Menzies government McMahon was elected to the House of Representatives at the
1949 federal election, winning the newly created
Division of Lowe for the Liberal Party. His candidacy was endorsed by
Billy Hughes, who had known his grandfather. McMahon soon developed a reputation as "a deadly earnest, dogged, enormously hardworking and dedicated member". In 1950, he successfully proposed an amendment to the
Menzies government's
Communist Party Dissolution Bill, reversing the effect of a clause so that the
burden of proof was on the government rather than an accused person. However, the bill was subsequently struck down by the
High Court. McMahon was promoted to
Minister for Labour and National Service after the
1958 election, in place of
Harold Holt. This brought him firmly into the inner ranks of the Liberal Party, and in terms of cabinet rank placed him among the party's most senior figures in New South Wales. McMahon oversaw the creation and administration of what became the
National Service Act 1964, which re-introduced
compulsory conscription for 20-year-old males in anticipation of further Australian involvement in South-East Asia. On the labour side of his portfolio, he frequently came into conflict with the leadership of the
Australian Council of Trade Unions (ACTU), though there was no major industrial action during his tenure. He attempted to reduce the influence of trade unions known to be controlled by the
Communist Party, particularly the
Waterside Workers' Federation. In 1964, McMahon was made
Vice-President of the Executive Council, further confirming his status within the government. McMahon was appointed
federal treasurer in
Holt's new ministry, a position he had long sought. He was the first person with an economics degree to hold the post. McMahon proclaimed a "very deep liking and respect" for the
Department of the Treasury and upheld its advice in policy battles with McEwen's
Department of Trade and Industry. According to
Alan Reid, he "fought relentlessly to maintain Treasury's influence, prestige and power". Although he consulted widely within his department, he also had a reputation for indecisiveness and deferring difficult decisions. the early retirement of long-serving Treasury secretary
Roland Wilson in October 1966 was credited in part to his dislike of McMahon. As treasurer, McMahon oversaw the implementation of Australia's
conversion to decimal currency (a decision of the previous government), with the
Australian dollar introduced in February 1966 in place of the
Australian pound. A year later he announced that the transition had cost half as much as estimated and that the period of dual currencies would be shortened, with the dollar being the only legal tender from August 1967. In November 1967, McMahon secured cabinet approval for Australia to leave the
sterling area, by refusing to match the British government's devaluation of the
pound sterling. The decision brought him into renewed conflict with McEwen, who had been out of the country when it was taken and sought to secure its reversal. There was further conflict over McEwen's proposal for a government-owned
Australian Industry Development Corporation, which McMahon and Treasury sought to counter with a proposal for a privately owned Australian Resources Development Bank.
Gorton government: treasurer and foreign minister shortly after McMahon's unsuccessful leadership challenge in 1969 When
Holt disappeared in December 1967, McMahon was assumed to be his probable successor. However,
John McEwen, interim Prime Minister and leader of the
Country Party, announced that he and his party would not serve in a government led by McMahon. McEwen did not state his reasons publicly, but privately he told McMahon he did not trust him. McEwen, an
arch-protectionist, correctly suspected that McMahon favoured policies of
free trade and
deregulation. McMahon therefore withdrew, and
Senator John Gorton won the
subsequent party room ballot for party leader and therefore Prime Minister. McMahon remained Treasurer and waited for his chance at a comeback. The Coalition was nearly defeated at the
1969 federal election. After the election, McMahon
unsuccessfully challenged for the leadership, but was nonetheless re-elected as deputy leader. He was subsequently demoted from Treasurer to
Minister for External Affairs.
John McEwen had announced in the lead-up to the spill that he would lift his party's veto on McMahon as prime minister. In March 1971, the Defence Minister,
Malcolm Fraser, resigned from Cabinet and denounced Gorton, who then announced a
leadership spill. The ensuing party room vote was tied, and under the party rules of the time this meant the motion was lost and Gorton could have theoretically remained as leader and Prime Minister. Nevertheless, Gorton declared that a tie vote meant he no longer had the confidence of the party, and voluntarily resigned the leadership. McMahon
was then elected leader (and thus prime minister), and Gorton was elected deputy leader. ==Prime Minister (1971–1972)==