In his comment in the Australian newspaper (24 Sept.) on John Howard’s ABC TV documentary (broadcast 18, 25 Sept.), Troy Bramston claimed that Howard had failed “to support its central thesis that Menzies played ‘the fundamental role’ in ‘the building of modern Australia’ “; instead, “it was not an era of policy innovation or modernisation…There is a huge gulf between the economic, social and foreign policies of the Menzies government then and the Liberal and Labor parties today.”
What Bramston failed to notice was the huge gulf between the economic policies of the Menzies government and those of his Labor opposition. Although there is much to criticize in Menzies’ strategy for Australian economic development, especially with the benefit of hindsight, it seems indisputable that Labor’s alternative would not only have been disastrous at the time, but also would have long sent the economy in directions quite opposite to modernization. Labor’s post-war vision was of an economy planned and centrally controlled. The success of a wartime regime of ‘command and control’ reinforced Labor’s long-held beliefs. In 1948, Chifley attempted to make permanent the wartime power over rents and prices. Menzies saw the proposal as part of Labor’s plan of complete socialisation—and certainly Labor’s ambitions for economic centralization and control went much further.
The ‘socialisation’ plank of Labor’s platform was then far from the shibboleth it became: Labor strongly believed in extensive ‘nationalisation’, starting with, but by no means limited to, the banks, steel industry and aviation. Menzies successfully frustrated Labor’s efforts to seize the banks. He preferred private enterprise to nationalisation, even if, as with aviation, the industry was heavily regulated.
Labor, which remained committed to bank nationalisation (although not ‘in the first term in office’), strenuously opposed the creation of the Reserve Bank, a fundamental turning point in the history of central banking in Australia.
Bramston claims that Menzies ‘inherited innovation’ from the Labor governments of Curtin and Chifley: specifically, post-war immigration, the Snowy scheme, and support for local car manufacturing. And some Menzies government innovations, like the 1957 Japan trade treaty, Bramston dismisses as not being unique: hey, Canada—which had not been threatened with invasion, let alone bombed by Japan—also signed a trade treaty with Japan.
Once again, contrast Labor’s policy with Menzies’. Under Evatt, Labor opposed the trade treaty with a Japan that was exporting, not steel and ships, but textiles, of which there were many Australian manufacturers, including in regional cities and towns. It is true that Labor arranged for GM to set up GMH in Australia, but during the Menzies era, Labor was strongly critical of the foreign private capital inflows that not only helped finance the development of manufacturing, engineering and chemical industries, but also carried along with it the latest technical and management knowhow. Said Calwell in his 1961 election speech: ‘It’s time for a change … to the open-door policy for foreign capital with no government plan for the protection against take-over bids of Australian-owned enterprises, and of our great national assets.’
In a period of relatively low international terms of trade (apart from the short rise and fall due to the Korean War), Australia absorbed over 1.5 million immigrants, many unskilled, doubling the share of foreign born to almost a quarter, while living standards rose at 2 per cent a year, and unemployment and inflation were low.
While Menzies had supported Chifley and Calwell’s intake of Displaced Persons, and their plans for recruitment from Southern Europe, Labor continually opposed Menzies’ immigration policies. Calwell again: ‘Full employment and adequate housing are the pre-requisites to any successful humane scheme of immigration.’ Labor emphasised the use of migrants in public works and government undertakings, rather than for speeding up the development of the private sector.
Labor was strongly committed to public housing (as in NZ)—it did not want a nation of ‘little capitalists’—so Labor’s 1945 State housing agreement, in force until 1956, was entirely about public housing. Nonetheless, according to the census, 53 per cent of households in 1947 were owner-occupiers; this rose to 71 per cent in 1966, where it plateaued for decades.
Bramston claims that ‘the Menzies government did not believe in balanced budgets; its last was in 1953.’ However, out of what otherwise would have been surplus tax revenues, the Commonwealth subscribed to State loan-raisings, averaging over one per cent of GDP. This helped the decline in public debt from 120% of GDP in 1950 to 52% in 1964 (and 8% in 1974, before Whitlam ignited an explosion).
Strong growth in per capita GDP, the fact of full employment—which gave families the security to buy homes—and low inflation, allowed the first moves to modern capital markets: the official short-term money market (1959), deeper and wider securities markets generally, consumer credit via hire purchase, more merchant banking, including foreign.
Sure, as Bramston wrote, ‘Menzies would not recognise modern Australia’. How many of his contemporaries would? But they would have recognized, as ‘modernisation’, the structural shift from agriculture—which halved as share of GDP to 11%—and towards services, including construction, which rose from 50% to 61% of GDP. Despite the tariff and import quotas, at the end of the Menzies era, manufacturing accounted for no more of GDP than in 1949 (26%). Subsequently, Labor under Hawke and Keating, with the support of the then Opposition, took the courageous decision to dismantle most industry assistance to manufacturing (although we still have remnants in motor vehicles).
Contrary to what Bramston claims, Menzies played the fundamental role in building a modern Australia, upon which the current is Australia is based.
Jonathan Pincus is Visiting Professor at Adelaide University. With Henry Ergas, he wrote the chapter on the economy in JR Nethercote, ed. ‘Menzies. The Shaping of Modern Australia‘