Fran O'Sullivan: Restoring gloss of Treasury's glory days

Finance Minister Bill English with Treasury Secretary Gabriel Makhlouf. Photo / Mark Mitchell

When the late Roger Kerr joined Treasury in 1976, it was at a time of great generational change and intellectual ferment.

Rising stars such as Graham Scott, later to become Treasury Secretary during Sir Roger Douglas' subsequent reign as Finance Minister, Rob Cameron (now an investment banker) and Bryce Wilkinson had - alongside Kerr - moved into the ascendancy by 1981 as they challenged what was popularly known as Fortress New Zealand and worked to avert the nation's bankruptcy.

Thirty years on, Treasury has long lost its gloss.

Chief executive Gabriel Makhlouf wants to reinvigorate the show. Makhlouf has extolled the international reputation that Treasury enjoyed in its glory days when it drove a huge and revolutionary economic-policy agenda that was renowned worldwide.

But it's going to take a lot more than organisational reshuffles and management slogans to rebuild the intellectual horsepower of today's Treasury.

The previous Labour Government basically gutted the institution when it set up the Ministry of Economic Development. Treasury officials learnt their place. Former Finance Minister Michael Cullen famously threw back policies at them and on one occasion derided officials for delivering him an "ideological burp".

Robust independence was for a time sacrificed to the second-guessing mentality that became pervasive during Helen Clark's regime.

In 2008, incoming Finance Minister Bill English was also unimpressed with Treasury's initial briefings. English suggested they were out of date and lacked the urgency the world financial crisis required.

Three years on, it seems abundantly clear to anybody who reads international media and data that the European debt crisis is not going to be resolved anytime soon; the US is still under immense pressure and our nearest neighbour, Australia, has a two-tier economy.

But the pre-election Budget forecasts suggest all will be hunky dory as long as the next government keeps cutting expenditure.

This seems far too surreal. And it needs to change.

Makhlouf is refocusing Treasury, but it is early days. Judging by its published work, it still seems far too focused on soft, fuzzy metrics instead of the hard numbers that really count.

The Treasury's website says it is focused on improving New Zealanders' living standards through three outcomes: "Improved economic performance", "a higher performing state sector that supports NZ's international competitiveness" and "a stable and sustainable macroeconomic environment".

It has done some good work on long-term intergenerational challenges.

But Makhlouf indulges in corporate speak when he says Treasury's ambition is to lead by being:

* A Navigator - shaping debates and being looked to by the Government, public and private sectors and the wider community to help New Zealand navigate through challenging times, creating and maximising opportunities.

* An Expert - providing expert commentary and advice on economic, fiscal, public-sector management and regulatory issues, as well as using and integrating the expertise of others.

* A Problem-solver - working collaboratively with stakeholders and other government agencies to deliver innovative solutions to problems.

* An Exemplar - leading with exemplary performance and exhibiting a culture of continually striving to improve in everything we do.

The problem is, Treasury has far too many people who are either managers or process/support people and not enough at the sharp end of policy advice.

In late 2009, former Treasury secretary John Whitehead restructured Treasury. A quick look back at the organisational chart then shows that Treasury has since been in a state of flux.

Whitehead stepped down as Treasury secretary earlier this year.

But it is instructive that many of those who took up roles in Whitehead's executive team in late 2009 have also left - among them the highly talented Struan Little, who swapped a deputy-secretary role looking after "dynamic policy" to become a deputy commissioner at the IRD.

A number of the other deputy-secretaries who had prime roles after Whitehead's reshuffle have either moved elsewhere or to other roles in Treasury, among them Colin Lynch (macroeconomic environment) who went to Statistics NZ. Treasury's communications manager Mike Munro has left for the private sector, and chief economist Norman Gemmell is taking up a role at Victoria University.

Makhlouf, who was previously Whitehead's deputy, has again restructured the senior management team, reducing it from 14 to eight positions.

These include Andrew Kibblewhite, the ex-PM's Department official, who is deputy chief executive; Catherin Atkins, who is deputy-secretary strategy (change and performance); John Crawford, who moves into the new role of deputy-secretary (commercial transactions); Richard Forgan adds public services to his infrastructure role; Bill Moran is acting deputy-secretary (macroecomonomic international and economic research); Andrew Turner is deputy-secretary Crown Ownership Monitoring Unit; Vicky Robertson deputy-secretary (growth and public services) and Fergus Walsh is chief financial officer and chief accountant.

Makhlouf's new structure is more streamlined. There are eight working streams sitting underneath the raft of deputy secretaries.

But it appears to be too far oriented to management and process, rather than developing the high-class policy advice this nation so desperately needs. Will this structure seriously deliver a major bang for the taxpayer's long-term buck where it counts? I doubt it.

Contrast NZ Treasury's organisational melange with that of the Australian Treasury, which has just four groups: Macroeconomic, fiscal, markets and corporate services - each headed by executive directors except for the macro-group, which has two.

The organisational chart is clear. What's more, it clearly puts the focus on what makes Australia go faster: strong, independent, economic policy advice, fiscal disciplines and a market orientation.

Its priorities are also markedly different to that of its New Zealand counterpart.

The Australian Treasury's priorities are to harness the opportunities created by the mining boom, including through investment in infrastructure and skills development, coupled with further microeconomic reform to further the well-being of the Australian people.

It has a strong focus on international competitiveness and productivity, and international connections including enhancing Australia's relationships with China, India, Indonesia and the southwest Pacific. It also works with the Foreign Investment Review Board to ensure foreign investment is consistent with Australia's national interest.

Swap mumbo-jumbo management-speak for clear functional priorities and Makhlouf may just succeed in attracting the bright graduates that will drive the new wave of the New Zealand reforms.

Then take over MED and build a Treasury with clout.

Being a navigator, expert, problem solver or exemplar just doesn't cut it.