Foreign policy has not been a matter of continuing concern in Australia: the professionals have given constant attention to it, but the public has normally been involved with it only when it was a matter of war or of problems involving allies. Raising the public temperature has been possible in such matters as the Vietnam War or the US alliance, but the disputes have not been of great importance in the body politic, though it matters greatly at times for such bodies as the Democratic Labor Party in its heyday, or the fringe leftist groups which are always a vocal part of the Australian political scene. Such a state of affairs is not accidental, but arises from the situation of a country which has no land-based boundaries with others, and so is not excited by territorial disputes or by the presence of its people as persecuted minorities in other countries; which is relatively homogeneous in its society, though multicultural to a certain degree; and which is greatly concerned with domestic issues. There is not much scope in such a situation for the quarrels with other countries (especially neighbours) which have traditionally provided elsewhere the stuff of an absorbing foreign policy and fuelled the fires of political indignation.

In the period under review, 1966–70, Australia was singularly free from the ’constant balance of payments worries’ of the 1950s and early 1960s. The problem of external balance – of finding enough foreign exchange to finance an ever-growing import bill – which, in the preceding two decades and indeed in many earlier periods of Australian economic history, had never been far from the centre of concern of Australian economic policy-makers, all but vanished, at least for the time being. On the contrary, towards the end of the period, Australia, to her own surprise, found herself embarrassed by a plethora of foreign exchange, in a small way paralleling the discomfiture of the major surplus countries, Germany and Japan,

Australian–American relations had never been worse than they were in 1975. It was reasonable to expect that they would improve in 1976. The reason was simply the change of government in Canberra in December. Labor Prime Minister E. Gough Whitlam had been unquestionably sincere when he claimed in 1973 that his policies would bring the trans-Pacific relationship to a new maturity, and place it upon foundations firmer than those on which it had rested previously. The fact was that during his term of office the two nations drifted from one disagreement to another, interspersed with occasional confrontations.

Australian interests in the Middle East in general and the Suez area in particular have traditionally been of two kinds: military and economic. Imperial and Australian defence planning in the first half of the twentieth century had been based on the assumption that there would be a string of imperial bases between London and Singapore or Darwin which would make effective Commonwealth defence plans in the Mediterranean, Indian Ocean and Pacific Ocean areas. Gibraltar, Malta, Suez, Aden, Colombo and Singapore had been the normal naval and/or air bases regarded as vital to the safeguarding of the Dominions east of Suez. Commonwealth security had been maintained through dominant British influence at key strategic points along what had frequently been described as the jugular vein of the Commonwealth. It was for this reason that Australian forces had served in the Middle East in two world wars. Political and economic stability in the sensitive Middle Eastern area was regarded as a matter of vital concern to the Commonwealth as a whole.

One of the pitfalls of writing contemporary history is that changes tend to appear more significant at the time than when viewed with the benefit of hindsight. There is a continuity in any country’s perception of the world – shaped not only by its geo-political situation but also by its cultural and political traditions and its collective aspirations, fears and prejudices – which is reflected in its relations with other countries and which transcends changes in government. The election in December 1972 of the first Australian Labor Government for 23 years clearly did not usher in a new millenium in relations with South-East Asia. Indeed, future historians may consider many of the changes it made as simply an acceleration of those begun by the Gorton and McMahon Governments or as responses to new situations in the region which would have been made by whatever party was in power. But what should not be underestimated is therather elusive, yet nonetheless important, changes in tone and sympathy which the Labor Government brought to Australia’s involvement in the region.

From the very beginning of Australia’s European life, migration has been a major force. In the first place it has been vital to development and growth, quite as vital as the inflow of capital and organization. Over the period 1788–1971 and excluding the Aborigines, the Australian population grew from nil to 12 640 000, 35 per cent by net migration and 65 per cent by natural increase, much of this last being due to new immigrants having children after arrival in Australia. This immigration has not been uniformly steady or invariably popular.

