By Gareth Vaughan
A bunch of neo-liberal ideologues, white men in grey suits with a beige mindset, and a pack of pencil-heads living in an ivory tower.
Secretary to the Treasury Gabriel Makhlouf has heard these and numerous other not always flattering descriptions of the Government's lead advisor on economic, financial and regulatory policy which he leads.
So he openly acknowledges wanting to change the public's perception of Treasury, which has broadly been along the lines of a conveyor belt churning out Rogernomics type policy and ideas since the 1980s.
"I'm absolutely looking to change the public's perception of the Treasury," Makhlouf told interest.co.nz in a Double Shot interview.
"Mainly to make it fit the reality of the Treasury that I lead. I lead a bunch of fantastic people who are absolutely committed to doing a really good job for New Zealand."
"We have a lot of internal debate on all the issues. We're absolutely focused on delivering quality policy advice based on really good analysis and based on evidence," he added.
"It's our job to help people understand that we are different to what they think we are."
Looking to change public perceptions of Treasury, and changes within the bureaucracy, are two themes Makhlouf has pushed since taking Treasury's helm from John Whitehead in June 2011. He joined Treasury in 2010 after arriving from Britain where a civil service career took in the Inland Revenue Department, Treasury and Revenue and Customs. He also served as Principal Private Secretary to Gordon Brown when he was the Chancellor of the Exchequer.
In a speech last November Makhlouf highlighted a comment posted on interest.co.nz describing Treasury as "a pack of pencil-heads living in an ivory tower," and said Treasury "wasn't a bunch of white men in grey suits with a beige mindset." He also said his ambition was for Treasury to be "an exciting and energetic hothouse of ideas."
Then later in November he told a Parliamentary Select Committee in response to comments from Winston Peters: “We’re not neo-liberal orthodoxists. I’m happy to put it on the record now."
And in a speech in April this year Makhlouf said a “knock down walls, re-wire and put in new plumbing” transformation was underway in the state service, which could see New Zealand's bureaucrats as "an exemplar for the world again as they were in the 1980s."
'Irritated' by being described as a neo-liberal
Makhlouf said the world is more complicated than it has ever been and Treasury therefore needs to work more collaboratively with others, both from inside and outside government, and to be "more outward facing" so its staff can understand the issues people and businesses face.
"There are two things in play; The Treasury looking to become much more outward facing, and I've personally spent quite a bit of time travelling around the country talking to business people and others. But there's also the challenge of helping the wider public understand what the Treasury's about, how we think, and why we think what we think," Makhlouf said.
"I always feel irritated about being described as a neo-liberal. Not least because I don't understand what it means and I'm not sure the people who do say that necessarily understand what it means."
"There is a lot more to Treasury than that. (But) we do have to prove it, absolutely," he added.
"I suppose one of the things that might indicate a different perspective than one we may have had in the past is the fact that we've made very clear, and you can read all about this on our website, that the way we look at policy is through what we call a living standards framework."
"We see our job as about improving the living standards of New Zealanders," Makhlouf added. "That's what we're about. And if someone asks us 'what are the living standards, how do you define that,' we've got a framework which says you do need to look at things like economic growth."
"Economic growth is an absolutely key foundation of living standards but it's not the only one. We do have to think about how we manage risks as a country, sustainability, the environmental sort of issues and equity. Equity (economic equality) is a factor that we think about in analysing our policy," Makhlouf added.
'I'd rather not be labelled in any particular way'
"If that makes us neo-liberals then I suppose I've got to put my hand up and say 'I'm a neo-liberal.' But I'd rather not be labelled in any particular way. I'd rather be judged, and have my people judged, on the quality of our advise, the quality of our analysis, and on the quality of the engagement that we have with the outside world."
In terms of changes going on within the civil service, Makhlouf said these need to be made because the world is changing, along with people's expectations of the public service.
"We designed a public service in the late 80s and through the 90s which was absolutely fit for purpose for the time. And at its core was making sure that agencies were accountable for what they had to deliver and did the best possible thing," said Makhlouf.
