KERRY O'BRIEN, PRESENTER: Since losing the Prime Ministership in 1983, Malcolm Fraser has made no secret of his displeasure with key personalities and policy directions in his beloved Liberal Party. First, the lost decade of feuding between leadership rivals Andrew Peacock and John Howard; then some of the policy directions of the Howard Government.

Malcolm Fraser has revealed in his political memoir, to be released tomorrow, that his disillusionment grew to the point that he considered resigning from the Liberal Party and that his wife Tammy stopped voting Liberal three elections ago. He has refused to say how he has voted in the past decade, but the implication is clear.

Mr Fraser, a champion of a multicultural Australia and of asylum seekers, also reveals a view in his book, written with journalist Margaret Symonds, that the Immigration Department had a culture of racism during his time as Prime Minister.

Here now is the second instalment of my interview with Malcolm Fraser in his Melbourne office.

It's clear you don't like John Howard; not just in the book, you made no secret of that when he was Prime Minister.

MALCOLM FRASER, FMR PRIME MINISTER (1975-'83): It was the policies I don't like. It was the policies.

KERRY O'BRIEN: Look me in the eye and tell me it wasn't the man as well as the policies.

MALCOLM FRASER: Oh, some aspects. I didn't like the way Andrew Peacock was not supported in 1984. He'd done well in that election; he deserved to continue. But by the end of '85 he was out. If those two had worked together, they would have won an election in the middle '80s.

KERRY O'BRIEN: What is at the heart of your attitude to John Howard?

MALCOLM FRASER: Oh, policies. You know, I don't like the march to the right. I didn't like allowing Pauline Hanson to get her head well and truly out of the burrow. These issues, to me they seem to be fundamental. If we want a cohesive society, if we want people that are prepared to respect others who are different in our society, I think a number of the race-related issues have been handled in ways which I really abhor. The whole Tampa incident. I was at the Kennedy School at one point after Tampa. I got a message saying, "Could the Australian students have a private meeting with me?" There weren't all that many of them. They said, "It won't take long. We just have a couple of questions." The question was:"Because of Tampa, how long are we going to have to pretend we're not Australian?" I ran into this sort of thing - when government was saying, you know, people don't notice it, it only affects us here - I ran into that sort of attitude in country after country after country. I had a leader of a formally Soviet-dominated country saying to me, "Look, don't you realise in Europe we have to handle 400,000 asylum seekers a year, and we try to do it with humanity and decency. You can't even handle 4,000 or 5,000. Why?"

KERRY O'BRIEN: You observe that even in your time as Prime Minister, and I think subsequently, that there was a kind of racist culture in the Department of Immigration, have I got that right?

MALCOLM FRASER: Yes.

KERRY O'BRIEN: More of a racist culture than was in the broader population of Australia.

MALCOLM FRASER: I believe so, yes. There are also people in that department who were the very reverse. But the whole idea for establishing detention centres in remote harsh localities, that sort of idea came out of the department.

KERRY O'BRIEN: Was that necessarily racist, or driven by racism.

MALCOLM FRASER: I think probably. Ask what would have been the reaction if a boatload of refugees, of white farmers coming from Zimbabwe.

KERRY O'BRIEN: So, what ...

MALCOLM FRASER: The answer to that tells you whether it's racist or not.

KERRY O'BRIEN: So where do you think that racist culture came from? Was it a kind of long-term hangover from the White Australia Policy?

MALCOLM FRASER: Well, maybe, isn't there a bit of racism, probably, in a lot of people? Even if it's unconscious. How many people truly treat everyone else, no matter where they come from, in the same way?

KERRY O'BRIEN: But I think there's a difference between that and identifying a culture of racism in a government department handling such a sensitive area as Immigration.

MALCOLM FRASER: You might want to quibble about the word racism. The culture that made them believe they were the gatekeepers, the protectors of Australian values. Put that another way, what does that mean? I mean, to me, the values which are important to any society, whether it's a wealthy, industrial society, or, for that matter, a simply African village, if you want peace, security, health services, a better future for your children, many of the values of both those societies are going to be the same. They're universal, they're not unique to Australia. And if you start setting yourself up as, you know, "Protect Australian values. Other people do terrible things." I'm not saying there's not something unique about Australia, but the values that make a civilised society are, I believe, for a large part, universal.

KERRY O'BRIEN: You've been very critical of the Howard years with regard to its treatment of asylum seekers coming to Australia. Is the Rudd Government any better?

MALCOLM FRASER: A little. But I don't like the debate, which still seems to be - well, from the Opposition: the Government's lost control of our borders. That's an absolute nonsense. The Government has not lost control of our borders. But the Government's response to this seems to be very often, "Well, we're as tough as you." At other times the Government tries to emphasise a degree of compassion in their policies.

KERRY O'BRIEN: They want to have it both ways.

MALCOLM FRASER: They're trying to have it both ways. I would sooner see them get up and argue that we have obligations to people who are fleeing terror.

