Hockey: Not Your Average Joe (11 page)

He asked them what they expected him to do. They said he needed to stage a press conference. Joe had already decided his face would not appear, if he could help it, on the news any more that week. ‘I said look, you know I’ve never been comfortable about this detention business,’ Joe told them. They stared back. ‘I’m acting immigration minister and I don’t like locking up, particularly children. Can we release people from these detention centres today?’

Joe laughs, remembering the conversation. ‘They said that would need to go to Cabinet. I said well can you prepare me a paper and I’ll say it at the press conference?’ The bureaucrats changed tack immediately. Perhaps it was best that he didn’t have a press conference today, they told him. ‘You think so?’ Joe responded. They assured him the department would put out a statement and that there was no need for him to speak publicly. ‘I said that’s probably a good idea. Can you get that paper together for me though?’ Joe says he’s never wondered why he’s not been made acting immigration minister again.

But the GST continued to dog him, and the next time Joe had help from Allan Fels. It was a few months later on a Friday afternoon, when Joe took a call from Fels, who had just done an interview with David Koch. ‘Minister, I might have accidentally dropped that some prices might go up by more than 10 per cent,’ Fels said down the line. The interview was due to air on television on Sunday.

‘What?’ Joe yelled, incredulous.

‘Well, some things might go up by more than 10 per cent,’ he replied.

‘You’re kidding me, aren’t you?’ Joe shot back, before walking into Costello’s Melbourne office and relaying the phone call. ‘This is after all the blood-letting over the bottle of Coke,’ Joe says. ‘I couldn’t believe it.’

Costello told him to order Fels to re-record the interview. And just as Joe was working out how he might do that, John Howard walked in. ‘What’s going on?’ he asked.

‘It was like a scene out of
Fawlty Towers
,’ Joe says now. Howard agreed with Costello. So Joe was forced to call Fels back and tell him that he had no choice but to call David Koch again, and re-sit the interview.

‘How am I going to do that?’ Fels asked.

‘I don’t know,’ Joe replied. ‘Think of something.’

Fels called David Koch back. ‘Look, David, I really want to give you an exclusive about this insurance company that’s ripping off its customers. I forgot to mention it. Do you think we could re-record the interview?’ Any journalist will say yes to a bigger story, and Koch was no different. ‘I did it and gave him the scoop,’ Fels says, ‘and when he came back to the 10 per cent, I had a convincing story that it could never go up by more than 10. Had the original interview gone to air, we would have had to spend several days trying to explain this thing to the public and we would have been in big trouble.’

David Koch had his exclusive. And another near-miss on the GST was averted, although not for long.

It was politics, not policy, that was also played out in Joe’s clash with Woolworths chief executive, Roger Corbett. Corbett didn’t like the GST one bit. In fact, Joe saw that Big W were putting tags on every item of clothing before the GST came in, providing one price if the customer bought the item now, and another to reflect how the item would be priced come 1 July. ‘They put it on every tag,’ Joe says.

Howard was apoplectic; Costello called Joe and told him he didn’t care how he convinced him, but Roger Corbett had to stop it.

Joe put in a call to Corbett. ‘Roger Corbett, who is cantankerous, had an argument with me. I said, listen, Roger, if we’ve got to have a body swinging from a lamppost in Martin Place and it’s yours, so be it,’ Joe says.

Corbett wanted to know if that meant Joe was threatening him. ‘No,’ Joe shot back, ‘but the ACCC can come down and help.’

Corbett had a tag on every item Big W was selling across Australia. He asked what Joe expected him to do. ‘Pull every tag,’ Joe responded.

‘But we’ve got millions,’ Corbett said.

‘I know,’ Joe bit back. ‘That’s why I’m giving you a week.’

Allan Fels watched from the sideline. The path Big W had embarked on was not illegitimate, but he could see it was politically embarrassing for the government. ‘He needed to really put the heat on Woolies to get that result,’ Fels says now.

Corbett’s story is very different. He says the two-tag strategy was to assist staff to remove the pre-GST price before doors opened on the first day the GST operated, and he had illustrated problems with the operation of the GST, causing embarrassment to Costello and the government. He says he refused to pull the two tags, despite Joe’s insistence, and eventually, after a meeting with Howard, mechanisms around introducing the GST were changed, for the better.

