During 1975, the Whitlam Government 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.
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.
On July 9, 1975, Whitlam held a special one-day sitting of the House of Representatives on the loans affair. The government tabled hundreds of documents in an attempt to clear the air.
Rex Connor’s authority to raise overseas loans was withdrawn in early 1975, but the minister continued to liaise with Khemlani.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, announced 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.
Archived posts – Loans Affair
- Whitlam’s Press Conference Following Ministerial Reshuffle June 10, 1975
- $4000m Loan Letters June 11, 1975
- The Australian: Let Us See The Khemlani Letter June 13, 1975
- Parliament Recalled To Debate Loans Affair July 9, 1975
- Loans Affair: Special One-Day Sitting July 9, 1975
- Whitlam’s Press Conference Following Cairns Sacking And Loans Affair Sitting July 15, 1975
- Rex Connor Resigns As Loans Affair Delivers Fraser’s “Reprehensible Circumstances” October 14, 1975
- Gough Whitlam Interviewed On The 10th Anniversary Of The Dismissal November 11, 1985
- 20 Years On: Four Corners Remembers The Dismissal November 11, 1995