The Killing Season Uncut (15 page)

Rudd claimed the leak was an attempt to lock him into a position. He pointed the finger at Gillard and Swan and their staff.

This was demonstrably a premeditated leak by somebody who wanted to entrench the position, and they succeeded … It's a very narrow group of people who had access to this information … There was a significant interest in putting this into the newspaper, locking the Prime Minister in, and that's exactly what happened … Who wants to lock the Prime Minister in? Well, there were two very adamant ministers in that group and their immediate staffs. Draw your own conclusions.

Within a week of Taylor's story, Newspoll revealed that Labor was behind the Coalition in the two-party vote for the first time since Rudd had become leader in 2006. But the biggest hit was to Rudd's personal popularity: it fell 11 points, the steepest single fall in the history of the poll. That was a shock, even to Gillard.

I was quite surprised at how hard the poll hit for his standing was. I did understand that the government would face huge backflip issues, I wasn't naive about that. But the big personal plummet for Kevin, I didn't foresee that.

 

Lachlan Harris described the ETS decision as Labor's collective failure.

My very clear memory is that every single source of advice going to Rudd told him to dump the CPRS. Now that doesn't let Rudd off the hook: he has to take responsibility as the Prime Minister for that misjudgement. But so do all of the rest of us, every single person around him in the Secretariat and in the ministry and in his own office, including me. We have to accept that was bad advice. It was a huge, huge mistake, and the reality is it was done with the complicit support of almost every single source of advice and authority within the party, except Penny Wong.

I'll go to my grave thinking about what a lost opportunity for a government I was proud to be part of.

Martin Ferguson

W
HILE
The Killing Season
could not have existed without its two central characters, it also needed a cast of senior ministers to tell the story. The series was always intended as a drama, owing more to Netflix than a parliamentary broadcast, but its plot points were the policy battles of the Labor government. With a keen eye on Prime Minister Tony Abbott's wavering fortunes, the frontbenchers were the hardest to recruit.

As well as picking our way carefully between the two sides, we had to consider how my interview questions would be received, analysed and passed on to others as evidence of our approach. I flew to Canberra for the launch of former Foreign Minister Gareth Evans' diaries, knowing Shadow Treasurer Chris Bowen would be there. I listened to Paul Keating's angry speech about Hawke and wondered if Rudd and Gillard's battle would endure, like theirs had. I sidled up to Bowen at the tea urn to make my
pitch. I also sat with Gillard's tribe, including Bob Hawke, at the launch of Greg Combet's book. I watched the dynamic between Gillard and Combet closely since he was unafraid to criticise her leadership moves. Once we had a majority of the frontbench, I hoped Bill Shorten would feel under pressure to take part.

As I moved between the two sides (good Kevin/bad Kevin, patient Julia/ruthless Julia), my certainties moved too. At times I thought I would lose my mind in no-man's-land. I longed for a story with a single villain whom I could pursue to the ends of the earth.

The conflicting narratives were hardest to unravel over the mining tax.

 

The second-most-significant relationship in the Rudd Labor government was the one between Kevin Rudd and Wayne Swan. In some ways it is harder to read, perhaps, because of the layers of experience the men shared, in friendship and enmity. In his interview, Swan was much more cautious than Gillard. He had few good words to say about Rudd but he avoided the deeply personal criticisms that Gillard allowed herself.

After a bitter falling out over the leadership battles of the 2000s, Rudd and Swan found a way of working together. It enabled them to confront the crisis of the GFC together. By the beginning of 2010, their relationship was strained again, this time by the mining tax.

Lachlan Harris has a unique perspective. He came to work as press secretary for Kevin Rudd from Wayne Swan's office.

Even right up to the bitter end, I think they were still constructively working together in an attempt to win the 2010 election and to govern well. I mean anyone who's been around a while knows that things are always going to be tough between Kevin and Wayne. But my view is things were still moving forward.
Unfortunately I think the mining tax was a big point where that relationship came under real pressure.

