Treasury's Changing Influence
Updated: Dec 12, 2019
Since Changing Fortunes: A History of the Australian Treasury was launched in August I’ve posted a series of articles on key points in Treasury’s history. They can be found on the book website www.changingfortunes.info The book itself is available in all good bookshops, book distributors and the MUP website https://www.mup.com.au/books/changing-fortunes-signed-by-paul-tilley-paperback-softback This final article in the series summarises the waxing and waning of Treasury’s policy influence over its history.
From its bookkeeper beginnings at federation Treasury developed first as an administrator and budget manager then as an economic policy adviser after WWII. Treasury became a powerful budget manager and economic adviser in the golden years of the Menzies government before its influence waned somewhat under the more assertive governments that followed. Treasury’s influence next waxed in the economic reforms of the Hawke/Keating governments, then again with the Howard/Costello governments. Since that time Treasury’s influence has waned with other advisers, including the ministerial offices, having greater influence over government policy.
I have sketched below my take on Treasury’s changing level of policy influence (and the ministerial offices).
The reasons for Treasury’s waxing and waning influence on public policy are embedded in the nature of the relationship between the public service and the government of the day – in the fundamentals of the Westminster system in Australia.
When Treasury’s influence first waxed in the 1950s and ‘60s, much of the business of government was done behind the scenes – this was the time of powerful mandarins – the seven dwarfs. Treasury built its position of strength through control of the budget purse strings and also developed the reputation of having the strongest economic analysis. In that environment, while there were contests, mostly Treasury reigned supreme. But this bred resentment by others and arrogance by Treasury.
The more assertive governments of the post-Menzies era changed the relationship with the public service. The Whitlam government in particular didn’t trust them and the ministerial offices expanded in size and role. This played out dramatically in the Loans Affair where Treasury was cast in the role of institutional whistle-blower –the relationship with government was irreparably damaged. Malcom Fraser’s splitting of Treasury in 1976 was then a dramatic demonstration of the new power balance.
What subsequently emerged in the 1980s, though, was a different governments/public service relationship – a partnership in reform – which underpinned a series of Hawke/Keating government economic reforms. Treasury took the design lead in support of a strong Treasurer who could sell the reforms politically. Many substantial microeconomic reforms flowed in key parts of the economy such as tax, tariffs, competition policy, superannuation and workplace relations.
This partnership model again featured with the Howard/Costello government reforms of tax, financial system and corporate law. The formula was again a Treasury capable of designing and advising on complex policies and a Treasurer capable of selling difficult reforms, supported by a Prime Minister and cabinet prepared to back them. These reform periods of the 1980s and 1990s set Australia up for an extended period of economic growth.
The story of the last decade, however, has been frustrating. The model of the public service running significant aspects of government administration behind the scene is long gone. So too it seems is the model of a government/public service reform partnership. But no coherent policy development model has yet emerged in its place.
We are stuck in a politically fraught world with governments fighting for their daily survival. They have little appetite for policy advice from the public service – whose role is confined to the implementation of a more politically-driven policy agenda. It is the ministerial offices and other external advisers who are best placed to provide that more politically-attuned advice. As the Prime Minister said when interviewed for my book (when he was Treasurer)
“Treasury shouldn’t tell the Treasurer what to do. They should tell the Treasurer what they think of what the Treasurer plans to do, of alternative ways in which he can do what he wants to do … Treasury needs to remember its job is to advise the government on the government’s agenda – not to decide the agenda.”
This is a view of public service policy departments as implementers of the government’s policies but not as influencers of the policy agenda. It is a view of Treasury as an implementation arm of government, not a department with an economic policy framework of its own.
The short-term future for economic policy reform, and Treasury’s role in that, looks bleak. The government, with its bare majority in parliament, seemingly has little appetite for the hard political yards of economic reform. The emphasis for the time is very much on message over substance.
But we need to look to the longer term, to a time when greater political stability returns, and ask the question of what the model of policy influence will be then? There should be no expectation of a return to a previous model of influence – the future will not look like the past. The role of policy advisers outside the public service, such as academics, think-tanks, consulting firms and the ministerial offices, will be greater. Institutions such as Treasury will need to find ways to work with, and influence, these other bodies in order to ultimately influence government policy.
The issue for the public service, including Treasury, is to prevent its policy advising capabilities from withering on the vine through underutilisation in the meantime. In addition to their duty to support elected governments with their priorities in the short term, the challenge for public service leaders is to find ways to maintain these policy advising capabilities.
The need for a genuine economic reform program only builds with time as Australia’s vulnerability to external shocks grows. The time will come to design another economic reform program, whether that be planned or in crisis. Let’s hope that Treasury has the policy capability when that time comes – to be ready for its influence to wax again.
 Scott Morrison, Changing Fortunes: A History of the Australian Treasury, p404