Editing Gough Whitlam (section)

===Second term===
By mid-1974, Australia was in an economic slump, suffering from the [[1973 oil crisis]] and [[1973–1975 recession]]. The 1973 oil crisis had caused prices to spike and, according to government figures, inflation topped 13 per cent for over a year between 1973 and 1974.{{sfn|Reid|1976|pp=118–119}} Part of the inflation was due to Whitlam's desire to increase wages and conditions of the Commonwealth Public Service as a pacesetter for the private sector.{{sfn|Reid|1976|p=160}} The Whitlam government had cut tariffs by 25 per cent in 1973; 1974 saw an increase in imports of 30 per cent and a $1.5{{spaces}}billion increase in the [[trade deficit]]. Primary producers of commodities such as beef were caught in a [[credit squeeze]] as short-term rates rose to extremely high levels.{{sfn|Reid|1976|pp=118–119}} Unemployment also rose significantly.{{sfn|Reid|1976|p=160}} Unease within the ALP led to Barnard's defeat when Jim Cairns challenged him for his deputy leadership. Whitlam gave little help to his embattled deputy.{{sfn|Reid|1976|pp=123–124}}

Despite these economic indicators, the Budget presented in August 1974 saw large increases in spending, especially in education.{{sfn|Reid|1976|p=183}} Treasury officials had advised a series of tax and fee increases, ranging from excise taxes to the cost of posting a letter; their advice was mostly rejected by Cabinet.{{sfn|Freudenberg|2009|p=308}} The Budget was unsuccessful in dealing with the inflation and unemployment, and Whitlam introduced large tax cuts in November. He also announced additional spending to help the private sector.{{sfn|Reid|1976|p=183}}

Beginning in October 1974, the Whitlam government sought overseas loans to finance its development plans, with the newly enriched oil nations a likely target. Whitlam attempted to secure financing before informing the [[Loan Council]] which included state officials hostile to Whitlam. His government empowered Pakistani financier [[Tirath Khemlani]] as an intermediary in the hope of securing US$4{{spaces}}billion in loans. While the [[Loans Affair]] did not result in a loan,{{sfn|Brown|2002|pp=128–129}} according to author and Whitlam speechwriter Graham Freudenberg, "The only cost involved was the cost to the reputation of the Government. That cost was to be immense{{snd}}it was government itself."{{sfn|Freudenberg|2009|p=348}}

Whitlam appointed Senator Murphy to the High Court, even though Murphy's Senate seat would not be up for election if a half-Senate election were held. Labor then held three of the five short-term New South Wales Senate seats. Under proportional representation, Labor could hold its three short-term seats in the next half-Senate election but, if Murphy's seat were also contested, Labor was unlikely to win four out of six. Thus, a Murphy appointment meant the almost certain loss of a seat in the closely divided Senate at the next election.{{sfn|Reid|1976|p=206}} Whitlam appointed Murphy anyway. By convention, senators appointed by the state legislature to fill [[casual vacancies in the Australian Parliament|casual vacancies]] were from the same political party as the former senator. The New South Wales premier, [[Tom Lewis (Australian politician)|Tom Lewis]], felt that this convention applied only to vacancies caused by deaths or ill-health, and arranged for the legislature to elect [[Cleaver Bunton]], former mayor of [[Albury]] and an independent.{{sfn|Reid|1976|pp=206–208}} By March 1975, many Liberal parliamentarians felt Snedden was doing an inadequate job as leader of the Opposition, and that Whitlam was dominating him in the House of Representatives.{{sfn|Freudenberg|2009|p=315}} [[Malcolm Fraser]] challenged Snedden for the leadership, and defeated him on 21 March.{{sfn|Freudenberg|2009|p=317}}

Soon after Fraser's accession, controversy arose over the Whitlam government's actions in trying to restart peace talks in Vietnam. As the North prepared to end the civil war, Whitlam sent cables to both Vietnamese governments, telling Parliament both cables were substantially the same.{{sfn|Freudenberg|2009|pp=338–340}} The Opposition contended he had misled Parliament, and a motion to censure Whitlam was defeated along party lines.<ref name="The Age-1975" /> The Opposition also attacked Whitlam for not allowing enough South Vietnamese refugees into Australia, with Fraser calling for the entry of 50,000. Freudenberg alleges that 1,026 Vietnamese refugees entered Australia in the final eight months of the Whitlam government, and only 399 in 1976 under Fraser.{{sfn|Freudenberg|2009|p=342}} However, by 1977, Australia had accepted more than five thousand refugees.<ref name="The Dispatch-1977" />

As the political situation deteriorated, Whitlam and his government continued to enact legislation: The [[Family Law Act 1975]] provided for no-fault divorce while the [[Racial Discrimination Act 1975]] caused Australia to ratify the [[International Convention on the Elimination of All Forms of Racial Discrimination]] that Australia had signed under Holt, but which had never been ratified. In August 1975, Whitlam gave the [[Gurindji people]] of the Northern Territory title deeds to part of their traditional lands, beginning the process of [[Aboriginal land rights in Australia|Aboriginal land reform]]. The next month, Australia granted independence to Papua New Guinea.<ref name="In Office" />
[[File:Suharto-Whitlam House.JPG|thumb|The Suharto-Whitlam House in [[Dieng Plateau]], [[Indonesia]], where Whitlam discussed the future of [[East Timor]] with Indonesia's President [[Suharto]] in 1974]]

Following the 1974 [[Carnation Revolution]], Portugal began a process of decolonisation and began a withdrawal from [[Portuguese Timor]] (later [[East Timor]]). Australians had long taken an interest in the colony; the nation had sent troops to the region during [[Battle of Timor|World War{{spaces}}II]].{{sfn|Cotton|2004|pp=4–5}} In September 1974, Whitlam met with President Suharto in Indonesia and indicated that he would support Indonesia if it [[Indonesian occupation of East Timor|annexed East Timor]].<ref name="Dunn-1996" /> At the height of the [[Cold War]], and in the context of the American retreat from Indo-China, he felt that incorporation of East Timor into Indonesia would enhance the stability of the region, and reduce the risk of the East Timorese [[FRETILIN]] movement, which many feared was communist, coming to power.{{sfn|Cotton|2004|pp=4–5}}

Whitlam had offered Barnard a diplomatic post and in early 1975 Barnard accepted, triggering a [[1975 Bass by-election|by-election]] in his Tasmanian electorate of [[Division of Bass|Bass]]. The election on 28 June proved a disaster for Labor, which lost the seat with a swing against it of 17 per cent.{{sfn|Kelly|1995|p=106}} The next week, Whitlam removed deputy prime minister Cairns, who had misled Parliament about the Loans Affair amid controversy about his relationship with his office manager, [[Junie Morosi]].{{sfn|Lloyd|2008|p=345}} At the time of Cairns's dismissal, one Senate seat was vacant, following the death on 30 June of Queensland ALP Senator [[Bertie Milliner]]. The state Labor party nominated [[Mal Colston]], resulting in a deadlock. The unicameral Queensland legislature twice voted against Colston, and the party refused to submit any alternatives. Bjelke-Petersen finally convinced the legislature to elect a low-level union official, [[Albert Field]]. In interviews, Field made it clear he would not support Whitlam. Field was expelled from the ALP for standing against Colston, and Labor senators boycotted his swearing-in.{{sfn|Kelly|1995|pp=107–109}} Whitlam argued that, because of the manner of filling vacancies, the Senate was "corrupted" and "tainted", with the Opposition enjoying a majority they did not win at the ballot box.{{sfn|Kelly|1995|p=109}}