GFC plan excluded Gillard, and Tanner in early stages

KEVIN Rudd and Wayne Swan operated as a two-man government in the early crafting of Australia's response to the global financial crisis

KEVIN Rudd and Wayne Swan operated as a two-man government in the early crafting of Australia's response to the global financial crisis

Their "kitchen cabinet" colleagues Julia Gillard and Lindsay Tanner were left in the dark for two months about their plans.

The revelation in a new book about the inner workings of the then fledgling government comes amid resentments over the Prime Minister's personal style and the breakdown in traditional cabinet processes under his leadership.

The first stimulus package in October 2008 was presented to cabinet, having been formulated by the government's four top ministers, after all key decisions had been made and the press releases already printed.

Shitstorm, written by respected Canberra journalists Lenore Taylor and David Uren, this newspaper's economics correspondent, also details how the Treasury under Peter Costello began preparing as early as 2004 for how to respond to the next recession.

The authors show Labor's early action -- planning for the first stimulus began in early August, almost six weeks before Lehman Brothers collapsed -- meant Australia was able to respond more rapidly than any other nation.

The clandestine planning at The Lodge included only the Prime Minister, the Treasurer, members of their staff and Treasury secretary Ken Henry.

The Deputy Prime Minister and Finance Minister were not brought into the loop until a meeting in Brisbane on October 7 of the Strategic Priorities and Budget Committee, or "gang of four", where Mr Tanner argued that the stimulus was not needed because the latest data showed reasonable economic growth.

The final decisions on the size and shape of the package were decided at an all-weekend meeting a week later. Mr Tanner admits he required a great deal of persuading on the boost to the populist first-home owners grant.

The authors detail how Dr Henry argued for a $5 billion spending package in October, coining the term "go hard, go early, go households" on the spot. But Mr Rudd prevailed by reminding him that in August he had suggested a $10bn injection was required to alter the economy's course. "You either don't act or you do," he said. "The worst thing you can do in public policy terms is to half-act."

The authors chronicle how the secrecy and crisis management of the "gang of four" endured after that.