A Place of Influence
Updated: Sep 30, 2019
Changing Fortunes: A History of the Australian Treasury.
Treasury is one of Australia's great enduring institutions, having survived, largely intact, since Federation - 118 years so far. For most of its history, Treasury has provided governments with rigorous, impartial policy advice framed to support the long-term growth potential of the Australian economy. At its best, Treasury has been a reformist agency that has supported and pushed governments in policy reform partnerships. At other times, Treasury has played a crucial conservative role in mounting arguments against economically harmful policies.
If there has been a central defining culture in Treasury, it has been around analytical excellence - having the strongest policy framework and the best ideas. If there has been one recurring constraint on Treasury's policy effectiveness, it has been being too narrow in its focus and closed to alternative perspectives.
Like any organisation, though, Treasury has changed over time. It has sought to adapt to the environment it has found itself in, both in terms of the government of the day and the economy and society more broadly. Mostly, Treasury has been able to provide sustained, consistent, robust policy advice. While different other agencies have come to the fore at times, they have not been able to maintain as consistent, or as strong, a policy framework as Treasury. The issue for Treasury has been that its influence has waxed and waned over time.
Treasury's influence first waxed after World War II. Through the golden years of macroeconomic and budget management of the 1950s and the first half of the 1960s, Treasury was influential. At other times, however, Treasury's influence has waned. From the late 1960s to the early 1980s, Treasury still had a strong economic framework but was seen as dogmatic and was pushed out into the cold. Then through the nation-changing economic reforms of the 1980s and 1990s Treasury was able to support reformist Treasurers in Keating and Costello. Its influence waxed again.
The experiences of the early twenty-first century have proved more difficult, with Treasury at times struggling to define its role. The deteriorating political scene has impacted adversely on the public service generally and, as with other agencies, Treasury has been dragged closer to government, into the daily political warfare with its endless demands for facts and figures. In the process. Treasury has been partially manoeuvred away from the policy advising space - a space that expanded ministers' offices and external bodies have readily filled - and has again lost some influence.
There are two broad sets of reasons for Treasury's changing fortunes.
First, Treasury's own ambition for reform has varied. At times, Treasury has been an ambitious partner in reform, most notably through the 1980s and 1990s. When Treasury’s conservative instincts have dominated, that has militated against it being such an agent for reform.
Second, Treasury's role relative to other advisers has varied. At times. Treasury has been a-dominant provider of economic advice to governments, such as in the golden years of the 1950s and early 1960s. In recent times, influence has drifted away from the public service, with ministers' offices and external bodies becoming more prominent players.
Throughout its history, though, Treasury has managed to evolve, seeking to maintain its position as a central adviser to governments. That evolution will need to continue if Treasury is to regain its position of influence.
Treasury under Strain
The year 2014 was a difficult one for Treasury: its secretary had been sacked but was still in the role; its budget had been cut and people were being made redundant; and it was losing its status as the influential policy adviser to the government.
By the end of 2014, the government itself was not travelling well. Just over a year into its term in office it was still unable to pass significant parts of that year's Budget, preventing it from moving on with more positive agendas. Tensions within the government were becoming increasingly visible and the following year would bring leadership challenges. The political malfunction of the new government was matching the political malfunction of the old government.
The reasons for the misfortune of the Abbott government have been much raked over. While Treasury may have taken the view that the government was hopeless -'Well, we told them but they won't listen, so what can we do?'-the opposite approach was in fact called for. A strong Treasury at this time may have been able to play some role in saving the government from itself. But the department’s conservative instincts dominated and it was unable, or unwilling, to seek this role. Treasury had no faith in the government and the government didn't trust Treasury.
The ramifications for Treasury, as for elsewhere in the public service, of this sustained period of political breakdown across the Labor and Coalition governments were profound. Of great concern was that the lack of written policy advice on contentious issues continued. Agencies such as Treasury were losing their influence as policy advisers, even their roles as such, as the balance of power shifted decisively to the ministers' office. The whole policy development process was in bad shape.
Faced with the relentless push for greater responsiveness, combined with a deteriorating political scene, Treasury had been dragged into a relationship where, when it mattered, policy advice was often not provided. Treasury was close to the ministers but had traded off some of its ability to influence, the very thing that it had previously criticised others for. At times, it was hard to discern the boundary between department and office.
Treasury could still claim that the policy advice it did provide was frank and fearless. It was the policy advice it didn't provide that was the issue. On many occasions, when faced with the prospect of providing the treasurer of the day with advice that might cause discomfort, an information brief would be provided instead, or at best oral advice - all in the name of being seen to be more responsive to the minister’s perceived needs.
Changing Fortunes: A History of the Australian Treasury tracks how Treasury’s role has evolved over its history, from the government’s bookkeeper at Federation to the economic policy agency of today. It seeks to explain the changes in the relationship between the public service and the government of the day. How and why we reached the situation we are in today, with the public service becoming more information providers and implementers of government decisions than policy influencers.
Changing Fortunes: A History of the Australian Treasury is being published by Melbourne University Press.
The book will be launched by Peter Costello on 6 August at the ANU.
Paul Tilley was an economic adviser to governments for 32 years, working at senior levels in all parts of Treasury, as well as other key agencies such as the Department of Prime Minister and Cabinet, the Treasurer’s office and the OECD. He is now a Senior Fellow at the Melbourne Law School, a Visiting Fellow at the Australian National University Tax and Transfer Policy Institute and works with a number of non-government organisations.