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John Cain was a leader of integrity, courage and vision… and still he lost Victoria’s top job

The former premier’s reputation has been unfairly distorted by his opponents

Tim Colebatch 23 December 2019 2692 words

Recession-buster: John Cain as premier. The Age

John Cain, premier of Victoria from 1982 to 1990, has been roughly treated by history. As he used to say ruefully, most political careers end in failure, including his own. And history — at least at the time when it matters — is written by the winners. They present their caricatures of their opponents as reality, and are usually believed.

Cain’s death on Monday, two weeks after suffering a stroke at the age of eighty-eight, is an opportunity to reassess his legacy, correct the distortions, and refocus on the achievements of this thoroughly decent man, a gutsy, principled reformer who led Labor in Victoria out of the wilderness to become the state’s longest-serving Labor premier.

By nature a loner, he nevertheless reached the top by working closely with and ultimately leading teams of talented individuals bent on following their own paths. Those paths often clashed with the views of powerful people and interest groups — not least, then-treasurer Paul Keating — but his government’s achievements speak for themselves.

As opposition leader during the 1990–91 recession, Jeff Kennett blamed Cain’s government for every business collapse in Victoria and branded Labor as “the guilty party.” Labor certainly made economic mistakes, but it also became the fall guy for mistakes made by others — the Reserve Bank, Keating himself, and the people running the businesses that collapsed. It was guilty of contributory negligence and poor budget management under pressure, but that was it.

Conventional history praises the Hawke–Keating government’s economic achievements, but forgets that the state that led the nation out of recession in the 1980s was Victoria — mainly because the state government stimulated economic activity, reformed its own role, created incentives for economic development and gave the state a coherent blueprint for growth.

When Australia headed into recession in 1982, the new Cain government moved into action, producing a big-spending budget financed by a combination of higher taxes and raids on money squirrelled away in “hollow logs” by state authorities. That budget and its economic reforms saw Victoria displace New South Wales as the state with the lowest unemployment. From 1983 to 1989, when unemployment averaged 8.5 per cent in NSW, it was just 6.75 per cent in Victoria.

Several years ago, renowned journalist and academic Philip Chubb began work on a new biography of Cain, focusing his sharp eye on the contrast between its idealistic, reformist, Keynesian approach and the Hawke government’s market orientation and often conservative political pragmatism. Keating resented alternative ideas from any direction, particularly from Victoria, and many of the Cain government’s problems were exacerbated when Hawke and Keating starved the states of borrowing rights and made them bear the brunt of federal budget cuts.

Chubb’s premature death from cancer cut his project short. Pity: it would have been a very interesting book.

The Cain government’s reforms ranged across virtually every area of government, though thirty years later most are barely visible through the overlay of changes by subsequent governments. No area of social policy was left untouched in its hunger to reform the state after twenty-seven years in opposition. It was the first government to build hospitals in outer suburbs, to get serious about occupational health and safety, and to reduce smoking rates. It liberalised trading hours and liquor licensing, legalised prostitution, ended the electoral gerrymander, developed low-cost outer-suburban housing and brought all public transport under one ticketing system. It forced the AFL to stage its football finals at the MCG, and built the Great Southern Stand to help house them.

Two physical legacies stand out:

• The Australian Open of today could not be remotely the tournament it is without the vision and speed with which Cain grasped the need for the Melbourne Park venue, and his political courage in pushing it through against a self-seeking coalition of noisy opponents, led by then opposition leader Jeff Kennett but also including rail unions, greenies and many others on Cain’s own side of politics. Kennett made his attack personal, dubbing Melbourne Park “Cain’s cathedral.” And so it is. Without him, it would not exist — and the Australian Open would be a minor tournament.

• The Southbank precinct was created under the direction of Cain’s planning minister and close political ally Evan Walker. It quickly became the symbol of a new Melbourne in which people could stroll over the Yarra to a complex of restaurants, shops and bars ranged along the river in an area formerly home to factories, warehouses and used-car yards.

If you want to see the legacy the Cain government left Victoria, that is where you find it.

Some politicians become accidental leaders. John Cain, by contrast, seemed marked out for leadership from birth. Even before he entered politics, he was being pointed out as a future Labor leader. Once he entered parliament, it seemed just a matter of time. And once he became leader, he led Labor to one of its biggest-ever victories.