The second half of the 1970s brought a marked deterioration compared with the previous five years in the underlying trends in Australia’s transactions with the rest of the world. The annual deficit on current account transactions averaged 2.1 per cent of nominal GDP (Gross Domestic Product) during the years between 1974/75 and 1979/80 compared with 1.1 per cent during the previous five years, and private capital inflow averaged 1.4 per cent of nominal GDP compared with 2.4 per cent in the first half of the decade. Several factors contributed to this worsening, and the worsening in turn evoked a number of new policy responses from the government. These developments will be described before a detailed account of various aspects of balance of payments trends is given.

Australian interest in New Guinea, which first became significant in the 1870’s, was abundantly justified from the point of view of national security by the events of the war against Japan. New Guinea became plainly the last rampart protecting the Australian mainland from invasion and the recognition of this, heightened by the personal experience of the island gained by thousands of servicemen, persisted in Australian minds after the war. There is now a very much wider awareness of New Guinea as an element in the national situation and some New Guinea matters have unprecedently become national political issues in the postwar period: the question of the use of Manus as an American base, the Bulolo timber inquiry, the retirement by the Commonwealth Government of the first post-war Administrator, and the proposed use by the United States Navy of Japanese technicians in a survey of New Guinea waters.

Australia’s foreign policy has always been determined more by her relations with the great powers than by her relations with the middle and small states in her neighbourhood. It is by great powers, with one possible exception, that Australia has felt threatened, and to other great powers that she has chiefly looked for protection against them. In the years 1966–70 Australia’s foreign policy was dominated by the Vietnam war. In April 1965 Australia committed combat troops to Vietnam formally in response to a request from the government of the Republic of Vietnam, for assistance against what it claimed was aggression from North Vietnam. But what primarily accounted for this decision was the belief that Australia should support her great power ally, the United States, in the stand it was making against communist expansion in Asia, emanating from China and, to a lesser extent, the Soviet Union.

Australia is not part of Asia. Nor is it, as is sometimes suggested, an extension of or an appendage to the Asian continent. In making so unqualified an assertion, one is not seeking to take refuge in the traditional acceptance of continental nomenclature nor in the existence of the narrow straits that separate the East Indies from Australia. The implication is that from almost every conceivable point of view the lands on either side of the Arafura Sea are fundamentally different in character.

In formulating its foreign policy any country tends to distinguish between areas of central and of peripheral importance, between those areas where it can exert considerable influence and those where it can exert little influence. This is the choice facing small and middling countries like Australia. The great powers have to make similar choices to conserve their resources – political, economic and diplomatic – but are still able to exert considerable or even overwhelming power from time to time in areas which are normally peripheral but which may, because of shifts in the power balance, become less peripheral and more central from the point of view of global policies.

During the decade here under review, basic circumstances conditioning relations between Indonesia and Australia have undergone an important change. This has been primarily the result of the major political upheaval in Indonesia following the abortive coup of September–October 1965. Until the coup, Indonesia tended to be seen as, at best, a source of serious embarrassment to Australia, particularly in relation to Australian policy in New Guinea and Asia, and, at worst, as a positive threat to the security of ’Free Asia’, Papua New Guinea and Australia. Since 1965, Indonesia has come increasingly to be seen as a potential ally, worthy of Australian assistance, although the culmination of this apparent transformation was not reached until President Suharto’s visit to Australia in 1972. During that visit, press headlines provided dramatic evidence of the extent to which Indonesia was seen to have changed: ’Suharto—a seeker of security’, ’New defence link with Suharto’, ’President Suharto meets Aust. Govt, military links with Indonesia discussed’.

For the first time in its history, the Indian Ocean became an area of major international concern during the five years under review. This was due to the combination of a greatly reduced British defence presence, and a Soviet initiative to expand its political and economic interests in the region concurrent with a modest display of naval activity. The United States showed little inclination to match the Soviet presence, so that Australia’s western maritime environment – across which roughly half its trade was carried – seemed less secure than at any time since the First Fleet arrived in New South Wales in 1788.