AUSTRALIAN PUBLIC SERVICE COMMISSION MINISTERIAL CONVERSATIONS

ECONOMIC REFORM DIRECTIONS AND THE ROLE OF THE PUBLIC SERVICE

THE GREAT HALL, PARLIAMENT HOUSE

CANBERRA

WEDNESDAY, 2 NOVEMBER 2005

 Well thank you very much Lynne and thank you to all of the people from the Australian Public Service who have come out to this lunch today. Very rarely has such an assembly of intellect been gathered in one place in this Great Hall.

And before I actually speak on the topic that I have been advertised to speak on, I have just been having table conversation up here with the Secretary of the Department of Finance and the Commissioner of Taxation and others and I thought I would just give you three principles to warm the cockles of your heart as we go into another Budget round.

The first principle is this: don’t be embarrassed if you can’t spend your budget. This is not a problem as long as you tell the Finance Department about it. Do not feel obliged to get all of the money that has been budgeted out. If you can discharge your function without doing so do not feel embarrassed about returning some.

The second principle: do not feel you have to hang on to every current function and add new ones. It is quite possible when new functions come along that they are to replace existing ones. Nothing is for ever. Government is not a matter of holding on to what you have got and adding to it or accruing to it, sometimes we find better ways of doing things and we can replace old ways of doing things.

And my third principle is this: sometimes the best managers can make do with smaller staff. I was hoping for greater warmth of reception to that principle actually but it is a good principle and bear it in mind.

Can I commend the Australian Public Service Commission for establishing this event. It is an important opportunity for Ministers to engage with the public service and I note that the Prime Minister and Kevin Andrews have already spoken to you about key priorities; so I thought I might just speak to you about, after the experience that I have had for a number of years in Government, how I regard the function of the public service, how it helps me and hope that you might glean from that some ideas as to how you could help the Government generally, your Minister in particular and through the Minister, the Australian public.

My first experience with the public service as a Minister was a sobering one. It was the 4 th of March 1996, two days after the 1996 Election. I received the blue book from Ted Evans, the then Treasury Secretary. The news was not good. Instead of a surplus Budget as had been announced the previous May and reaffirmed during the Election there was a looming $9 billion Budget deficit for that financial year. My reaction was not a happy one, nor for me and not for Ted Evans. But we did decide to do something about it. We introduced the Charter of Budget Honesty which required a mid-year review of the Budget position and in particular, a Pre Election Economic and Fiscal Outlook. Laws that make it necessary, indeed mandatory, for the public to know the shape of the Budget before an election rather than after it.

Secondly, we set targets for fiscal policy to balance the Budget over the course of the economic cycle and to reduce Commonwealth debt to GDP ratios.

Thirdly we adopted the formal agreement between the Treasurer and the Reserve Bank Governor to recognise operational independence of the Reserve Bank and to give it a specific written inflation target.

I remind you of these initiatives in 1996 because now they are taken as so much part of the economic furniture that perhaps they are not recognised as the critical governmental initiatives that they are. I hope that they are now bipartisan policy. They have certainly been adopted in part by other countries around the world. And our experience over the last 10 years has given Australia a lot of credibility in international circles. Our GDP has grown faster than the United States and the OECD average about half a percentage point per annum in per capita terms faster than the United States and the OECD average. More Australians are in work than ever before, wages have grown, inflation has remained subdued, our debt to GDP ratio has been dramatically reduced, we’ve weathered financial crises in Asia, the US recession, world record oil prices, SARS and we have stood almost alone amongst the countries of the developed world by having continuous growth.

Our record is not going unnoticed. Let me read the OECD Economic Survey released in February this year, it is quite long, but let me read it. This is what the OECD said, and we all ought to take some pride in this, quote:

In the last decade of the 20 th Century, Australia became a model for other OECD countries in two respects: first, the tenacity and thoroughness with which deep structural reforms were proposed, discussed, legislated, implemented and followed-up in virtually all markets, creating a deep-seated competition culture, and second, the adoption of fiscal and monetary frameworks that emphasised transparency and accountability and established stability-oriented macro policies as a constant largely protected from political debate. Together, these structural and macro policy anchors conferred an enviable degree of resilience and flexibility on the Australian economy. The combination resulted in a prolonged period of good economic performance that shrugged off crises in its main trading partners as well as a devastating drought at home. The short-term output is for continuing strong growth of productivity and outlook, low inflation and Budget surpluses accompanied by tax cuts.

I mention these comments because I think we should all share in the recognition of how important these anchors are and we should all recognise that what is called the ‘Australian experience’ is now widely recognised overseas.

I will never forget going to my first APEC Finance Ministers’ meeting back in 1997. There was an unmistakable air that whilst Asia was prospering Australia was falling behind. You couldn’t help but think that we were tolerated but not respected.

If you went to an APEC Finance Ministers’ meeting today, as I did recently in Jeju, Korea, there is no doubt that our standing has immeasurably improved. Our success has enhanced our international profile and it has given us presence. We are listened to and we are respected. And one of the things that we put on the international agenda at the G-20 meeting in Beijing recently was intergenerational change and demographic trends. We have credibility coming out of our Intergenerational Report which enabled us to take that work as a model and a lead and to ask a respected international body to try and apply our lessons and our policy intuitions to the region and the globe.

