During 1975, the Whitlam Government also endured the “Overseas Loans Affair”, the story of efforts by the Minister for Minerals and Energy, Rex Connor, Treasurer Dr. Jim Cairns, and others, to raise an overseas loan of $4 billion.
The loan was to be used to fund a number of natural resources and energy projects, including the construction of a natural gas pipeline, the electrification of interstate railways and a uranium enrichment plant.
The loan was sought not from the traditional American and European sources, but from the Middle East, which was awash with “petrodollars”, following the quadrupling of oil prices in 1973 and 1974.
A Pakistani broker, Tirath Khemlani, was used by Connor to secure the loan. In the end, no loan was ever obtained, no commissions were paid, but the government was made to look reckless and foolish.
A special one-day sitting of the House of Representatives was held on 9 July 1975, during which Whitlam tabled the loans documents and sought to defend the government’s position.
During an emotional defence of his behaviour, Rex Connor proclaimed the Whitlam Government’s defence of Australia’s mineral resources and called upon the words of an old Australian poem:
Give me men to match my mountains,
Give me men to match my plains,
Men with freedom in their vision,
And creation in their brains.
- July 9, 1975: Listen to Whitlam’s speech on the Loans Affair
- July 9, 1975: Listen to Fraser’s speech
- July 9, 1975: Listen to Rex Connor’s speech
Wracked by economic difficulties and the political impact of the Loans Affair scandal, the Whitlam Government was vulnerable throughout 1975. Whitlam had been forced to sack Dr. Jim Cairns from the government and a by-election in Lance Barnard’s former seat of Bass in June 1975 saw a massive swing against the government and the election of the Liberal Party’s Kevin Newman in a seat that had been held by the ALP for 60 years.
Rex Connor’s authority to raise overseas loans was withdrawn in early 1975, but the minister continued to liaise with Khemlani. When the Melbourne “Herald” newspaper published documents supplied by Khemlani in October 1975, Connor was forced to resign from the Cabinet. He was replaced by a young Paul Keating.
After the resignation of Rex Connor in October 1975, the Opposition Leader, Malcolm Fraser, announed that the Senate would defer passage of the Supply Bills until Whitlam called an election. Whitlam refused. There followed three weeks of constitutional crisis as the parties confronted each other in Parliament and the country.