The ‘deputy PMs’: Claims Albanese’s powerful inner circle is shutting out ministers

Federal ministers are frustrated that key spending proposals are being rejected by Anthony Albanese’s powerful inner circle, with Penny Wong and Katy Gallagher dubbed “co-deputy prime ministers” in a sign of tension within the upper echelons of the government as it prepares the upcoming budget.

Four members of the ministry confirmed to this masthead that Industry, Science and Innovation Minister Ed Husic had complained directly to Albanese that the cabinet’s powerful expenditure review committee – responsible for overseeing ministers’ submissions for budget measures – was shutting out ministers from decision-making.

Penny Wong and Katy Gallagher are de facto “deputy prime ministers” in the Albanese government, according to cabinet-level leaks.Credit: Marija Ercegovac

Seven ministers and several senior staff in the Albanese government spoke anonymously to this masthead so they could speak freely about the sensitive policy and budget processes at the highest levels of government.

The leaks reveal growing disquiet among some in Labor that the quest to land a second surplus is overriding other important policy agendas, and they come at a time when Treasury and the Department of Finance are keen to re-exert control over spending after the pandemic when government expenditure exploded.

Husic also raised concerns about what he saw as the influence on the committee of two unelected bureaucrats – Finance secretary Jenny Wilkinson and Treasury secretary Steven Kennedy. Some critics claim the pair are holding the government back from spending on Labor policy initiatives.

Foreign Minister Penny Wong has been a close confidante of Albanese for decades, while Gallagher, the finance minister, is also close to the PM. Both women belong to his Left faction.

Industry and Science Minister Ed Husic.Credit: Alex Ellinghausen

Together with Treasurer Jim Chalmers, they form a “gang of four” at the heart of the Albanese government. Deputy Prime Minister Richard Marles and Trade Minister Don Farrell are also members of the formal leadership group.

One minister said: “[Industry minister] Ed [Husic] regularly stands up to say that throwing us [ministers] out of the [expenditure review committee] room to deliberate on our policy matters is not a popular tactic.”

“He has done it in cabinet, too. Some governments keep the ministers in the room while ERC deliberates, some kick them out – this one kicks them out, but [Finance secretary] Jenny [Wilkinson] and [Treasury secretary] Steven [Kennedy] stay in, so they have more influence in ERC [expenditure review committee].”

Describing the influence of Gallagher and Wong, another minister said: “Katy and Penny are effectively the deputy prime ministers, they are the ‘PM whisperers’. Katy is a genuinely respected problem solver”.

Finance secretary Jenny Wilkinson and Treasury secretary Steven Kennedy.Credit: Alex Ellinghausen

“Katy wields extraordinary power, and [treasurer] Jim [Chalmers] has been very strategic by sticking close to her.”

Chalmers declined to comment for this story.

In a press conference on Wednesday to discuss the national accounts, the treasurer said it was important to bring the budget into surplus to tackle inflation.

“We’re very proud, frankly, that we delivered the first surplus in 15 years, and that wouldn’t have happened without the restraint and responsibility that we demonstrated in those first couple of budgets,” he said.

“We’ve delivered that first surplus. We’re a reasonable chance of a second one, but I guess what I’m trying to convey to you is we will try and do what is right by the economy and by our people.”

The members of the powerful expenditure review committee are Albanese, Wong, Gallagher, Chalmers, Marles, Health Minister Mark Butler, Infrastructure Minister Catherine King, Communications Minister Michelle Rowland and Assistant Treasurer Stephen Jones.

Ministers who have had spending proposals knocked back for inclusion in the May budget include Butler, Husic, Social Services Minister Amanda Rishworth, Aged Care Minister Anika Wells and Climate Change Minister Chris Bowen.

Husic’s complaint was made in a planning meeting of all 30 ministers after the committee and cabinet had signed off on the revamped stage 3 tax cuts two days before Albanese announced them at the National Press Club on January 25.

Husic declined to comment on his contribution to cabinet, citing confidentiality requirements, and disputed the characterisation of his comments in the full ministry meeting.

Several other ministers expressed concern that Kennedy and Wilkinson and their departments were opposing new policy proposals, but others disputed this and pointed out the government had increased Newstart and rent assistance payments and spent more on health.

A third minister said: “[Treasury and the Finance department] are shaping Labor’s agenda with views formed under the previous Coalition governments, and that reflect their personal ideology.”

Albanese, Wong and Gallagher also declined to comment.

A fourth minister, describing the ERC process, defended how it was being run and said that “things have gone back to the [Peter] Walsh-[Paul] Keating days.”

Peter Walsh was finance minister in the Hawke government and Paul Keating was the treasurer.

They added that during the Rudd government, ministers had also been excluded from the budget committee after presenting a spending proposal.

A fifth minister said there was a view that Finance had too much control over the policy development process in government.

“We said when we won, we would respect public servants, but they have to respect us too,” they said.

The minister said the expenditure committee had received a large number of spending proposals from ministers who were then being told to focus on key demands.

“It’s a Labor government, and people want to do things. But they’re being told to wind back and focus,” they said.

“Instead of 10 proposals, they’re being told to come back with five.”

A senior government staffer involved in the budgetary process said: “Finance is all-powerful in this government, and Jenny Wilkinson is one of the most powerful people in the country. It’s the Jenny and Katy show. Finance will object to spending $1 even if it will save us $10”.

The minister said both Chalmers and Gallagher were recognised as good at their jobs and secure in their positions.

When a minister presents a spending proposal to the expenditure review committee, the departments of Treasury, Finance and prime minister and cabinet present an assessment of the plan on paper that is blue, green and white, respectively.

Several ministers said that Finance’s green paper regularly rejects spending proposals in its efforts to deliver a second successive budget surplus, an objective strongly backed by Treasury.

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