"And essentially what we're doing now is saying 'that was great but the issues that the country faces and the world faces (now) are much more complex and they require agencies to work in a much more horizontal way.' So essentially in a nutshell the changes that are now being put in place are about getting (government) agencies to work much more closely together so that the collective impact of the public service is what the public actually sees."
Asked to what extent changes in the public service were a cost cutting exercise Makhlouf said efficiency was certainly important in a "fiscally constrained" world.
"We need to look after our finances so we've always got to look at making sure that the public's money is used in the most effective and efficient way. But it absolutely is not the main story," Makhlouf said.
"The main story is that we need to make sure the public service is delivering the sorts of services the public wants."
This meant things being worked on include making sure government departments focus on results, that the back office is as efficient as possible especially given all arms of government use IT.
"So absolutely, efficiency's important but I would say that getting the public service to be fit for purpose is the most important thing," Makhlouf said.
Putting the NZ bureaucracy 'back in a place where the rest of the world will pay attention'
In terms of his comment about New Zealand's public servants being "an exemplar for the world" in the 1980s, he said British public servants in that era looked to New Zealand to see what was best practice.
"The thinking in New Zealand around what was called at the time 'new public management' was really ahead of its time," said Makhlouf.
"It focused on making sure organisations were clearly accountable, clearly actually focused on delivering services and doing so in an efficient way...Other countries have copied us and some of them have overtaken us."
Changes underway now would put the New Zealand public service "back in a place where the rest of the world will pay attention."
Asked for examples of civil services doing things well in other countries Makhlouf cited the leadership development and training offered to civil servants in Singapore, and innovative thinking the British are doing around how to deliver services.
"But) I don't think it's right to say that there's one country who we should copy completely. There are ideas everywhere that we should reflect on and some of them, actually adopt."
How to judge your public servants
In terms of how the public should judge whether their public servants are serving them in an appropriate way, Makhlouf pointed to the quarterly "Kiwis Count" survey. This was one avenue for people to give their views. On top of this, a key question was whether people feel they're getting what they want quickly enough, at a price they think's reasonable, and at a service standard which they feel is acceptable.
"It is absolutely for the public to judge whether the public service is delivering what it should be delivering and not for us to make that judgement," Makhlouf added.
Another way to judge the bureaucrats was against 10 "challenging results" the Government has set for the public sector to achieve over the next five years.
"They cover a whole bunch of areas, - welfare reform, education, vulnerable children and others. So judging us against those I think will be one of the criteria," said Makhlouf.
The 10 are;
1. Reduce the number of people who have been on a working age benefit for more than 12 months
2. Increase participation in early childhood education.3. Increase infant immunisation rates and reduce the incidence of rheumatic fever.
4. Reduce the number of assaults on children.
5. Increase the proportion of 18-year-olds with NCEA level 2 or equivalent qualification.
6. Increase the proportion of 25 to 34-year-olds with advanced trade qualifications, diplomas and degrees (at level 4 or above).
7. Reduce the rates of total crime, violent crime and youth crime.
8. Reduce reoffending.
9. New Zealand businesses have a one-stop online shop for all government advice and support they need to run and grow their business. And;
10. New Zealanders can complete their transactions with the Government easily in a digital environment.
'A fantastic moment in time'
Asked about the challenges facing New Zealand, Makhlouf said a key thing for him was how New Zealanders take advantage of the opportunities in front of them.
"We are finding ourselves in a fantastic moment in time. For the first time in our history we are in the part of the world that's actually going to be the centre of economic geography," said Makhlouf.
"The Asia-Pacific region is going to basically dominate the world's economy for the rest of the century. Secondly the growing middle classes in Asia, - we're going to see demand for our products continue to grow because they're growing. And thirdly, we're actually getting closer to the rest of the world through technology. Broadband is bringing us closer to the rest of the world."
"And I see those as opportunities which we've never had before," Makhlouf added.
"The biggest risk we face, I think, is not seizing those opportunities. Now what does that mean? That means making sure our economy's as productive as it could be, making sure our education system is actually delivering results for all the kids in the country, making sure our welfare system is actually supporting people who need it and helping people into work. It's about making sure that we're looking after our natural resources. It's about making sure that we protect ourselves against financial crises."
