There are some quasi-eternal verities about Australian aid, as there are about many other Western countries’ development assistance. These are briefly that who gets the aid depends largely on the state of political relations with that country; that the growth in Australian aid annually is a function of ’incremental creep’ – that is last year’s amount plus an inflation factor; that the terms and conditions of our aid (which are good) are an outcome of a stalemate within the federal bureaucracy; that the purposes of our aid change slowly in response to changes in international thinking on development; that aid is generally not a domestic or foreign political issue, since politicians find little mileage in it with an electorate generally uninformed or else acquiescent in its humanitarian purposes.

In the 35 years since the Second World War successive Australian governments have all participated actively, though with varying degrees of enthusiasm, in the multilateral diplomacy of the United Nations, its ’Specialised Agencies’ and regional and other commissions, and the Commonwealth of Nations. Their policies in this environment have extended the scope of Australian relations through fully international cooperation while at the same time reflecting the imperatives of bilateral and regional relations.

“The honeymoon is about to be over. It has given a real sense of partnership between Australia and Japan, but now we can come down to discuss business”. According to the Japan Times, this was the message with which Mr Kiichi Miyazawa (at that time Minister for International Trade and Industry) greeted journalists on his arrival in Sydney in April 1971. This was no more than a complaint about the Australian tariff system, which discriminated against Japanese manufactures in favour of British. Such complaints were a regular feature of Australian–Japanese relations and became more frequent in the minor troughs of the Japanese business cycle that regularly followed each new peak of Japanese economic growth. “The end of the honeymoon” was, however, an arresting phrase and it was often remembered during the years that followed when, against the background of the world recession, the boundless expectations of the preceding period gave place to a more sober reality. In this paper, I shall attempt to gauge the extent of this reappraisal.

For the Australian economy, the 1980s were different from other decades. Many of the major differences between the 1980s and other decades reflected, or were reflected in, the Australian economy’s links with the global economy. Particularly important during the 1980s were the responses to structural changes taking place in the global economy that were a result of increasing economic interrelationships across national borders. This chapter examines these changes from three aspects. First, it describes briefly what happened to the Australian economy in its international dimensions during the decade; second, it analyses the major changes in the international economy that affected Australia; and third, it examines Australia’s response to these developments.

The sustained capital inflow, which had been an important feature of the Australian economy in the 1950s and 1960s, rose to new heights in 1971 and 1972, when the traditional flows of equity investment and long-term loans were supplemented and temporarily eclipsed by large-scale borrowing by both foreign and locally-owned companies operating in Australia. This dramatic change in the nature of the capital inflow cast serious doubts on the wisdom of the macro-economic policies then being pursued by the Australian Government and revived earlier discussions about its ability to implement appropriate policies in the face of volatile capital flows between Australia and the rest of the world.

In the modern international history of the Far East tremendous importance has been attributed to Indian thought and action. This has been because in the struggle in Asia between East and West India remains uncommitted and her potentialities are not fully revealed. Strategically the sub-continent is so situated that it cannot be ignored in any major problem of international relations. India is looked upon as being the one country which can provide a bridge between East and West in the struggle to achieve a new basis for understanding in the Asian area. Mr. Nehru is regarded as the leader of an attempt to build, if not a third force, at least a group of powers not aligned with either East or West, and it is within the nation he leads that the success or failure of the democratic method of solving Asia’s problems will be determined.

The years 1976 to 1980 were an especially dynamic period for Australian relations with the South-West Pacific. The claim for a significant role in the region which Canberra had staked during the first half of the 1970s was developed and defended with considerable vigour in the second half of the decade. And, in many respects, this expansion represented something more than a continuation of the undertakings of the previous five years. There were qualitative as well as quantitative changes in the character of Australia’s relationship with the South Pacific during the second half of the 1970s which marked a fundamental shift in the Australian view of the Islands from the preceding five years.

In the preceding volume in this series Professor Macmahon Ball has described how in the period 1952 to 1960 the following factors operated to reconcile Australians to Japan: (1) with the realisation that Japan could again become a threat to Australia only if allied to her powerful Communist neighbours came the realisation that Japan must be assured of friendship, prosperity and international respect by the members of the Western camp; (2) the desire to fall in with Washington’s policies; (3) increasing dependence on Japan as a market. He also noted that, beyond the level of policy, good relations were being strengthened at the popular level as more and more Australians visited Japan as tourists and traders. He predicted that political relations between the two countries would become closer and indicated points at which, he hoped, Australia would take advantage of Japan’s special interests or capacities

Foreign policy is the means by which a country tries to achieve those national objectives that lie outside its exclusive jurisdiction. For many years foreign policy in most Western countries has been conducted, wherever possible, above the rough and tumble of domestic politics. In Britain especially but also to some extent in Australia, foreign policy has been ’an idol to be hidden in the temple, untouched by profane hands’. The content of foreign policy is now becoming less distinctive, its conduct less exclusive, and the years 1976–80 witnessed some changes in the foreign policy process which reflect the broadened compass of foreign policy. That process was also influenced of course by a number of transient political or personal factors.

“Australia’s policy on West New Guinea is almost a unique test of the wisdom, maturity and far-sightedness of our diplomacy. Almost every other foreign policy issue since 1945 has been in some way obscured or compromised by our relations with our powerful friends. But our stand on West New Guinea is our own.” The extent to which purely domestic considerations of sentiment and strategy have influenced Australia’s relations with her Asian neighbour is nowhere illustrated more baldly than in the case of her policy towards Indonesia, and in particular her stand on the Indonesian- Dutch dispute over West New Guinea. Except on a few rare occasions great-power politics have little influence on Australian policy in this area. Under both the Chifley and Menzies Governments we have frequently been out of step with our powerful friends. And in no other field of Australian foreign relations have our policies traversed so wide an arc.

When in January 1976 the Fraser Government restored the use of “God Save the Queen” as Australia’s alternate national anthem, the London Daily Telegraph editorially welcomed the decision. Although admitting that Britain could “no longer act as chief investor or market protector or nurse” to Australia and New Zealand, it commented: We share with the Australians and New Zealanders a common parentage: we are of the same family ... And now, at a very dark time for us when everything seems to be going wrong for us and all certainties are in doubt, we hear from the other end of the earth a resounding symbolic reaffirmation of belief in the values and loyalties which were once our own and will—God willing—be ours one day again ... We may learn from down under that self-respect does not reside in vulgar novelty, or rude disrespect for what we were and still are.