Fran O'Sullivan on business
Business analysis and comment from Herald columnist Fran O'Sullivan

Fran O'Sullivan: Treasury needs boss with guts and goals

Finance Minister Bill English with Treasury Secretary John Whitehead, who vacated the post this week. Photo / Mark Mitchell
Finance Minister Bill English with Treasury Secretary John Whitehead, who vacated the post this week. Photo / Mark Mitchell

Wanted: Treasury boss with the guts to challenge Governments, tell the public how it is and develop the necessary structural reforms to ensure New Zealand's long-term international competitiveness.

I am sure that is exactly the sort of chief executive that Finance Minister Bill English wants to replace retiring Treasury Secretary John Whitehead, who disappeared off to the World Bank this week without a permanent replacement in sight.

But none of the hand-picked journalists who took part in Whitehead's round of valedictory interviews seemed to have had the wit to ask him: "Why didn't you groom a successor?"

It is nearly six months since the State Services Commission (SSC) placed a nondescript advertisement seeking a new Secretary and Chief Executive for the Treasury.

The job description was fairly anodyne. Not a patch on the incisive words used to describe the role of the US Treasury Secretary, or even that of his counterpart in Australia.

But by mid-March the Wellington Beltway was running hot with speculation that State Services Commissioner Iain Rennie - who is a former Treasury Deputy Secretary - might harbour a desire to return to his old stamping ground.

Clearly, Rennie - who would also have been an obvious potential candidate - made it clear internally that it was not his particular ambition. If so, he would obviously have stood aside from his high-powered commission role so someone else could run the process.

What did set the rumour mill running were stories that three very credible players had put their hands up. The trio - said to be John Zohrab, Geoff Bascand and Neil Quigley - either still are, or have been, public servants of distinction. But apparently they were not formally interviewed.

It is also said that Graeme Wheeler - another former Treasury official and former managing director of the World Bank - had been prepared to come back to do his bit for New Zealand after seeing the devastation of the Christchurch earthquake. But a snafu seems to have emerged.

The situation is now so risible that even the nation's chief spy-master had to be called in to decide whether Deputy Secretary Gabriel Makhlouf should be allowed to step up as acting Treasury Secretary in the meantime.

What sparked this bizarre move was the fact that the Treasury Secretary was required to have New Zealand citizenship.

Makhlouf, who came to New Zealand from Britain 15 months ago after a career in the British civil service, was not a New Zealand citizen.

Other top public servant roles where being a New Zealander is a pre-condition include the chief executives of Foreign Affairs, Defence and the Prime Minister's Department.

SIS head Warren Tucker has now decided being a New Zealander is not a precondition for this most influential role in the public service.

Tucker reviewed the security criteria and the job description was changed. A move which not only makes Makhlouf's elevation legitimate, but now opens the field for the permanent Treasury boss role to a much wider bevy of candidates.

The situation is hardly satisfactory. Rennie and the search firm he contracted to find top-class candidates for this prime role will no doubt be feeling the heat by now. The SSC boss knew many months ago that Whitehead was due to stand down in April when his second term as chief executive expired. The ducks should have been well and truly lined up so that there was for a seamless transition.

Contrast this lamentable state of affairs with the changeover from Ken Henry's period as Chief Executive of the Australian Treasury to that of his successor Martin Parkinson.

Prime Minister Julia Gillard announced both moves on December 21 last year. The changeover occurred on March 7.

Unlike Whitehead - who for most of his lengthy term as Treasury secretary was a shrinking violet - Australian Treasury bosses are also made of sterner stuff.

In his final speech, Whitehead lamented that misperceptions of Treasury's role dating back to the 1980s had "limited our ability to be persuasive when talking about what matters most for living standards.

"Some have never got beyond believing that we are the root of all New Zealand's economic evils. Others see us as little more than the defenders of fiscal virtue, obsessed with eliminating deficits and debt - the organisation that knows the price of everything but the value of nothing."

Contrast this with Parkinson's full-blooded comments after the recent Australian Budget where the economy had "dodged a bullet".

"We did so because of 25 years of hard, and not necessarily popular, economic reform ... Australian governments from the mid-1980s onwards recognised the need to transform our economy. They prosecuted the case for microeconomic and structural policy reforms that were crucial in increasing the economy's capacity to ride out a severe external shock.

"They put in place robust monetary policy frameworks. And they demonstrated the resolve needed to bring deficit budgets back into surplus, and committed themselves to increasingly well-articulated medium-term frameworks for fiscal policy."

No wonder we languish so far behind Australia.

- NZ Herald

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