"It's about a whole bunch of things and each of these things in themselves are significant," Makhlouf said. "All of these things we can do, (But) none of them is small and easy. But we can do them and if we can do them, we've got a fantastic opportunity."
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14 Comments
It is good that Mr Makhlouf is being relatively transparent. Nevertheless I have still seen nothing in his public statements that suggests that the medium to long term wealth of New Zealand Inc is a priority, or even a factor, in Treasury's priorities. GDP growth is okay, and certainly better than not having it; but if its on the back of dwindling ownership of the assets of the country, then the country's wealth and long term incomes have to be compromised. The extra production is for someone else's benefit.
The policies of the government, in selling assets, and Treasury in its management of government debt by offshore borrowing, and the RBNZ brief and model of monetary management all seem indifferent to long term national wealth building. This in turn is consistent with an indifference to a very high current account deficit. The reality may be different, but from the outside, it appears not.
Gareth, very good that you have a dialogue with him. At some stage I would appreciate him addressing this issue.
For somene who doesn't like to be labelled as neoliberal he repeatedly states he admires the 1980s Treasury when 'it led the world'... Those treasury advisors were very orthodox and very neoliberal.
I wonder why he does not mention the 1970s when we implemented our World first ACC scheme. Or the 1930s when State Housing etc, got us out of the Great Depression. Those were times when we really were leading the world with new policies.
As for being the centre of a developing world I suggest watching Jeremy Grantham http://www.ritholtz.com/blog/2013/07/jeremy-grantham-on-our-debt-solutio... and think how much growth their really will be in places like China.
It is very heartening to read the outlook of the Secretary to the treasury appears to be concerned with the reality of life for everyday New Zealanders. I hope is advice to the government includes caution towards the Transpacific Partnership given that it will unleash the parasitic american banking fraternity on NZ. Bankers such as Goldman Sachs who have recently been caught manipulating the aluminium market . These banks dwarf NZ's GDP and the loss of sovereignty that the TPP would entail are a real threat to the well being of NZers
For a moment there I had a flash of sympathy for government ignoring or avoiding Treasury advice on issues such as asset sales, the lack of benefits from the Sky City convention centre and the poor returns on some infrastructure spending.
But two wrongs never make a right.
Does anyone else think the '10 challenging results' totally miss NZ's core issues?
Another way to judge the bureaucrats was against 10 "challenging results" the Government has set for the public sector to achieve over the next five years.
Colin,
Does anyone else think the '10 challenging results' totally miss NZ's core issues?
Indeed, my comment above was prompted by that list. To try and be fair to him, clearly Treasury is very involved in the financial management of the government, and presumably they have a range of targets in areas they are more traditionally associated with, as well as the relatively micro issues he has listed.
It is the areas of economic management and vision of the country (not just the bookkeeping of the government) where their views on targets and the processes of achieving them would be most interesting. And it is those areas where to my mind, the actions of the government itself suggest some serious questions. There just may be good answers, but it would be nice to have them.
An example of the type of success the Treasury would like to see continued -
An article in InFinance published October 1 2011 introduced Don Brash such;
Don Brash was governor of the Reserve Bank of New Zealand from 1988-2002. He is credited with helping to significantly reduce interest rates and spearheaded a new central banking model.
