Loans Affair

The Loans Affair, also called the Khemlani Affair, is the name given to the political scandal involving the Whitlam Government of Australia in 1975, in which it was accused of attempting to illegally borrow money from Middle Eastern countries by bypassing standard procedure as dictated by the Australian Treasury.

The Loan

During 1975, the Whitlam Government attempted to raise a loan of approximately US$4 billion. The money was supposed to be used to fund a number of natural resource and energy projects, including construction of a natural gas pipeline, the electrification of interstate railways and a uranium enrichment plant. This was alleged to be illegal on the grounds that it bypassed the requirement of authorisation by the Loans Council which was then enforced.

The Minister for Minerals and Energy, Rex Connor, Treasurer Dr. Jim Cairns, and others, were prime identities in the scandal.

The loan was sought from the Middle East and not European or American sources because the Middle East at the time was awash with "petrol-dollars", as the price of oil quadrupled between 1973 and 1974. A Pakistani broker, Tirath Khemlani, was used by Connor to secure the loan. In the end, however, no loan was ever obtained, and the scandal did much to tarnish the Whitlam Government's reputation.

Progression after its leak

A special one-day sitting of the Australian House of Representatives was held on 9 July 1975, during which the then Prime Minister of Australia, Gough Whitlam tabled the documents containing evidence about the loan and sought to defend his government's position.

Beset by economic difficulties at the time and the negative political impact which the Loans Affair conjured, the Whitlam Government was very vulnerable to further assaults on its credibility. Gough Whitlam was prompted to sack Dr. Cairns from his cabinet.

Aftermath

Although Rex Connor's authority to seek an overseas loan was withdrawn following leaking of the scandal, he continued to liaise with Khemlani. The "Herald" Newspaper based in Melbourne published documents confirming this and Connor was forced to resign from the cabinet. He was replaced by the future Prime Minister, Paul Keating.

The loans affair embarrassed the Whitlam government and exposed it to claims of impropriety. The Malcolm Fraser-led Opposition used its numbers in the Senate to block the government’s budget legislation in an attempt to force an early general election, citing the loans affair as an example of ‘extraordinary and reprehensible’ circumstances. Whitlam refused, and this led to the Australian constitutional crisis of 1975.

ee also

* Gough Whitlam
* List of Australian political controversies

External links

* [http://www.whitlamdismissal.com/loans/ Whitlam Government Dismissal: Overseas Loans Affair]

* [http://www.whitlam.org/collection/1975/1975_10_9_Australian.html Editorial on the "Loans Affair"] (Extracts from The Australian)

* [http://www.ozpolitics.info/topics/dismissal.htm Topical Discussion on the Loans Affair and the Dismissal] (Includes Chronological Timeline of Key Events)