Another thing that we placed on the international agenda is reform of the world economic institutions. Why? Because we have credibility in these areas. We also hope to take a lead in relation to energy and resource security for the region and the world.

Australian stocks have risen. As I said in a recent Lowy Institute Speech, by UN population data Australia has the 53 rd largest population of the countries of the world. We are about the same as Syria, Senegal, Mozambique. But a country which has the 53 rd largest population in the world measured by US exchange rates has the 13th largest economy in the world. Have a think about this by population 53rd by economy 13th. We are a significant player in the world economy. Sure we are dwarfed by the United States and probably by China and by many of the G-7 but we are a player. Not because of population but because we have such a productive economy and our per capita GDP is so high.

Let me make this point, the moment we begin to lose that performance is the moment we will begin to lose our presence in these regional and international fora. And from time to time other models have been put forward for Australia. The ‘Swedish’ model of Australia reconstructed, the ‘Japanese’ model so popular in the 1980s, the ‘computer chips’ model of the early pre-tech wreck of this century. Each time we kept our collective heads and we rejected these fads. And we have made our own contemporary ‘open market’ model an Australian model which has prospered and delivered us this presence in international fora.

A big part of your job in the public service, I believe, is to take medium and long-term views, resist fads, resist special interest lobby groups. The news cycle is now so short in Australia the newspapers need a new policy to give the news lead on a daily basis. The television would like a new policy in the morning and a different one in the afternoon for the morning cycle, the evening cycle. The trouble is, if we were inventing so many policies we would never see them through. We would never be able to implement them. In some cases the best policy is not to change, is not to adopt the fad. That may be bad for the news cycle but it would be much better for the country, and it is the country and its medium and long-term interests that we are interested in.

The Australian public service is not only producing results for Australia but working in capacity building in.png, the Solomon Islands, Nauru, in other areas where they are contributing to law and order and government accountability. This is in addition to the usual services that our public servants provide through embassies and AusAid. Our public servants are working in Indonesia on the Australian-Indonesia Partnership for Reconstruction and Development.

You and your colleagues have worked in East Timor, Iraq and Afghanistan and received effusive praise including effusive praise by Paul Bremer former administrator of the Coalition Provisional Authority in Iraq.

The Australian Federal Police is joining Indonesian counterparts to apprehend and convict Bali bombers.

And leaders of other countries are approaching our door asking for the Australian public service experience so that they can capacity-build in their own countries. And of course we are happy to accommodate them. These countries are our friends and our neighbours and we wish to assist where we can. And what makes the Australian public service successful in its work here and as a role model overseas is its culture. Where we share the public service we can share that culture, a culture which is immune to corruption, which is honest, which is not subject to bribing, which provides comprehensive, accurate and timely advice. But I will make this point, our neighbours wouldn’t be so interested in learning from our public service if our country wasn’t producing results. What gives the credibility at the end of the day are the results. And if the results turn, the credibility could well turn. We must remember that our public wants to see results. We must remember in a democratic system our Members of Parliament are accountable to the public for results. Process is important because it protects us against bribery and corruption, it protects independence. But let us not forget that the process is directed ultimately to securing the results. It is the results that count.

And our Ministers properly feel under pressure to produce results. We have that great leveller of a democratic society, it is called the election and in an election it is the results that will be used to judge our Members of Parliament and our Ministers.

I am going to speak personally now as a Minister on what helps me and what doesn’t and at this point of course I will faithfully read out everything that my Department has written. Sorry but I left that speech behind. Let me tell you what I really think about what helps and what hinders.

When I receive advice what I appreciate most is knowing the facts. Advice should define issues very clearly and the facts should be carefully and empirically established. Nothing is worse than making a policy decision based on inaccurate facts or assumptions and I have seen it happen and it invariably unwinds.

I am not so interested in value judgements because Ministers think they can make their own value judgements, the Cabinet believes it can make value judgements. But what they need to know is they need to know the facts and they need to know what different policy options will lead to in outcomes. They need to know how the problem arose and what consequences will flow from one answer to that problem as opposed to another. They are not so interested in narrative.

The politician thinks to themselves, they have been elected on the basis of their values or their objectives and they will make those decisions where you have got Ministers that are capable and want to make decisions, but they want to know what the facts are and what the different options will lead to in actuality. And of course assembling this information usually at very, very short notice is quite difficult. And that is where they need a professional public service.

How we use your advice when coming to decisions is up to us. We will be judged at the time of the election but how you get it to us is critical to you because we will judge you at the time that the advice comes forward.

The second thing that we rely on the Australian public service for is implementation. Ministers regard themselves as policy makers, making decisions. They need a public service to implement those decisions. Some of our neighbours have had problems with governance. They don’t have problems because they are not making decisions it is just that when the decision is made nothing ever happens.

Implementation is absolutely critical. And even the best decisions badly implemented will affect people in their daily lives. We need to be assured that our decisions will work on the ground and that is where we rely on the Australian public service.