KERRY O'BRIEN: It was embarrassing for the Liberal Party that it took a Labor Government to introduce definitive financial market reforms and there have been claims that you had dissuaded, even blocked John Howard as Treasurer from making those reforms. You paint a different picture. Without going to the fine detail, is there a clear record of what happened within your Cabinet over this issue and what does that record say?

MALCOLM FRASER: There is a clear record. You're right: there's not time in this interview to go through that record. So, buy the book and get it, cabinet minutes, cabinet decisions, letters written, inter-departmental notes ...

KERRY O'BRIEN: But did you at any stage go to John Howard as Treasurer and say, "I want it to be a priority of this government that we reform financial markets"?

MALCOLM FRASER: It was meant to be a priority. He knew it was my view, the Cabinet's view. There were views expressed all along about how urgent, how important it was. In retrospect - I mean, the committee handling all of this was chaired by somebody out of Treasury. Probably, it should have been chaired by somebody out of the Prime Minister's department.

KERRY O'BRIEN: You're saying, I think, that Treasury essentially spiked your guns on this, that they were more comfortable with a regulated economy where they had more power over the process.

MALCOLM FRASER: They thought regulation gave them power. They didn't want to lose that power. And I have little doubt that the Treasury would have been holding John Howard back and probably giving him advice which is suggesting - well, I don't know what, but ...

KERRY O'BRIEN: But did John Howard ever come into Cabinet and argue strongly for financial market deregulation?

MALCOLM FRASER: There was no submission that he brought forward of any consequence that was not willingly accepted by Cabinet on this subject.

KERRY O'BRIEN: So he didn't, in other words, come to Cabinet ever with a broad, ambitious agenda for financial market deregulation, floating of the dollar?

MALCOLM FRASER: That was rejected. No, he didn't.

KERRY O'BRIEN: Does it hurt you that John Howard is seen by history, in just clinical terms, as almost twice as successful as you in terms of his length in Government - 12 years vs. seven and a half?

MALCOLM FRASER: No, it doesn't hurt. It happens.

KERRY O'BRIEN: Your friction with Liberal colleagues since your retirement have obviously produced times of great turmoil for you and for Tammy. You've revealed that you came close to resigning from the party at one point, Tammy says she didn't vote for the Liberals at the last three elections. And you've refused to say whether you did the same. There's a certain implication in your refusal. What has been the personal cost of that conflict within you, the emotional cost?

MALCOLM FRASER: The emotional cost is seeing the party move further and further to the right. You know, when is this going to stop? Where is it going to stop? There's almost an authoritarian streak. The way issues are used for political purposes. I mean, Menzies description of the Liberal Party and why he chose the name Liberal: we wanted the party to be liberal, forward-looking, progressive, in no way reactionary, willing to make experiments. And if you look on Menzies time, I think he was all of those things.

KERRY O'BRIEN: What would Menzies think of today's Liberal Party and for that matter today's Labor Party?

MALCOLM FRASER: Well he wouldn't recognise today's Labor Party. I suspect he'd welcome the fact that they've changed enormously and are no longer socialist, the socialist left. Well, what's that? They privatise, they believe in capitalism, they believe in a fair go for workers. Now, putting it in those blunt terms, both parties would agree with those sorts of the statements. The debate today ought to be one about competence.

KERRY O'BRIEN: What would your message be to today's - or to the next generation, the would-be generation of politicians; those who would aspire to go into politics?

MALCOLM FRASER: Well, I'd certainly encourage them to go in. I'd encourage them to try and achieve something with their own lives before going in, because I believe that kind of experience is extraordinarily valuable for a politician.

KERRY O'BRIEN: And yet that wasn't the case for you.

MALCOLM FRASER: No, it wasn't the case for me. But I also came in from outside. I wasn't a party apparatchik. I think too many of today's people in both parties come forward, university, "What party will I join? Oh, yes, I know somebody here. I might get a job working for this member or for that shadow minister or minister."

KERRY O'BRIEN: All the while working to become a politician.

MALCOLM FRASER: All the while working to become a politician. So they've never had an experience outside the political process. I think that's the sort of person that we don't really want in the Labor Party or in the Liberal Party, and we've got it in both parties.

The Labor Party had a chance to get George Williams, QC, most noted constitutional lawyer, human rights lawyer as a candidate and as a member. They chose one of the other people I'm describing instead. And why? Why turn away from that talent? What is it in today's parties that is virtually saying, "Well, if you're a George Williams or Garr Barwick, you may not get pre-selection"? I'd like to reverse that.

KERRY O'BRIEN: Well, it's getting too late.

MALCOLM FRASER: Too late for me to reverse it.

KERRY O'BRIEN: Too late for you to reverse it. But it doesn't stop you speaking out about it, does it?

MALCOLM FRASER: No, not yet.

KERRY O'BRIEN: Malcolm Fraser, thanks very much for talking with us.

MALCOLM FRASER: Thankyou.

KERRY O'BRIEN: And the whole of the Malcolm Fraser interview will be on our website tonight.