In the article Don Brash said of himself;
"For me, working in the financial services sector was almost an accident. My academic training was not in finance, but in economics. I did a PhD in economics at the Australian National University, and my thesis was on American corporate investment in Australian manufacturing. After that was published, I went to work at the World Bank in Washington, and although the World Bank might at a stretch be included as a financial services institution, it was (and is) really an economic development agency. It was only after five years at the World Bank that I was invited to be the CEO of a recently established investment bank in New Zealand.My involvement in the financial services sector has been rather diverse. I spent 10 years as the CEO of an investment bank, two years as the CEO of an organisation established to merge the banking operations of nine savings banks, and 14 years as governor of the Reserve Bank of New Zealand.I am most proud of the fact I helped implement a totally new model of the relationship between government and central bank. Prior to the Reserve Bank of New Zealand Act 1989, all central banks were either modelled after the 'old Bank of England' (with all decisions taken by politicians, and the central bank responsible only for implementing those political decisions) or modelled after the Bundesbank (with a high level of independence from the political process). New Zealand pioneered a 'third way', where the central bank is totally independent to operate monetary policy but the target at which policy must aim is an inflation rate pre-agreed between, and announced by, government and central bank. While I was governor, New Zealand also became the first country in the world to formally embark on inflation targeting. Inflation targeting is now almost universal among developed country central banks, while the 'third way' relationship between government and central bank has been copied by Australia, the UK, and Canada.Ruth Richardson former New Zealand Minister of Finance in Jim Bolger lead 1990's National Party Government wrote of Don Brash in her book – Making A Difference- published 1995;To Jim the Treasury staff were ideologues whom he instinctively mistrusted. I would regularly arrange meetings between Jim, myself, Graham and Don, seeking to provide Jim with that 'comfort zone' around macroeconomic policy that I knew would be vital. I thought it important that Jim be exposed regularly to Don Brash's thinking.
hhhhhmmmmmm - Don Brash - gets interestinger and interestinger - he and Gabriel - who was also a Gordon Brown advisor - would be quite familiar you would think; A Paper by John Sigleton of Victoria University of Wellington for workshop on Central banks and financial crises at the Reserve Bank of New Zealand, Wellington, June 2009 titled - The winds of change for central banks: the impact of economic crises on the central banking world – said this of Don Brash; In opposition in the mid 1990s the Labour Party held talks with international central bankers and academics about central bank reform. Labour was desperate to shake off its image as the party of high inflation and trade unionism. If Labour hoped to win more than one term in office it would have to appear competent, prudent, and disciplined. Ed Balls, a financial journalist and Labour adviser, introduced the prospective Chancellor, Gordon Brown, to leading central bankers including Don Brash of the RBNZ. Labour was pledged to restructure the Bank of England, and to enhance its accountability and autonomy, but a final decision on CBI was not made until shortly before the 1997 election. Brown did not reveal his plans for CBI to the Governor of the Bank of England, Eddie George, until after the election. According to Michael King (2005: 108), the central bank was astonished by this development. The result of Don Brash's advice upon the banking architecture of England was that in 1997 the Government announced its intention to transfer full operational responsibility for monetary policy to the Bank of England. The Bank was given its independence as a central bank. It was also announced that the Bank would cease to be responsible for the Government’s debt management. The UK Debt Management Office was created in April 1998 as an executive agency of HM Treasury to take over responsibility for debt management. The Bank’s regulatory functions passed to the Financial Services Authority. Described as such on the -about- section of the UK Debt Management Office.
I'd take the glass-half-full message from this Interesting article and discussion.
Being quite simply this.
It matters less about 'growth' or its absence in China in particular and Asia in general, than it matters that these are enormous populations, which, whodathunk, need to eat.
NZ is world-class at growing stuff and exporting it.
It is also world-leading at much of the IP inherent in this activity.
- farm robotics,
- measurement of key inputs and outputs,
- QC,
- Processing technology and practise
- Processing machinery and fabrication
- Ag research and training
- Environmental impact measurement
I could go on but ya gets the idea.
We are rilly,rilly good at all of this stuff: China seriously wants us to double our food exports to them by 2020, is the word I've heard.
As Makhlouf says, the only thing that's holding us back from this opportunity is -- us.
And what a lot of the hold-back involves is - whodathunk - culture. What we do around here, and what internal dialogues we hold with ourselves.
And that's the hardest thing in the world to change.
I once had a conversation with a dairy farmer from the post-WWII era. He was in a delegation of dairy farmers from here - sent over to the States on a farming technique-type exchange shortly after the war. They were amazed to find that US dairy farmers hadn't yet taught their cows how to back out of a milking stall. That knowledge apparently revolutionised shed design/milking technique in the States. Pretty cool, eh?
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