Let me give you an example of this. The biggest policy implementation that I have ever been associated with was the introduction of GST. There is something like three billion prices in the Australian economy or more and the price of every one of them changed as a result of tax changes. We did our work very thoroughly, we were confident the package could be implemented and would work and if you overlook the short burst of hysteria at the time, the package was implemented very smoothly. It is now used as an example for other countries on how to implement a GST, one of the biggest changes that we have ever had in Australia. It occurred what, some five years ago, very rarely today would people raise it as a political issue. The follow through was good. It took resources and we shouldn’t be afraid of using those resources. But the follow through was outside of the political. This is where we required and needed the Australian public service.

I want to make one last point which I think needs to be carefully thought about at a whole of government level. The Australian public service prides itself on delivering fearless advice to Ministers. Personally I am very grateful for fearless advice. I will tell you why. I would like to be forewarned of the criticisms before I appear on the 7.30 Report or on AM or debate a matter of public importance in the Parliament. Forewarning us of criticisms is actually very, very useful even if it doesn’t lead to a change in policy. From a political point of view you need to know the upside and the downside.

One of the things that concerns me about preserving that ability for fearless and critical advice is practices which are now growing up under Freedom of Information Laws to get hold of all documents relating to policy development. And when newspapers get hold of documents relating to policy development they rarely report it in terms of ‘this was considered but wisely rejected’, ‘pros and cons were carefully analysed’. It is generally reported under the headline ‘secret government documents show’, ‘the government rejected advice after being warned of consequences’.

This will become an obstacle to giving candid and fearless advice. Let me say to you, we do have candid and fearless moments in the Cabinet, this may surprise you, but it does happen. We would be far less fearless and candid in the Cabinet if we knew that the Minutes were going to be released under FOI. That protection is very, very important to us.

The Freedom of Information Laws as originally conceived were particularly to allow citizens to know what the Government knew about them and that is their use and to allow citizens to correct information that the Government has wrongly held about them. I would not want to see practices growing up under those laws which would inhibit policy making or would lead to a disinclination in relation to working documents and policy development to document in writing the pros and cons of particular proposals.

So what do we need to achieve as we go forward? Well I think from the Government’s point of view and I hope from the point of view of the APS we want to go forward in the economic area with clear aims and objectives. Let me say to you, whatever Department you come from, you will never run stronger departmental policy at the expense of overall economic credibility.

It is economic growth that gives the country the wherewithal and the resources to run its policies and its education system and its defence system and its security. The reason we have economic decision-making as central is it is central to everything we do. And if we compromise that, everything else gets harder. I have expressed it this way before good economic policy and good social policy is like breathing in and breathing out. You can’t do one without the other. If you don’t have good economic policy you won’t have good social policy because good economic policy is the best social policy finding people jobs, allowing them to service their mortgages, keep their homes, educate their kids live happy and fulfilled lives.

The second thing I would like to say is this, we ought to resist the temptation in politics of what I call Balkanisation and you see it sometimes at a political level. I am going to do what my region wants me to do or my State wants me to do. I will just do whatever is in their interests notwithstanding that it may not be in the interests of the nation as a whole. I think policy works best when we have got a conception of national interest. We must take into account regional interest but we have got an idea of nation, the national interest.

One of the reasons why the US Budget is in such deep deficit is a practice in the US Congress of people tacking on to Budget Bills projects for local areas. It is good for the local area but by the time you put the whole thing together it is bad for the nation. I would want to resist that at all costs here in Australia.

If we Balkanise in the Parliament to be just 150 people interested in 150 separate areas without any conception of the overall nation then we will lose economic credibility. If we Balkanise in the Departments so that it is my Department right or wrong, my resources, my Budget, my staff without any conception of the overall whole of delivering government services, then the service will be much the less for it. Nobody minds robust proposals but you have got to remember there is a framework to all of this, an overall framework and parameters within which we have got to all survive. It is not my Department right or wrong, it is government outcomes and government results as a whole of which my Department is a part and a constituent part.

And I think if we can focus on this concept of national interest, and I think by the way it is going to mean concepts of national interests which rises above petty parochial federalism and State interests then we can continue the fabulous growth that we have had in this country.

Let me give you an example where national interest has to rise above. We need integrated national markets in water, in energy, in gas and that may mean that State Energy Ministers who currently regulate these areas have less to do. But it is an outcome which is important for the nation and to rise above turf wars and parochial interests.

And I think if we have that conception of national interest, overriding national interest of economic centrality to all of the aims and the objectives of the public service which is producing proper advice based on hard empirical facts, the Ministers that are taking decisions and responsibility, then we can continue the outcomes that we have seen over the last 10 years. That is what the public of Australia wants us to do. They just want good, unobtrusive government so they can get on with their lives in a good environment, with good health and good education and job opportunity, chance to keep their mortgage, pay their bills, realise their aims and ambitions. We need to always remember at the end of all of our process that it is results that count. It is outcomes that people want and it is outcomes that we should deliver to them.

So, I hope that the confessions of 10 years of being a Minister are of some value to you and the professionalism of the Australian public service can draw on my observations to achieve and scale even greater heights in the future.

Thank you very much.