“What are we going to do now?” one of Rudd’s Labor colleagues remembers hearing as, for the first time, a former top bureaucrat becomes Australia’s prime minister. He broke the mould, bypassing factional politics but also a leader always on the go and demanding exhausting performance from his staff and his officials.
ABC last night aired the first of three episodes of The Killing Season, an account of one of the most turbulent times in Australian political history under the stewardship of Kevin Rudd and Julia Gillard. This episode focused on the first Rudd years and the challenges that shaped his government.
It began with an apology for past Australian policies to the Stolen Generation, depicting a time when the Rudd government, still in its honeymoon, was in control of both its agenda and the message.
But there was a gathering storm in the US financial system, Ferguson explains, beyond the horizon for most Australians.
Then Treasury secretary Ken Henry would eventually be put in a very difficult position offering advice a prime minister doesn’t want to hear, but has to. However, they began with their roles reversed from the typical minister/secretary story:
“I got a call to go out to Fairbairn and get on the plane. The prime minister lent across the small table that separated us and said ‘so tell me, what is the worst thing that can happen?’
“I had no idea what he was talking about, so I asked with respect to what … I thought he was jumping the gun in asking the questions. I didn’t think we were at the point that those questions needed to be asked.”
As the sub-prime loan scandal unfolded into what we now call the global financial crisis, Henry’s impression of Rudd’s instincts would change markedly from that early interaction.
Unhappy with Henry’s advice, Rudd flew to New York and instead consulted with US Treasury secretary Hank Paulson where he got the answer he wanted to hear as well as the reassurance that he was asking the right questions.
Back home, top bureaucrats were having difficulties getting papers staffed through the PM’s office — unless Gillard was acting in the chair. But the GFC meant Rudd’s “command and control” style of centralised government was particularly well-suited to the circumstances and the “gang of four” became the default for decision making — Rudd, Gillard, Wayne Swan and Lindsay Tanner.
Henry explained that a small group of senior ministers, as opposed to dealing with the full cabinet, became essential to getting agreement on Australia’s response to the crisis: “It simply would have been impossible to get everyone in the right place at the right time. And it would have proved an overwhelming distraction. No government would run a national security crisis that way, and they don’t.”
Rudd told the nation we were dealing with extraordinary economic times, as the foreign cashflow to banks dried up and money could not be lent to Australian households. He faced the typical conundrum of the public servant — if he took the right steps and prevented a crisis, he wouldn’t be thanked. But if he got it wrong, then he’d be held forever to account.
For Rudd, this issue became his raison d’etre, says his political financial advisor.
Henry, who had initially not concurred with Rudd’s instincts, agreed:
“I think it is extremely likely he was better prepared for this stuff that any political leader anywhere else in the world.
“At the end of the day someone has to make the judgement, and in the political system we have, that person has to be the prime minister … can’t be anyone else.
“I said to him subsequently that I thought his instincts were better than mine, and I still think that.”
Henry’s proposed stimulus package — “go early, go hard, go households” — was adopted by the gang of four, as well as a guarantee on deposits. But it was a painful decision for a Labor government that came into power with the promise to be economic conservatives. It put the bureaucrats in a bind. Henry explained:
“There were officials in Treasury that said even after you’ve done all these things, there’d still be a deep recession … hundreds of thousands losing their jobs.
“In [Rudd’s] mind it was abundantly clear, he made no secret of it, ‘so I go down in history as the prime minister who has put Australia back into deficit.
“Their predecessors had deficits, went unremarked. But for this group of ministers, Labor ministers, this was very big.”
Nobody could ever know if it was the right level of intervention, Henry shrugged.
In the end, other issues defined the Rudd legacy.
The Killing Season continues next Tuesday June 16, 8.30pm on ABC.