Before he emerged, Labor’s longest-serving leader and premier in Victoria was his father, John Cain senior. A working-class activist, the older Cain was a commonsense, tough, honest Labor moderate, respected by the public and his opponents. Over his two decades as party leader, 1937 to 1957, he was twice elected to govern Victoria, and did so with some success. But each time he was felled by forces beyond his control — public anger over bank nationalisation in 1947, and the split in the Labor Party in 1955.

John Cain junior, born in 1931, was his only son. He grew up in an austere, grey Victorian home on Northcote Hill, looking down on the city. By the time he was six, his father was Labor leader. One suspects his childhood was a lonely one. He would certainly have stood out at Northcote High when his father was premier, and when he was sent to Scotch College it must surely have felt like enemy territory.

But the boy was bright and diligent. He sailed through a law degree at Melbourne University, became a solicitor in Preston, and was elected president of the Law Institute. He also became an activist in the Victorian ALP, then run by a dictatorship of left-wing unions fronted by state secretary Bill Hartley. Getting into power was not their priority; exercising power within the party was all they cared about.

Cain made common cause with white-collar union leader Barney Williams and a group of other aspiring lawyer-politicians — Xavier Connor, John Button, Richard McGarvie and Barry Jones, among others — to build support in party branches and lobby for the democratisation of the Victorian branch. Victoria was by far Labor’s most unsuccessful state branch: it had been out of power at state level since 1955, and its miserable performance cost Labor the 1969 federal election.

Eventually the federal executive intervened, dissolved the state branch, and reconstituted it in a way designed to prevent any one faction controlling it again. Cain’s group became the Independents, a small but influential faction holding the balance between left and right. In 1976 he himself became the MLA for Bundoora, and was immediately given a frontbench job as shadow planning minister. It was quickly obvious that he was the party’s natural leader.

But that didn’t happen immediately. In 1977, when state leader Clyde Holding decided to move to federal politics, his deputy Frank Wilkes was elected to succeed him. A stolid, self-disciplined man, Wilkes did his best, but the job was clearly beyond him, and he was comprehensively outshone by Liberal premier Dick Hamer. Cain’s first leadership challenge foundered on opposition from the left, but in August 1981, with an election drawing close and Hamer’s successor, Lindsay Thompson, off to a good start, the left dropped its opposition and Cain became leader.

Eight months later he led Labor to a smashing electoral victory. The party picked up seventeen seats, almost all in Melbourne, and won 53.8 per cent of votes after preferences. That victory was offset in the Legislative Council, however, where every two country votes had the same weight as three in the city. The Coalition would retain control of the council almost throughout Labor’s time in government.

Cain had become Labor’s first premier since his father had been defeated twenty-seven years earlier. Labor branches and policy committees still mattered in 1982, and the party came in with a massive reform agenda — much of it led by ministers from the party’s right faction, including Rob Jolly (treasurer), Steve Crabb (Transport) and David White (initially Water Supply, later Health).

It was a government of action. It set out economic plans in great detail, and seemed to be tackling every problem. Its Keynesian pump-priming clearly worked, and despite constant attacks from Kennett, newly elected as opposition leader — and a bitter controversy when Cain sacked the governor, Sir Brian Murray, for accepting a free flight to the United States — it appeared to be heading for a comfortable re-election in 1985.

That didn’t happen. Kennett’s sheer energy kept the Liberals in the contest, and in voters’ eyes he clearly had the better of Cain during the campaign. The Liberals and Nationals, running as a coalition in Victoria for the first time since 1950, won a 3.1 per cent swing and came close to victory. The Legislative Council outcome rested on the seat of Nunawading, which ended up as a dead heat — temporarily resolved when the returning officer drew the name of Labor candidate Bob Ives out of a hat.

That election exposed Cain’s limitations as well as his strengths. He was a warm human being in one-to-one conversation, but found that warmth hard to project to the wider public. To some, he came over as reserved and withdrawn, a stickler for probity, a man said to buy his own stamps for personal correspondence rather than use those provided by the taxpayer. His dismissal of the governor for the minor sin of taking a free flight cost him support among a class of Victorians already worried by the growth in the size and reach of government.

That same sense of probity made Cain refuse to take advantage of the fluke draw out of a hat in Nunawading, which gave Labor a temporary majority in the Legislative Council. Briefly, Labor had the numbers to end the Coalition’s hold on the council by bringing in Senate-style proportional representation (as Victoria has now). But Cain refrained from doing so until the courts had ruled (for a fresh election in the seat) and the voters had voted (electing the Liberal). The Coalition maintained its veto power on legislation and Kennett, for populist reasons, used it to block any tax rises in real terms — until he himself became premier years later.

