 1984-85 Budget, were set out in my article of 1 January 2013 in The Australian, loc. cit..

[33] Jack Waterford, Stone – a matter of retirement or resignation, The Canberra Times, 30 August 1984.

[34] Note for File of 4 September 1984 by Jim Grenfell, Personnel and Establishment Section of the Treasury.

[35] See my minute to Keating of 12 September 1984 recording this and subsequent developments. My annotation on this minute notes that it was not sent, being “overtaken by events”.

[36] Notification of the Making of Statutory Rules, Superannuation (Retiring Age) Regulations (Amendment), Special Gazette No. S363, Friday 14 September 1984.

[37] Brendan Nicholson and Troy Bramston, Bob Hawke was an envious bastard: Paul Keating, The Australian, 1 January 2013.

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