Rudd urged to heed economic lessons from the 1970s

As we enter 2009, secret Cabinet papers from 30 years ago reveal that the Fraser government was grappling with economic challenges similar to the ones now testing the Rudd Government.

The papers show how the then treasurer, John Howard, tried to deal with the global oil shock and a budget blowout.

The documents have been released today by the National Archives under the 30 year rule.

And interestingly, they also reveal just how worried the government was about Australia's sporting reputation.

In Canberra, Kirrin McKechnie reports.

(Excerpt from "Stayin' Alive" by the Bee Gees)

KIRRIN MCKECHNIE: It was the height of the disco era - platform shoes were a fashion essential, the Bee Gees dominated the pop charts, and Olivia Newton John burst onto the international stage in the movie "Grease".

It was also the last year of commercial whaling in Australia, the Northern Territory achieved self government, and SBS was established.

But for many, 1978 will be remembered as the year terrorism struck on Australian soil.

REPORTER: This is the Sydney City Council garbage truck in which a bomb exploded here at 20 to one last night.

KIRRIN MCKECHNIE: Three people were killed and many more were injured when a bomb exploded outside Sydney's Hilton Hotel, where the prime minister Malcolm Fraser was hosting a Commonwealth Heads of Government meeting.

The bombing sparked a review of Australia's counter-terrorism capabilities and led to the creation of the Australian Federal Police a year later.

But it was the precarious state of the economy that proved to be the Fraser government's biggest threat in '78. Unemployment peaked at seven per cent, inflation was high and the budget was in the red.

A young John Howard was in charge of the Treasury coffers and as he prepared his first budget, he was extremely concerned about a blowout in the deficit.

Fred Chaney was a minister in the Fraser government. He says the current Treasurer should heed the economic lessons learned around the Cabinet table 30 years ago.

FRED CHANEY: The lesson is that governments need to be very careful in structuring their budgets in ways which give them permanent difficulties with respect to bringing budgets back into surplus. And I think there may be some very useful lessons for the current Treasurer in pondering the struggle that John Howard had.

KIRRIN MCKECHNIE: Fred Chaney also thinks there are important lessons to be learned in the Fraser government's stance on East Timor.

In 1978 the Government decided to legally recognise Indonesia's sovereignty over the country it had invaded three years earlier.

Cabinet papers reveal it formed its decision in part due to lobbying from exploration companies keen to begin drilling for resources in the Timor Sea.

FRED CHANEY: I think it was a case, and we've had plenty of them in our history, of a high level of moral blindness on the part of all of us - in the community, in Parliament, in Government, in Opposition and so on. It's not a lone case.

KIRRIN MCKECHNIE: While the Government expected public criticism over the East Timor decision, that year Australia's reputation also took a battering amongst its Asian neighbours.

The foreign minister Andrew Peacock briefed his Cabinet colleagues on a meeting of Australian diplomats based in South-East Asia who warned Australia was seen as selfish and introverted.

But the government seemed equally concerned about Australia's sporting reputation. The sports minister took a submission to Cabinet arguing for more sports funding, warning a poor medal tally at both the Edmonton Commonwealth Games and the Montreal Olympics had damaged Australia's self image and national pride.

The concerns about the cost made Cabinet defer its decision, leaving it to Aussie singing stars to sell the nation's image on the world stage.

(Excerpt from "You're The One That I Want", Olivia Newton-John)

ELEANOR HALL: Olivia Newton-John in the movie Grease, ending that report from Kirrin McKechnie.