Premiership
Borbidge's government imitated that of Goss when it initiated sweeping changes in the public service when it won office. In some cases, figures who had been demoted or dismissed when Goss had come to power were reinstated to their former positions. Borbidge was criticised for attempting to stack the public service, but he counter-alleged that the public service was already subject to severe Labor bias.
The Borbidge government also initiated changes to the industrial relations system by introducing Queensland Workplace Agreements (QWA's), similar to the Australian Workplace Agreements later created under the Federal Liberal government of John Howard. Borbidge also supported Howard in his efforts to reform Australian gun ownership laws after the Port Arthur massacre, a move that brought him unpopularity in some traditional National Party quarters. When in 1997 the High Court of Australia expanded the recently-introduced concept of Native title in bringing down the Wik decision (for which Borbidge criticised the bench as "historical dills"), Borbidge argued that Howard's proposed changes to the Native Title Act did not go far enough in abolishing native title from pastoral leases. The Act was supported by the National party federally, however.
The Borbidge government was almost immediately beset by scandal when it was revealed that during the Mundingburra by-election campaign, Borbidge and Cooper (now Minister for Police) had signed a secret Memorandum of Understanding with the Queensland Police Union guaranteeing the QPU the repeal of unpopular Goss government measures, the power of veto over senior police appointments, and increased police funding in return for a donation of $20,000 to the by-election campaign. This close relationship evoked many memories of the Bjelke-Petersen era, where relations between the executive and the police service were frequently close.
The matter was referred to the Criminal Justice Commission (CJC), a body that had been established on the recommendation of the Fitzgerald Inquiry and that was regarded poorly both by the National Party and the Queensland Police. Retired New South Wales Supreme Court judge Kenneth Carruthers QC was appointed to lead the inquiry, which also investigated an allegedly improper agreement between the Labor Party and the Sporting Shooter's Association.
The government became embroiled in a war of words with the CJC, and Sheldon's first budget as Treasurer reduced funding for the body. In October 1996 the government announced an inquiry into the CJC itself. This had a dramatic sequel when after the new inquiry, led by retired Queensland Supreme Court judges Peter Connolly QC and Kevin Ryan QC, requested that Carruthers hand over all records from his inquiry, he resigned without completing his inquiry, alleging interference. The Carruthers Inquiry was completed by Bob Gotterson QC and Brendan Butler SC, who ultimately exonerated all the participants from facing potential criminal charges.
In June 1997 Carruthers and the CJC went to the Supreme Court of Queensland applying for an end to the Connolly-Ryan inquiry. The Court closed the inquiry in August, stating that it had acted outside of its terms of reference and Connolly was compromised by bias. A subsequent motion of no confidence was passed in the Parliament against Denver Beanland, Attorney-General, with Cunningham's support, but Beanland, with Borbidge's support, refused to resign.
In the lead-up to the 1998 elections, intense speculation surrounded the role that the new One Nation Party, formed in April 1997 by Queensland federal MP Pauline Hanson, would play. Hanson's positions on issues such as multiculturalism, gun ownership and native title were well received in the Nationals' heartland of rural and regional Queensland, and the Nationals struggled to prevent leakage of their support to One Nation. The cynical mood in the electorate that Borbidge had harnessed to win office now began to turn against him, as he endeavoured to satisfy both the hard-line conservatives deserting the Nationals, and the urban Liberal supporters who detested Hanson and her views. Knowing the threat One Nation posed to his own party, Borbidge attempted to ensure that One Nation would be placed last on coalition how-to-vote cards. However, the organisational wings of both the Liberal and National parties rebuffed him and insisted that they would preference One Nation ahead of Labor (see Australian electoral system). This was done under pressure from the federal Liberal and National organisations, who apparently believed that One Nation's populism would strike a chord with Labor voters and thus peel enough of them off to keep Labor out of power.
In the 1998 election, the Coalition was severely punished for this stance, losing 17.7 percent of its two-party vote from 1995. One Nation picked up 11 seats, and unexpectedly finished with a higher primary vote than the Liberals or Nationals. The Coalition was reduced to 32 seats to Labor's 44. Borbidge needed the support of the two independents in the legislature—Cunningham and Peter Wellington--and the One Nation MPs to stay in power. However, this was brought undone when Wellington agreed to support a minority Labor government led by Peter Beattie. Borbidge promptly resigned.
Borbidge made little headway as Opposition Leader against Beattie. The Coalition reaped no benefit when One Nation imploded, or when an inquiry ended the careers of several Labor MPs—including Deputy Premier Jim Elder. Before the 2001 state election, Borbidge, remembering what happened three years earlier, promised that the Coalition would never preference One Nation again. However, several of his own MPs reneged on that promise after the writs were dropped. Beattie seized on this, arguing that this proved a Coalition government would only survive with the support of One Nation and former One Nation MPs. At the 17 February election, the Coalition saw its seat count more than halved, to 17 seats. Amid this severe defeat, Borbidge created controversy when he immediately resigned from parliament, forcing a by-election in Surfers Paradise. Voter backlash at having to return to the polls for the second time in three months resulted in the election of an independent member in the traditionally safe National seat.
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