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John Armstrong is the Herald's chief political commentator

John Armstrong: Treasury boss sparks culture change

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The Treasury is hoping to spark public debate on how New Zealand copes with an ageing population with today's release of its long-term fiscal projections. Political correspondent John Armstrong spoke to the department's head about how he is changing the Treasury's culture and trying to improve the department's public image.

Treasury Secretary Gabriel Makhlouf. Photo / Mark Mitchell
Treasury Secretary Gabriel Makhlouf. Photo / Mark Mitchell

There is a hint of irritation in the voice of Treasury chief executive Gabriel Makhlouf.

"I don't understand what the word 'neo-liberal' means," he replies to the devil's advocate suggestion that three decades of the Treasury pushing an unrelenting less government, more market line in its advice to finance ministers has increased inequality in New Zealand.

Makhlouf - the name is of Lebanese origin - knows full well what neo-liberal means. He simply takes umbrage at his department being pigeon-holed, and at being the butt of old jokes like how many Chicago School economists does it take to change a light-bulb. (Answer: None. If the light-bulb needed changing, the market would already have done it.)

He does not duck the question, however, citing global advances in technology and changing family structures as far more germane in explaining levels of inequality.

The nature of Treasury's advice is in fact changing, he says. This is most evident in its adoption of a "living standards framework", which deems that economic well-being is no longer determined solely by economic growth, but that other factors have a bearing, such as infrastructure, housing and savings.

Embracing that framework does not mean the Treasury is about to throw out both the free-market baby with the neo-liberal bath-water. The department still sees prudent fiscal policy and sound monetary policy as fundamental.

Makhlouf stresses, however, that the living standards framework is not some peripheral exercise designed to appease critics.

He says the framework will become a central tool in delivering policy advice.

"We see our role as being about improving living standards.That's our job, full stop."

The framework is a further indication that the Treasury is climbing down from its ivory tower and engaging far more with the world outside No 1, The Terrace, Wellington.

That began during the tenure of John Whitehead, Makhlouf's predecessor. Two years into a five-year contract as chief executive, "Gabs" - as he is widely called in Wellington public service circles - joined the Treasury in 2010 following a successful career in the British civil service which included a stint working for the former Labour Party leader Gordon Brown when the latter was Chancellor of the Exchequer.

"I got a phone call out of the blue. It coincided with a time when I thought I should be doing something different in a different part of the world.

"When I arrived, it was pretty clear to me there was a view of the Treasury in the wider community that did not reflect the reality inside the building."

Makhlouf has set about engineering a "culture change" in the deportment with the goal of producing a "world class" Treasury where every staff members "lives our values".

One of the steps the Treasury has taken to counter the critics' "caricature" of the department - as Makhlouf puts it - has been to get greater public participation in the production of its long-term fiscal statement - a document which basically tries to gauge the likely pressures on government spending brought about by an ageing population.

The department commissioned research papers from outside specialists and set up a separate panel of experts to assess the Treasury's resulting analysis.

Makhlouf also makes a point of getting out of the capital as much as he can to talk to businesses and other economic players in the regions.

Alongside that, he wants the Treasury to operate more collaborative with other Government agencies, citing the example of the Government's welfare reforms which saw his department working closely with the Ministry of Social Development.

A number of times during the interview Makhlouf stresses that for the Treasury to be successful it needs to be "influential". And that hinges on the quality of its advice.

By the very nature of his position, however, Makhlouf is influential. During the latter part of his term, Whitehead spoke publicly about policy matters normally deemed to be the preserve of ministers, thereby raising questions about the constitutional propriety of him doing so.

Makhlouf was likewise criticised by teacher unions last year for a speech on education which saw him publicly entering the debate about slightly increasing class sizes to fund steps to boost teacher quality.

He says he did so for two reasons: first, the Treasury's view on class sizes had been misinterpreted and he was correcting it; and, second, that the education system is failing Maori and Pacific Island children "and no-one was talking about it".

He agrees departmental chief executives need to be careful about talking policy because ultimately those decisions are for ministers to make.

"There are parameters. We are public servants. But I think we have got a responsibility to help people understand the facts."

- NZ Herald

John Armstrong

John Armstrong is the Herald's chief political commentator

Herald political correspondent John Armstrong has been covering politics at a national level for nearly 30 years. Based in the Press Gallery at Parliament in Wellington, John has worked for the Herald since 1987. John was named Best Columnist at the 2013 Canon Media Awards and was a previous winner of Qantas media awards as best political columnist. Prior to joining the Herald, John worked at Parliament for the New Zealand Press Association. A graduate of Canterbury University's journalism school, John began his career in journalism in 1981 on the Christchurch Star. John has a Masters of Arts degree in political science from Canterbury.

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