Even so, the GST had given Joe a rude awakening, and by the year’s end he had been asked 19 questions by the Opposition in parliament – all before the GST was introduced on 1 July. After that, the questions being asked of him were coming from his own Party.

TEN

It was on
a Sunday morning in June 2000, not long before Sydney broke out in party for the Olympics, that Joe learnt he didn’t even have to be mentioned in the story to make the headlines, at least with his prime minister. As he strode out for a morning walk through Bondi, the sound of his mobile phone pierced his thoughts. ‘It was John Howard,’ Joe says. ‘He was screaming at me – who authorised this, who did this, where did this come from?’

Joe hadn’t read any of the morning newspapers, and was slow on the uptake. Howard had a word of advice there, too. ‘Have a look at the papers and fix it.’

Joe took a quick detour to the nearest news rack to find the
Sunday Telegraph
’s headline: ‘QUEEN EXILED – Face removed from $5 note’. The poster outside the store was even more direct: ‘OFF WITH HER HEAD’, it screamed. The news report explained that the Queen’s face would be removed from the $5 note, ‘banishing the monarch from Australia’s paper currency’.

‘Fantastic front page,’ Joe says now. ‘I laughed and laughed, then went –
oh shit!
’ Joe, who had not made any secret of his support for the republic, didn’t hear again from the prime minister that day but had a call from Costello soon after Cabinet sat the following day. ‘What have you done to John?’ Costello asked, before indicating that the prime minister wanted the Queen to return to the $5 note as soon as possible.

Joe should have seen this coming, because he knew how strongly the prime minister supported the monarchy. He knew she was about to be executed from the $5 note and that’s because he’d earlier had a cup of tea with Reserve Bank governor Ian Macfarlane. Joe, as minister for financial services, had responsibility for the Mint, but believes it is debatable whether currency sat under his portfolio, or that of the treasurer Peter Costello. Costello believes it fell directly under Joe’s jurisdiction. But Joe’s belief, certainly in 2000, was that coins, not paper, came under his wing, and this decision, in any case, had been made by the Reserve Bank not the government. Macfarlane had shown him the new plates for the $5 note. In fact, Joe missed the change at first, and needed prompting to notice that Henry Parkes had bumped the Queen off. On the other side Catherine Helen Spence, the 19th-century journalist and campaigner for women’s suffrage, had usurped the position of Parliament House.

Given Joe’s acknowledged political nous, the Queen’s head being removed from the $5 note should have prompted an immediate warning, but it didn’t. In fact, he loved the idea. The old $5 notes were still in circulation, but the plan was to issue the new one for the centenary of Federation. Joe, an avowed republican, left his chat with Macfarlane feeling upbeat, and not giving the Queen another thought – until Howard’s phone call.

Costello says: ‘They said to him they were going to do this and he thought it was a good idea. I didn’t know about it. Even if I had it wouldn’t have worried me, but when it came out it certainly worried John Howard.’ Howard’s response confirms that. He was not amused, he says now.

A year earlier, in 1999, Australians had voted against a republic in a divisive referendum that pitted Liberal Party MPs against each other. Even within the ministry there were pro-and anti-republicans, and those groups had subsets of supporters, with some wanting direct election and others opposed. Tony Abbott and Nick Minchin joined their boss in fighting the ‘no’ case. The republicans were led by Malcolm Turnbull, but had Peter Costello on their side. Joe was still a junior minister but he took on Abbott, the minister for employment and workplace relations, at every opportunity, particularly when Abbott claimed republicans were intent on ‘ethnic cleansing’.
It was a battle that illuminated the deep divisions in the party over the issue, and it was a
difficult one for Howard to handle.

Joe supported a republic strongly but was only ever a sideline player despite finding himself next to the Queen on the night in November 1999 when Australia voted against the referendum. He was at the Rugby World Cup final in Cardiff, representing the prime minister, who was unable to attend. Howard had stipulated that Joe was not allowed to speak to the Queen about the outcome. That night, Joe was seated in the royal box, next to Prince Philip. The Queen, French president Jacques Chirac and UK prime minister Tony Blair were also there. ‘I’m like Forrest Gump, sitting there,’ Joe says now.

