Independence hampered by politics

WHAT is the truth when it comes to the forecasts the federal Government is relying on to chart a course back to a budget surplus? It is hard to know whether they should be believed or rejected.

Is an annual growth rate of 4.5 per cent from 2011-12 too optimistic or is it reasonable given post-recession economies usually grow rapidly? Of course we are repeatedly told this recession is like no other, the worst since the Depression.

In his post-budget speech, Treasury secretary Ken Henry patronisingly commented that the budget "exceeded the reading age" of those who dared criticise the forecasts. Henry sounded more like a politician than a bureaucrat using such spiteful hissing. His record for accurate forecasting since he became head of Treasury in 2001 has not measured up with his arrogance.

The International Monetary Fund thinks the forecasts are too optimistic, but then it hasn't exactly covered itself in glory with its powers of prediction either. It didn't see the 1997 Asian contagion coming and it certainly didn't predict the present global economic meltdown.

Kevin Rudd described the Treasury projections as "a conservative estimate", but then he also described himself as a "fiscal conservative" ahead of the previous election, before going on a spending spree of unprecedented proportions in recent months. The Opposition isn't convinced the forecasts are achievable, but it would say that, wouldn't it? Its track record in opposing nearly everything the Government does reads more like political opportunism than considered decision-making.

Reserve Bank of Australia governor Glenn Stevens cautiously lent his support to the Treasury forecasts after initially refusing to do so. However, this time last year he was talking up the threat of inflation in 2009 after having repeatedly jacked up interest rates.

The bottom line is that forecasting economic growth, and therefore future debt levels, is about as imprecise a science as you can get. Don't take my word for it; consider what Henry was saying in February when he fronted a Senate committee following the special budget update. He volunteered that net debt projections are "no better than crude assumptions about macroeconomic aggregates".

That was then. In the here and now Henry (and his department) is being saddled with responsibility for the forecasts by a Prime Minister who is not only relying on them to deliver a surplus in the foreseeable future but one who doesn't want to take the blame in the event those same forecasts don't hold true.

Henry is copping it sweet, standing by figures he must know are rubbery at best. Why would he do that?

Rudd's approach to the public service may not constitute a traditional definition of politicising the bureaucracy, but he is certainly using it to his political advantage.

When the Prime Minister was asked if Treasury provided a variety of growth forecasts for the Government to choose from, a scenario the Opposition suggested might have occurred, he refused to answer the question. Instead he said: "Treasury provides independent advice to the Government and it is the responsibility of the elected Government therefore to work within those parameters." That answer leaves open the possibility that a range of scenarios was indeed provided by Treasury.

If Henry didn't have a track record for refusing to release materials under freedom of information laws that might embarrass ministers or officials, it might be possible to find out where the truth falls.

Hawke government Treasury deputy secretary Des Moore believes "public servants are now under much greater pressure to accommodate political views".

He pours scorn on Rudd's notion that the budget figures are free from political persuasion. "The budget papers are presented to parliament by the treasurer and finance minister and they are responsible for the material within them. While all governments rely extensively on Treasury advice in framing budgets, ministers do not always accept that advice. It is quite possible that this year's budget forecasts were a combination of Treasury modelling and discussions between senior ministers and Treasury officials."

That from a 30-year veteran of Treasury.

Moore's view reflects international and historical perspectives about the changing role of the civil service in the Westminster system. In the context of Britain, Australian National University professor Rod Rhodes has written "the brute fact is that top civil servants are political administrators, not managers. Their job is to take care of their minister."

The Australian Journal of Public Administration is littered with articles similarly lamenting the politicisation of the public service in the Australian context.

Henry was appointed secretary of Treasury by Peter Costello in 2001 and was reappointed five years later. Earlier in his bureaucratic career he took a five-year leave of absence to work as a political adviser to Paul Keating while he was treasurer.

Henry is therefore someone acceptable to both sides of politics. However, spending so much time in a political office, alongside party apparatchiks and wannabe politicians, means that Henry is no ordinary mandarin.

He understands politics and therefore the political game his Prime Minister and Treasurer are playing.

At his post-budget address, Henry was asked if he believed Treasury was independent. Surprising frankness followed: "Strictly, of course we're not. The Treasury Department is a department of state. It is part of the executive government. It works to the government of the day, whatever the political persuasion of the government of the day. And so in that sense of course the Treasury is not independent from government and it can never behave as if it is independent from government."

That sounded as if he was contradicting the message from Labor ministers that the forecasts were "independently provided by Treasury". Henry quickly added: "But there's another sense in which it does have a degree of independence and that is that the Treasury conducts its analysis without government interference."

As Rhodes says, the role of the modern public servant is to "take care of their minister". It is something Henry is no doubt mindful of every time he opens his mouth.

Peter van Onselen is a contributing editor at The Australian and an associate professor of politics and government at Edith Cowan University in Perth.