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Curtin's gift.

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Tuesday 3 May 2005

John Edwards, Chief Economist, HSBC Bank


Curtin's Gift  


War time Prime Minister John Curtin is reverenced in the Australian story, but largely for the wrong reasons. 


He fought Churchill to bring Australian troops home from the Middle East, we were told, and thereby saved Australian from invasion by Japan.  


He created the alliance with the United States.  


He turned Australia away from its traditional attachment to the United Kingdom. 


He did these great things, we were told, although he himself was a man of modest attainments - decent but limited, poorly educated, a recovering alcoholic, an idealist inexperienced in great office who became Prime Minister in 1941 only reluctantly and who then had greatness thrust upon him by the extraordinary circumstances of the Pacific war. 


But there is much we now know which is at odds with this story.  


It is pretty clear, for example that Curtin was much better read and had a more powerful, analytic mind than most of his contemporaries. 


That he was a skilled practical politician with the tell tale characteristics of sardonic humour, a rough tongue, and startling private candour and a rough tongue.  


It is also apparent that he came to office in 1941 with a well prepared program of major domestic policy changes which he methodically executed while also steeling Australia for war with Japan. 


As a warlord Curtin was less than the legend. It is certainly true that he insisted that the 7th Division come home to Australia rather than fight the Japanese in Burma as Churchill wished, and true that he declared that Australia looked to America, free of any pangs over its traditional links with the United Kingdom.  


But it is also true that Curtin subsequently agreed to most of the returning 6th Division stopping in Ceylon for several months and the 9th Division remaining in the Middle East for another year, and that at the time of the greatest Japanese threat to Australia most of its battle hardened troops were still west of Singapore.  


But if Curtin’s contribution as warlord has been overplayed in our national story, his profoundly important contribution as the architect of the modern Australian Commonwealth has been much neglected.  


From his earliest years as a member of the Victorian Socialist Party Curtin engaged in a lifetime struggle to comprehend what was then called the Social Question and we would now call Economics.  


Working through classical economics and its Marxist variants, Curtin became by the late twenties an eager reader of the Maynard Keynes. By the time the Great Depression hit at the beginning of the 1930’s Curtin was far ahead of his peers in his understanding of the forces at work.  


As a Labor backbencher he not only advocated expanding the money supply and tolerating a budget deficit, two policy approaches which are mainstream today, but also floating the Australian pound. A hostile Senate and a hostile Commonwealth Bank refused Labor’s Depression remedies, an experience which guided Curtin’s conduct when he became Prime Minister a decade later. As he often said, what the conservatives refused as impossible in peace, could be readily agreed in war. 


Within a few months of coming to office in 1941 Curtin put his program into effect. Three weeks after he became Prime Minister he announced that the federal treasurer would have authority to direct the Commonwealth Bank, and that the Commonwealth Bank would have the authority to direct the trading banks.  


He thus created a true central bank under the Treasurer’s control for the first time in Australian history, an objective of Curtin’s in three decades of political struggle.  


In early 1942 Curtin pre-empted the State’s taxation powers to create national uniform income tax. Not long after he announced that the Commonwealth’s most important post war goal would be full employment, a program filled out in a White Paper he commissioned in 1944.  


At the same time and under Curtin’s direction Australia began to participate in discussions with the US and the UK on the post war institutions of global economic governance, the IMF, the World Bank and what became the GATT. 


The monetary and fiscal tools acquired by Curtin are today the major weapons of economic policy, which continues to be directed at the full employment goal which Curtin adopted over sixty years ago. Australia’s integration into the post war global economy and its participation in the institutions which govern it, which Curtin initiated, continue to shape Australia’s economic destiny.  


Guests on this program:

John Edwards  

Chief Economist 

HSBC Bank Australia Limited