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Treasury comes clean, finally « Previous | |Next »
April 4, 2007

I see that the Federal Treasury has been reflecting on its economic policy and advice to the government and its reception. In a speech to Treasury officers at the Hyatt Hotel in Canberra on March 14 Ken Henry, the Treasury Secretary, reviewed Treasury's achievements and challenges, and gave some context and direction to the tasks ahead in an election year with an economy operating at close to full employment. Consequently, any benefits to one sector are likely to drag workers from more efficient sectors, reducing our output. So Treasury needed to be vigilant against "bad" policy proposals, of which there is a "greater than usual risk" in this election year.

The speech was not intended to be made public. However, an edited text of his speech is published in the Australian Financial Review, and it makes for interesting reading. Ken Henry has gone beyond giving a sound and timely warning that good policy can often fall victim to political opportunity when an election beckons, as he talks about problems with policy leadership on water and climate change.

Scratch media, Climate Change fridge magnet, 2006

Ken Henry says:

As an exercise in policy leadership, the superannuation reform is as good as anything I've seen the department produce in the 20-odd years of my Treasury career. We have also worked hard to developed frameworks for the consideration of water reform and climate change policy.

Really? Water reform and climate change policy are marked by major policy failure! So what happened?

Henry explains:

All of us wish that we had been listened to more attentively over the past several years in both of these areas. There is no doubt that policy outcomes would have been far superior had our views been more influential. That is not just my view. I know that is increasingly widely shared around this town. But we are not giving up. Water has got away from us a bit in recent time, but it will come back for some at some stage--it will have to---and we are, at last, right at the centre of policy development in the climate change area.

Henry does did not spell out what Treasury's advice had been on water. Presumably, Treasury would be critical of the way that the buyback of water for the environment has become mixed up with the politics of the Nationals who have their hands in the cookie jar for subsidies for the irrigation industry.

However, you could have fooled me on the quality Treasury input into the climate change issue, judging by its non-consideration in Treasury's own Intergeneration Report 2007. Fossil fuels underpin all of our economic activity, science and technology, and at the moment there is no developed alternative for the future. Since the prosperity of the past decade and a bit has been brought by unchecked use of fossil fuels, so global warming and economic growth are deeply intertwined. The central issue for the policy elite amongst the Canberra bureaucracy is to show whether it is possible to cut carbon output dramatically without trashing our economy.

Treasury acknowledges that it was cut out of the Howard Government's $10 billion water package earlier this year. Treasury is also implying that it has done the work on the economic implications of the warming caused by greenhouse gases, that the Treasurer has failed to grasp the implications, and so the Howard government's policies are full of shortcomings? Does that mean Treasury supports the need for an emissions trading scheme, that it has done the economic modeling, and that it is the Howard Government that is out of step?

This is a government that has removed science from the policy-making arena, has gone to the dark side over science with many members embracing anti-scientific irrationalism, and has acted as a wholly owned subsidiary of the energy and coal industry combined with an apparent attempt to suppress the scientific realities.

So you can see why why Treasury needs to speak out about the need for government to act in a meaningful and rational way. Is this leaked speech Treasury speaking out?

| Posted by Gary Sauer-Thompson at 9:05 AM | | Comments (2)


Gary -
Rumour about this town (Canberra) is that Costello put a Treasury Cab Sub arguing for a carbon tax in 2003 but got rolled. Ken Henry is, as it happens, quite a strong greenie in his private views.

But you're naive to think that Treasury would be allowed to leave anything embarrassing to the Govt in the IGR - the decision to leave out climate change is unlikely to be their's.

well that is interesting information about a cabinet submission. I wondered.

If I implied that the finger should be pointed at Treasury re global warming then I take that back. I do understand that the poor Intergenerational Report 2007 is the fault of the Howard Government.

I interpret Treasury posting Ken Henry's speech on the Treasury website as the Canberra bureaucracy saying enough is enough. Politics is now in opposition to economic reason and it is not good for the country.

As Michelle Grattan points out in The Age the consequence is that:

Henry is being used for target practice by ministers and the PM, angry that he's embarrassed them with a private speech to his staff saying the Government's water and climate change policies would have been better if Treasury had been properly consulted over the years.

The Howard Government need to be embarrrased.