This put the Victorian budget in a straitjacket. Labor had given priority to stimulating the economy rather than getting the budget back in balance; Kennett’s veto made it impossible to achieve a budget balance except by spending cuts, which the Labor family refused to accept. An inquiry by Melbourne University economist John Nieuwenhuysen came up with a sensible agenda for tax reform, but Kennett’s veto made it impossible to implement.

At the same time, the Hawke government was getting its budget into balance primarily by cutting grants to the states — while simultaneously limiting state borrowing to absurdly low levels. For Cain and his ministers, governing was no longer much fun: little reform could be attempted when there was no money to pay for it.

Cain won a third term in office in October 1988, but only just. The Coalition gained a further 1.2 per cent swing to win 50.5 per cent of the two-party vote. But Labor hung on to all but one of its marginal seats, scraping back with a 46–42 majority in the Assembly but again faced with a Coalition-controlled Legislative Council.

In hindsight, it would have been better for Cain’s reputation had he lost. Victoria was about to enter a whirlpool of financial disasters. The state government really had little or no responsibility for them; they were produced by a cocktail of poor management by executives and directors of the companies and Keating and the Reserve Bank’s terrible misjudgement in raising the cash interest rate to a crippling 18 per cent. At that level, firms were bound to crash, and it was mostly in Victoria that they did.

The problems escalated in early 1990 when the Geelong-based Pyramid Building Society collapsed — just months after treasurer Rob Jolly had assured Victorians it was solvent. In fact, the state’s regulators of building societies were too under-resourced to know what shape Pyramid’s books were really in. Especially in Geelong, depositors who had been lured in by Pyramid’s offer of high interest rates blamed the state government, not the directors, and demanded that their deposits be guaranteed. Cain, with no fiscal room to move, could not do so.

Worse was yet to come. At the government’s urging, the venerable State Bank of Victoria had acquired a merchant bank, Tricontinental, to lend to the flashy end of town, and had appointed a confident young finance guy, Ian Johns, to run it. Neither the bank’s senior executives nor its directors really understood the business or supervised it adequately. The entire Australian banking system was reckless in this era, but Tricontinental, under Johns, picked up the clients the banks had rejected. By the time the bill for losses came in, it was $3.5 billion — more than the State Bank’s entire capital reserves.

By then, Cain had thrown in the towel. Years of increasing party infighting and resistance to government actions had worn down his will to fight. The rail, tram and bus union kept calling wildcat strikes for which the government was blamed. Personal relations among ministers became frayed, former allies became enemies, and the government seemed almost visibly to be falling apart. On 7 August 1990, Cain resigned, and his deputy Joan Kirner took over.

Most political careers end in failure, but Cain’s end was particularly bitter. His government had crashed in the polls, his faction had crashed within the party, and he had few friends left. It was painful to watch the vitriol poured out against this decent man, with virtually no one willing to risk their standing by defending him. He remained a loyal team member, sitting quietly on the backbench until the election two years later; he would not cause a by-election that Labor might lose.

He had some satisfaction seven years later when one of his former staffers, Steve Bracks, defeated Kennett to lead Labor back to power — albeit, leading a far more fiscally cautious, middle-of-the-road government than his own. He returned to public life as chair of the State Library of Victoria and lent his support to fruitless moves within Labor to curb the power of the unions and factions.

Cain wrote his own memoir of his time in government: a typically candid one, which underlined his sense that by their third term in government everyone was looking after their own interests at the expense of the team’s — and that, indeed, the Labor team had more or less ceased to exist. Mutual trust had run dry.

For all that, the first two terms of his government were years of achievement and reform. In many ways, he and his colleagues followed on from Hamer’s reformist government, tackling the areas the Liberals had found too hard. They put a new focus on Victoria’s economic opportunities, and what government could do to foster them.

For better, for worse, they ended Victoria’s long history of autonomous state-owned enterprises and brought all government activity under political control. The public service became more professional but also more oriented to serving the government’s agenda. Ministerial offices grew in power — and so did many arms of the Labor Party that wanted a share of the action.

At the head of this somewhat chaotic body, John Cain set a personal example of stoic courage, integrity and altruistic endeavour. Had the seats at the 1988 election reflected the votes, he would have been remembered for those qualities and for his earlier reforms, rather than for the chaos of the last two years. He was one of the most admirable leaders Labor has produced. •

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