At half-time, the Queen left the seated area allowing Chirac and Blair to conduct a brutal debate in both English and French. The French had banned meat imports because of mad cow disease and Blair was lobbying Chirac to change the policy. The argument grew increasingly tense and Joe was enjoying eavesdropping until the Queen’s return distracted him. ‘Minister, how’s your day?’ she enquired politely. Joe remembered Howard’s stern warning not to talk about the referendum. He struggled not to smirk.

‘I said, well, your Majesty, it’s got its ups and its downs. She looked at me and said, “You’re obviously having an up with the result here at the moment.” And I said, yes, your Majesty. And she said, “I understand.” I said, thank you, your Majesty – you’re still my Queen. And she said, “Yes I am still your Queen – for the moment.” And that was it.’

Joe heard later that the Queen had wanted to put a statement out saying that Australia was on course to become a republic down the track and that she accepted that the mood of the Australian people was for change, but it was stopped.

Joe’s portrayal in the media had always been largely positive – it had proved a strong ally during his time as SRC president and as NSW Young Liberal president. He knew how to use it to work in his favour, but it was during his first term as minister that he realised the treatment being meted out to him could turn at a moment’s notice. That’s what he believed happened to him when he made the slip-up on the GST, and it was early in 2001 that he would again face the full force of the public scrutiny over an issue he couldn’t see coming.

Joe was rushing through a mall in Lane Cove, late for a local Liberal Party branch meeting in March 2001, when his phone rang. ‘I remember this vividly,’ he says. ‘Graeme Thompson said, “Minister, HIH has been put into provisional liquidation.” ’ Joe focused on each of the words being uttered by the head of the Australian Prudential Regulation Authority (APRA), the regulator of banks, insurance companies and super funds.

‘What do you mean?’ Joe pressed.

‘We don’t really know,’ Thompson replied.

‘What do you mean you don’t know? You better find out,’ Joe spat back.

The next day, Joe’s office asked APRA for a written brief. No sense of urgency enveloped its response, reflecting the fact that a few days would pass before the implications of Australia’s second biggest insurance company toppling over would become obvious. But, in a nutshell, it meant every policy insurer HIH had around the world was null and void. The consequences of that are hard to fathom, even with the benefit of hindsight, but motorists were heading to work in cars that were no longer insured. Holiday-makers were sleeping around the world, waking up in different time zones to find out they no longer had insurance. Homes were insured one minute, and not the next. Paraplegics, who were on annuities, had their monies stopped and more than 1000 employees at HIH no longer had jobs. Those were the ripples reverberating through the community as a consequence of Australia’s biggest ever corporate collapse.

It wasn’t just big news in business. The heartache had names, too, making the story the immediate darling of the media – from the financial press to women’s magazines. The 50-year-old school principal with a brain tumour had his monthly cheque, delivered through his protection insurance policy, dishonoured on presentation. Retirees who had invested their future in HIH shares so they could finance their own retirements were left with nothing. Another family was forced to live in the burnt pod of their home after HIH couldn’t meet the caravan rental payments. The news hit the young, as much as the old, small businesses as well as individuals, those working and those on holidays, commuters and those at home. The building industry downed tools.

Everyone looked for a target to blame, and Joe’s face filled television screens in lounge rooms across the nation. He was the minister responsible for APRA, which was charged with overseeing HIH. He was the young minister who had courted the media in a bid to be noticed, to stand out in an ambitious parliamentary cohort all wanting a bigger and better job, and now he had nowhere to hide.

In fairness, Joe (and his staff) had asked APRA on several occasions over the previous months about the performance of HIH and each time he was given an assurance things would be okay. The first time was the previous year after he visited Lloyds of London, where a young Australian worker had tapped him on the shoulder and offered an insight into what was happening in the insurance market. ‘There’s one mob that’s writing the crap on the floor,’ he told the minister, ‘and that’s HIH.’

Joe expressed surprise and made a note to meet up with Graeme Thompson on his return. At that meeting, he was assured that, although HIH was going through tough times, it would not falter. The same response was delivered at a second meeting.