The mining tax was a difficult section of the interviews with Rudd and Swan; their answers were formulaic and rote. The adage ‘Success has many fathers but failure is an orphan' says it all.

By the time I reached the topic with Treasury secretary Ken Henry, the architect of the mining tax, we had been talking for hours. The light had dropped outside the narrow windows of the sandstone building at Sydney University where we were filming. Henry began worrying about his dogs, alone and unfed at home. We paused for a card change in the camera, time for a brief stretch.

I noted how Henry retreated in his chair when we began discussing the tax. During the break, he said talking about the tax made him uncomfortable. The interview resumed.

SF: So why does the mining tax make you so uncomfortable?

Behind me, researcher Trish Drum, a gentler creature than I, gasped: you can hear her on the audio track. Henry shook his head.

KH: You're nasty, you are!

SF: No.

KH: The thing about the mining tax is that at the end of the day there are no real winners. The Budget doesn't win. The mining companies don't win: it's not the sort of tax system they want. And for the state governments, some of them, royalty revenues are strong now, but royalty revenues are incredibly volatile and there'll come a time when they too would have preferred a more stable source of revenue from the Commonwealth. I guess most importantly of all, the people of Australia don't get the return from these resources that are being taken out of
the ground and sold off, and they're irreplaceable. So there are no winners.

 

The only thing that helped me grapple with the mining tax and its arcane world of resource rents and uplift rates was that I had made a program about it in mid 2010 for the ABC's
Four Corners
. It had involved one of the longest days of my working life, starting in the Qantas Club at Perth Airport at 5 a.m. in a sea of workmen in hi-vis jackets, en route to Port Hedland up the West Australian coast. Five flights later—two choppers and three jets, including an interview with businessman Clive Palmer on his plane—I arrived at a dingy motel outside Canberra, a last-minute booking. I sat on a bunk bed in a ‘family-style' room listening to the thrash metal coming from an adjoining room. I knocked on the offender's door. After a few minutes, the door opened and a man peered out, eyes ringed with heavy eyeliner, the room behind him pitch-black. I told him: ‘I got up at four, I flew all over Western Australia, then I flew here, now I'm exhausted. I have to interview the Treasurer at 9 a.m. and I haven't got a hairdryer. Can you turn the fucking music down please?' I only used some of those words; I can't remember which ones. The bottom line is at least I forged some knowledge of the tax and the political debate that ensued at the time. Wayne Swan wasn't in his underpants when I arrived for that interview.

 

The Treasurer received Ken Henry's 1000-page report on the Australian tax system just before Christmas 2009. Swan said he had trouble getting the Prime Minister to pay attention to the recommendations.

I struggled to get him to agree to release the report, and then I struggled to progress internally his final agreement to put in place the mining tax.

Rudd said Swan wanted the tax. I had learnt to become suspicious of Rudd when the language in his answers became swollen, phrase upon phrase, sense crushed under the weight of the syntax.

The advice of my minister, having delegated responsibility to him for this purpose, was that he needed, for his own credibility as a tax reformer, to take this as a symbolic and emblematic and core part of the taxation review into practice. He led this, he led it, it was his initiative, he recommended it, he ultimately worked really hard on Julia and myself to bring us on side. We accepted it.

Julia Gillard thought Rudd was gripped by decision-making paralysis.

Well, once again this was a decision that got drifted into, and because you drift, your options close down and the amount of space you've got to manoeuvre in closes down. It's once again like the CPRS. You end up painted into a corner.

Ken Henry didn't share that view.

Didn't seem to me that he was delaying the taking of that decision, no.

Henry did, however, notice that Rudd's engagement with the policy fell away, leaving Swan to carry it.

KH: Probably wasn't as engaged as he might have been in the lead-up to the announcement.

SF: Did that hurt the political process?

KH: It's hard for me to judge. It's really hard to judge. I guess I do think that it required a stronger sales job. I'll say that much.

Rudd was adamant the responsibility was not his.

