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McMahon was born in Sydney, Australia. He graduated in law and economics from Sydney University and was a socially prominent solicitor before military service in World War II, when he reached the rank of major.
Elected to the House of Representatives in 1949, he held a number of portfolios including navy and labour, becoming deputy leader of the Liberal Party and treasurer in 1966. He gained a reputation as a hard-working and well-prepared minister.
After the death of prime minister Harold Holt in 1967, Country Party leader John McEwen vetoed McMahon as coalition leader and he continued as treasurer up to 1969 and minister for external affairs between 1969 and 1971 under John Gorton.
In 1971 the Country Party lifted its embargo on McMahon and he replaced Gorton as prime minister.
However, he was no match for opposition leader Gough Whitlam and lost the 1972 election.
He was immediately replaced as Liberal Party leader by Billy Snedden, but remained as a backbencher until 1982.