Prime Minister in 1904
Labour under Watson more than doubled their vote at the 1903 federal election and continued to hold the balance of power. In April 1904, however, Watson and Deakin fell out over the issue of extending the scope of industrial relations laws concerning the Conciliation and Arbitration Bill to cover state public servants, the fallout causing Deakin to resign. Free Trade leader George Reid declined to take office, which saw Watson become the first Labour Prime Minister of Australia, and the world's first Labour head of government at a national level (Anderson Dawson had lead a short-lived Labour government in Queensland in December 1899). He was aged only 37, and is still the youngest Prime Minister in Australia's history.
Billy Hughes later recalled the first meeting of the Labour Cabinet with characteristic sharp wit:
Mr Watson, the new Prime Minister entered the room, and seated himself at the head of the table. All eyes were riveted on him; he was worth going miles to see. He had dressed for the part; his Vandyke beard was exquisitely groomed, his abundant brown hair smoothly brushed. His morning coat and vest, set off by dark striped trousers, beautifully creased and shyly revealing the kind of socks that young men dream about; and shoes to match. He was the perfect picture of the statesman, the leader.
Despite the apparent fitness of the new Prime Minister for his role, the government hung on the fine thread of Deakin's promise of 'fair play'. The triumph of the historic first Australian Labor government was a qualified one – Labour did not have the numbers to implement key policies. The 'three elevens' – the lack of a definite majority in the parliament after the second federal election – dogged Watson just as it had Deakin.
Six bills were enacted during Watson's brief government. All but one – an amended Acts Interpretation Act 1904 – were supply bills. The most significant legislative achievement of the Watson government was the advancement of the troublesome Conciliation and Arbitration Bill, which was eventually passed by the Reid Government in December 1904. Although Watson sought a dissolution of parliament so that an election could be held, the Governor-General Lord Northcote refused. Unable to command a majority in the House of Representatives, Watson resigned the premiership less than four months after taking office, his term ending on 18 August 1904 (Deakin was later defeated on a similar bill). Free Trade leader George Reid became Prime Minister. The Conciliation and Arbitration Act was assented to by the end of the year, and it extended to state public servants, as Watson had proposed.
Deakin again became Prime Minister after Reid lost confidence of the parliament in 1905. Watson led the Labour Party into the 1906 federal election and improved its position again. At this election the seat of Bland was abolished, so he shifted to the seat of South Sydney. But in October 1907, mainly due to concern over the health of his wife Ada, he resigned the Labour leadership in favour of Andrew Fisher. He retired from politics, aged only 42, prior to the 1910 federal election, at which Labor won with 50 percent of the primary vote. It was the first time a party had been elected to majority government in the House of Representatives, it was also the first time a party received a Senate majority, and it was the world's first Labour Party majority government at a national level. The ALP vote had risen rapidly, going from 15 percent against two larger and more established parties in 1901, to 50 percent in 1910, after a majority of the Protectionist Party merged with the Anti-Socialist Party, creating the Commonwealth Liberal Party which received 45 percent.
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