You know you can't say this Prime Minister, Kevin Rudd, he's such a centralist that he doesn't delegate enough, so the guy delegates and allows the Treasurer to run with it, and then say there are problems in the end because the Prime Minister didn't pay enough attention to the detail. God give us a break. If you can't delegate tax reform to the Treasurer of the day, then frankly you don't have a functioning system of government.

Remarkably, one of the government's biggest reforms never went to Cabinet for a decision. Even Martin Ferguson, Minister for Resources and Energy, wasn't given an opportunity to advise the Prime Minister about the proposal.

SF: Did Kevin Rudd take too long to make a decision to proceed with the mining tax?

Martin Ferguson (MF): I don't know 'cause it never went to Cabinet. So I don't know what was going on in the so-called Gang of Four.

Swan and Rudd couldn't agree on the role of the Resources Minister.

SF: Right at the beginning, is it right that Kevin Rudd told you to keep Martin Ferguson out of it?

WS: Yes.

SF: Why?

WS: Because he didn't trust Martin Ferguson.

Rudd disagreed.

That is simply not true.

There was no way of verifying the contradictions between Rudd and Swan on the tax. Whatever the truth is about Martin Ferguson's involvement early on, the failure to bring the mining industry onside is one of the biggest regrets of his parliamentary career.

I'll go to my grave thinking about what a lost opportunity for a government I was proud to be part of to achieve for the Australian community. I hope someone in the future has the same commitment to achieving it. We destroyed their [the community's] trust and destroyed our opportunity to deliver it for Australia. A huge political mistake, a huge economic mistake, something we were held accountable for in 2013.

However unbelievable it seems now, Ferguson said there was no resistance from the industry to a profits-based tax.

I saw the CEOs, in Sydney and Melbourne, of Rio, BHP and Xstrata. They wanted a profits-based tax, and in the lead-up to it, Marius Kloppers [CEO of BHP Billiton], who effectively became the leader of the mining industry in that period, always conceded that things were good: high commodity prices, record profits, especially out of iron ore and coal. He totally accepted the industry should pay some more tax, never a question. The question was how you developed the tax and how you put [it] into place.

Like Ferguson, Henry believed that the mining industry supported the proposed change to the tax regime, but he didn't accept they were willing to pay more.

My understanding of their position was that they wanted a profits-based tax but they didn't want to pay any more tax. Get rid of the royalties, that's what they wanted. Replace it with the profits-based Resource Super Profits Tax. But they didn't
want to pay any more tax than they were paying already under the royalties.

Wayne Swan didn't believe a better-handled consultation with the industry would have made any difference to the way they responded.

The truth was, behind the scenes, they started from the very beginning to martial opposition, and whatever its [the tax's] design they would've opposed it 'cause they weren't going to pay another cent if they didn't have to.

 

It's easy to forget that the items on the government's reform agenda—CPRS, health reform, mining tax—were all happening at once. Twelve days after the conclusion of the health reform agreement with the states, and five days after the leak of the CPRS decision, Rudd and Swan released the Henry Review and announced the mining tax.

Rudd led Swan into the press room at Parliament House, Ken Henry standing sentinel at the door—at the last minute, Rudd had insisted on making the announcement himself. Responding to the review, the government announced a 40 per cent tax on resource profits that they predicted would bring in $12 billion in its first two years. Until then, few people in the government knew about the proposed mining tax or the timing of its announcement.

West Australian Senator Glenn Sterle had no idea it was coming. On the first weekend of May 2010, Sterle was running a corporate backpacking program in the Kimberley. A plane carrying him and representatives from the Chamber of Minerals and Energy, Rio Tinto and Woodside arrived in Kununurra.

We land and one of the mining people says, ‘Glenn, do you know about this mining tax?' I had no idea. This was on the
Sunday, I was going bush the next day, and when Kevin and Wayne dropped that mining tax on us I was just so annoyed. They woke the sleeping giant and we weren't enemies of the resource sector.