Saturday, September 19, 2015

Our best and worst treasurers. Some might surprise you. The Money Men, By Chris Bowen

Melbourne University Press, $34.99

In office for only two years, Joe Hockey might like to claim he never had the chance to become one of Australia's truly great treasurers. But shortness of tenure isn't by itself an impediment to greatness. 

When I joined the treasury in the early 1980s I was given a rundown of the best and worst of Australia's treasurers, as remembered by those in the department.

The best surprised me. It was Bill Hayden, a Labor treasurer in the Whitlam government in office for only four months. I had thought that the treasury hated Labor, and I knew that some in the department had helped bring it down.

Things were more complex than I had been led to believe. The treasury liked Hayden because he would take seriously what it had told him, zero in on any weaknesses, and send it back for more work. Then he would take the final agreed position to Cabinet and argue it forcefully.

His predecessor, Labor's Jim Cairns had either ignored the treasury, or treated it as his enemy.

Frank Crean, the Labor treasurer who preceded Cairns, was happy to put the department's position to Cabinet, but most of the time simply left it there. "This is the treasury submission," he is reputed to have said, and then no more, leaving Australia's most important economic manager voiceless.

As soon as I got hold of The Money Men, Chris Bowen's remarkably accessible account of Australia's 12 most notable treasurers, I went straight to the chapter on Hayden.

Bowen agrees with me, and agrees with the assessment of my colleagues at the time. I learned from Bowen that Hayden was the first to properly use the expenditure review committee, asking ministers to offer up cuts as well as spending proposals when pitching ideas for the budget.

And he drilled down into details, sensing whenever something didn't seem right...

The treasury had assured him a cut he planned to make to education minister Kim Beazley's portfolio would have little effect on the lives of teachers. Beazley told him there would be mass retrenchments. Hayden phoned the relevant officials and asked them to convene an urgent meeting with officials in Beazley's department, just to make sure they were right. Embarrassed treasury officers reported back that they had been wrong, and Hayden let Beazley off the hook.

Bowen says there's no greater tribute to Hayden's first and only budget than the fact that after the dismissal, the incoming Fraser government implemented it in full.

Howard, Hayden's successor but one, wasn't highly thought of within the department when I was there. It felt he lacked the strength to stand up to Fraser and argue for what he believed in. It's a judgement Bowen backs, saying if Howard's career had ended when he ceased to be treasurer, it would have been "extremely difficult to regard it as a triumph".

Bowen's book is something of triumph. No other treasurer or would-be treasurer has produced such a complete job application. Bowen is both. He had 12 weeks in the job under a reinstalled Kevin Rudd before Tony Abbott swept to power. Since then he has been the shadow treasurer under Bill Shorten.

Asked by Melbourne University Press to write a standard tell-all book about Labor's term in office he said he wanted to write instead about Australia's most notable treasurers. He was sent a contract the next day.

The book took two years, and it shows. So well told are the 12 stories that I wanted to hear more, about the other treasurers. 

But I also wondered whether it was the best use of Bowen's time as shadow treasurer. Might he have spent it more usefully developing policies?

His predecessor Wayne Swan didn't, or didn't do it enough. He took the job with economic policies far from fully formed, and with tax and superannuation policies I found embarrassing. It turned out to make little difference because within months he was grappling with the global economic crisis.

As Bowen says, Swan was one of the few treasurers able to show his mettle. His work in helping Australia avoid a recession that was widely seen as inevitable - even the budget forecast it - marks him as one of the greats. The resulting deficits are a fair price to pay. If he hadn't avoided a recession the deficits might have been greater.

Peter Costello gets extremely high marks from Bowen. He too avoided a recession - twice. The first was likely as a result of the Asian economic crisis, the second as a result of the worldwide recession that followed the early 2000s tech wreck.

Costello helped bail out Thailand, Korea and Indonesia, making Australia, along with Japan, the only country to have helped save all three. He ensured sound settings at home by formally declaring the Reserve Bank independent and by forcing through the Wallis reforms to the financial system.

And he did it while introducing the goods and services tax, a change so successful that it's impossible to imagine ever going back.

He was lucky to preside over the first mining boom, and Bowen criticises him both for not building up big enough surpluses (handing money back in repeated tax cuts and allowing the public service to balloon) and for convincing the public that continual surpluses are ends in themselves, a great political achievement, but a questionable economic one.

Keating gets the longest chapter and this list of his achievements is dizzying. He floated the dollar, deregulated the financial system, cut tariffs, modernised the tax system (introducing both the capital gains and fringe benefits tax), privatised Qantas and half of the Commonwealth Bank, forced competition on to Telstra, and through his misguided obsession with the current account deficit, pushed interest rates so high he brought on a recession.

And he dragged industrial relations into the modern era, introducing enterprise rather than economy-wide bargaining, and as a byproduct, gave us universal superannuation.

Bowen is more measured in his assessment of Keating than I expected him to be. He is happy to point out that Keating shares much of the credit for what happened with Hawke. He says no relationship is more important.

The early chapters on treasurers Turner, Page, Theodore and Chifley chart the evolution of the job and the rise of Keynesianism and the Commonwealth's power over tax as the dominant modes of economic management.

We know too little about our treasurers and we know too little about the job. Bowen's book fills a gap. It's fun to browse, and is set to become an essential reference work.

The assent of Turnbull means Bowen himself may never again become treasurer, or may have to wait for a very long time. But he has served the office well.

In The Age and Sydney Morning Herald