Citing a critic on interest.co.nz, Treasury secretary Gabriel Makhlouf says Treasury's evolving to deal with a new world and will become 'an exciting and energetic hothouse of ideas'

The boss of the Treasury says the government's economic adviser is changing, and isn't a bunch of white men in grey suits with a beige mindset as he moves to counter views such as one expressed in a recent comment posted right here on interest.co.nz, which said “Treasury are a pack of pencil-heads living in an ivory tower”.

In a speech given to the Trans-Tasman Business Circle in Wellington today entitled The Changing Face of the Treasury, Secretary to the Treasury Gabriel Makhlouf noted the recent comment posted on interest.co.nz by commenter 2 Tooth Bora here as an example of criticism directed at the Treasury, which has had a reputation as an economically dry, peddler of neo-liberal ideas since the 1980s.

Makhlouf, the former Principal Private Secretary to UK Chancellor of the Exchequer Gordon Brown who succeeded John Whitehead as Treasury Secretary last year, said his ambition was for Treasury to be an exciting and energetic hothouse of ideas.

"I want us to be powered by intellectual curiosity and focused on work that has a real and positive impact. I want us to be one of the most influential and respected organisations in the country, renowned for credible analysis and well-researched evidence that presents a more complete picture of complex issues," Makhlouf said.

"I want our intellectual and analytical strength to be matched by a deep understanding of what’s happening in the real world, and have that combined knowledge translated into first-rate policy advice."

'Treasury doesn't have a monopoly on good ideas'

He said "absolutely central" to Treasury's transformation was a push to be more outwardly focused and collaborative.

"If we are to achieve higher living standards for New Zealanders, then working with others is critical. The Treasury does not have the monopoly on good ideas. Nor can we achieve our goals without taking others with us," Makhlouf said.

Contrary to some views, he said Treasury staff  "were not a bunch of white men in grey suits with a beige mindset." The organisation's gender balance had been about fifty-fifty male and female for many years, and seven of its last eight management vacancies were filled by women.

"We also have a number of staff hailing from different parts of the globe and employ people from a range of disciplines and experiences. Along with economists, we’ve got qualified biologists, psychologists, anthropologists, sociologists, musicologists, and others."

However, he said there was more to be done, including bringing greater Maori perspectives to Treasury's work.

Makhlouf said Treasury's work was focussed on delivering three outcomes, being: improved economic performance, a stable and sustainable macroeconomic environment, and a more efficient and effective State sector.

"Our vision is a world class Treasury that is working towards higher living standards for New Zealanders."

"A broad view and an enquiring mind are essential for us to be a world-class Treasury. The environment in which we work has rarely been more challenging, and we need to adjust to the reality that the ‘rules of the game’ are different to what we may have become used to," added Makhlouf.

'The rules of the game have changed'

With the world in the midst of a prolonged period of instability and risk, or an age of volatility, rapid changes in economic power were under way meaning the structure of the global economy would probably be very different in 10 years’ time.

"Existing global rules, standards and norms are under severe stress, and countries everywhere are trying to understand the new world and adapt to it. Economics is at the heart of this debate. You just have to look at the economics magazines or the business pages to see that people are re-examining a few economic assumptions that used to be taken for granted, or asking what the objective of economic policy should be, or even whether the economic growth that has occurred in the last 250 years was an historical anomaly that is now over," Makhlouf said.

"Some things have of course not changed. Without question it remains a fundamental truth that successful economies need, among other things, a stable and sustainable macroeconomic framework, sound monetary policy that delivers stable and predictable prices, a prudent fiscal policy and debt that’s under control. And it remains true that a well-regulated financial system matters, that properly functioning markets matter, that price signals matter and that incentives matter."

Nonetheless, what had changed, and was changing, was the environment Treasury worked in, with this becoming "much more complicated."

This was partly due to the ongoing impact of the global financial crisis, partly due to the sophistication, pace and amount of information flowing around the world, and partly about changes in the drivers of global economic growth, the impact of a growing Asia, and huge structural change in Europe.

"Factors such as these are putting new and significant pressure on policy analysts and on decision-makers."

"For my part, I’d argue that the objective of economic policy is to raise living standards, with growth being an essential dimension of this," said Makhlouf.

In terms of his ambition for Treasury to be "an exciting and energetic hothouse of ideas", Makhlouf said this ambition was reflected in work Treasury staff have produced over the past year including a "comprehensive" range of evidence and policy options to the incoming Government last year on improving New Zealand’s economic performance.

Treasury had also worked with other state sector agencies to create a shared view on economic strategy, with this work feeding into the development of the Government’s Business Growth Agenda.

"A second and no doubt more controversial example has been our work on education. The Treasury continues to see student achievement as being of critical importance to raising growth and productivity over the long-term, and directly connected to our vision of higher living standards," said Makhlouf.

"We engaged with schools, academics, and others in the education sector, and delivered solid analysis and evidence that supported development of the Government’s policy agenda for schools," he said.

"The work informed public debate about improving the quality of teaching. My aim is for the Treasury to continue to be respected for the standard of our analysis and advice, even if people do not always agree with our recommendations."

Treasury staff 'reaching out'

In terms of being more collaborative, Treasury staff had been changing the way they engaged with outsiders and "reaching out" to benefit from other public and private sector expertise. This was about working in partnership with other agencies and using complementary skills to deliver better services for New Zealanders.

"More broadly it is about engaging with New Zealanders to understand better how we can make a difference and ensure that a diverse range of perspectives are factored in to our policy advice."

"A very good case in point is the way we’re developing the next statement on the Crown’s long-term fiscal position, which we are required to produce at least every four years. These statements provide 40-year plus projections on the Crown's fiscal position, identify challenges that will face future governments, such as those arising from society's ageing population, and provide the government, members of the public and their representatives in Parliament with information on evidence-based options for meeting those challenges," said Makhlouf.

"We’ve taken a new approach to doing this by bringing together an independent panel of economists, academics and commentators to test our assumptions and analysis. We’re also opening our work to public scrutiny by publishing it on the Treasury website as we go."

'Committed to being bold and innovative'

He said he wanted Treasury staff to be more open to new ideas and to ask themselves whether they had the models and frameworks they needed.

"We have to understand different perspectives, constantly look for new insights and recalibrate our views in light of new evidence. So we’ve decided to take a very deliberate approach to help bring this about," said Makhlouf.

"Our Diversity Strategy launched in February this year focuses on three key areas: diversity of thinking, including new approaches to problem-solving and creativity, ethnic diversity to better reflect the views of the broader society we serve, and the proportion of women in senior leadership roles."

Makhlouf said he was conscious that if the Treasury wanted to build public understanding and turn perceptions around, "to gain a reputation that better matches the reality of the organisation," the importance of its work, and the talents of its staff, it had to earn it.

"I am absolutely determined that we will. We are an organisation that is committed to being bold and innovative, passionate and ambitious, collaborative and challenging, adaptable and focused. We’re operating in the midst of formidable domestic and global challenges, and I’m proud of how the Treasury is responding to those challenges," said Makhlouf.

"We’re thinking differently, working differently and engaging differently. Our journey of change isn’t over, but I know we’re travelling in the right direction."