Not long after, Joe ran into Laurie Cox, who had been executive chairman at Potter Warburg Group. He’d got to know Cox during the sale of GIO in NSW and considered him a doyen of business; he respected him. ‘Joe we’ve done some due diligence on HIH and I’m telling you it’s going to explode in your face,’ Cox remembers telling Joe.

‘I came back and thank God I asked for a written brief from APRA,’ Joe says. He received that advice in early November, in which he was told HIH was facing financial hassles but that on its June accounts, was quite stable.

Despite the rumblings that continued to bubble away in the industry, and the concerns held both inside Treasury and in Joe’s office, APRA continued to allay the concerns of all who asked – and Joe accepted that advice. That assurance was delivered in an environment where the importance of general insurance to the economy and to the market had really slipped under the radar; superannuation was considered the big issue.

Joe had learnt from his senior minister Peter Costello about how much a minister could meddle in various areas. Joe’s portfolio encompassed a spectrum that ran from the ACCC at one end to the Reserve Bank and the Australian Bureau of Statistics at the other. Ministerial intervention was regular at the ACCC end but not at the other. APRA sat towards the Reserve Bank in the ministerial influence spectrum. Until that night in March 2001, months after these initial conversations, even Joe, as minister responsible, could not have seen how the HIH story would unfold.

But it unravelled quickly. Tony McGrath, the provisional liquidator from KPMG, met with Joe in his electoral office in North Sydney. It was lunchtime and at short notice. ‘Tell me, Tony, how big a problem have we got here?’ Joe asked.

McGrath didn’t mince words, signalling it could end up as the nation’s biggest ever corporate collapse. ‘Are you sure?’ Joe asked.

‘Very early on,’ McGrath says, ‘we knew that it was going to be sizeable deficiency but unlike a bank – the bank goes broke you know what your loss is straightaway – with an insurance company where they take money in advance to guard against the future, you’re forced to estimate what could happen in the future to work out your financial position. It was a little bit of a slow-motion train wreck.’

McGrath wanted to use adjectives, not numbers, because that was more accurate at this stage. ‘Joe wanted to pin me down to numbers and we had a bit of an arm wrestle around that and ultimately, because he’s charismatic, I gave in.’ McGrath signalled the loss could be anywhere between $4 billion and $8 billion. Joe thanked him and said he needed to seek the advice of the prime minister. He knew this information had to be delivered up the chain and Howard was on his way to a Cabinet meeting in Sydney. Howard asked Joe to meet him there.

Joe told Cabinet of his meeting with McGrath, including the figures. ‘There was silence. Everyone was gobsmacked,’ Joe says. Howard spoke first, asking Joe how he saw the government’s response. Joe only had one view, partly informed by his political antennae, but it ran contrary to the beliefs of most of those sitting around the table. ‘We should step in,’ he said. Howard and Costello led the chorus of negative responses. It was not the government’s job to bail out a troubled corporation, they argued, and it could set a dangerous precedent.

‘I said, these are our people,’ Joe says. ‘We can’t leave these people without anything.’ Joe was right on that score. Many of those now facing ruin were Liberal Party stalwarts who were practising self-sufficiency, and funding their own lives. To do otherwise, would have been to sell a chunk of the Party’s constituency down the river. The debate continued around the concept of ‘moral hazard’, an economic concept that basically says that if you keep protecting everybody they will continue to take risks. Those opposed to government intervention reminded colleagues of the Wallis report into the nation’s financial system, which had warned against such interference. Others – including Joe, Tony Abbott and Amanda Vanstone – talked about exceptional circumstances (like those revisited during the later global financial crisis) and urged the prime minister to act.

But it was politics – and the enormous media coverage of the catastrophic consequences of the collapse – that would end up driving the government’s final response. As the argument raged around the government’s top table, Howard also sought counsel from other senior business figures to ensure he understood every step. With a direction from Costello to have APRA sort out the mess, Joe and Andrew Lumsden headed over to the APRA offices, where a board meeting was in full flight. Joe sat there, getting angry, as the APRA Board talked about lessons from the fall. He couldn’t comprehend how they weren’t picking up on how calamitous the collapse was to the wider community.

‘I lost my patience,’ Joe says. ‘Listen, you guys were meant to supervise this company,’ he told them. ‘You’ve got to fix it.’