The blithe insouciance with which the government yesterday announced that Phil Gaetjens would replace the departing John Fraser at Treasury demonstrates the extent to which what was once the powerhouse of Australian economic and fiscal policymaking has been degraded to a partisan thinktank, one that contributes little to the polity and its public life. 

Gaetjens is a Liberal warrior, a former chief of staff to Peter Costello and Morrison himself. He was, by all accounts, highly competent and well-regarded, even by his Labor opponents, in that role. The many problems of Costello’s Treasurership — the short-term and long-term fiscal indiscipline, the corruption of the retirement incomes system, Costello’s inability to see anything outside the leadership prism — were political in origin, and can’t be blamed on him. And it’s not unusual for both sides to place favourites as departmental secretaries (like industry, where Labor put Don Russell, or the APSC, where Tony Abbott hilariously put John Lloyd). But not in central agencies. They’re too important to politicise. Or they used to be.

Fraser’s replacement should have been a senior economist with impeccable Treasury lineage and credibility, David Gruen. He’s currently a Deputy Secretary in PM&C, who was inexplicably passed over by the government to run the Australian Bureau of Statistics. Now, Treasury, too.

While governments of both sides have been criticised for politicising Treasury, it was Abbott who did the most damage. He demonstrated his characteristic mixture of incompetence and batshit-insane fixation with culture wars by deciding, over the objections of Joe Hockey, to sack Martin Parkinson (for the crime of uttering the words “climate change, or somesuch) but without having worked out who would replace him, necessitating Parkinson remaining in position for a further year. Malcolm Turnbull sensibly brought Parkinson back to head PM&C when Abbott was thankfully removed. Parkinson’s eventual replacement, John Fraser, added little value to Treasury, other than to abolish any mention of climate change as an economic issue and generally convey the impression John Stone had returned to run the place like it was 1983.

More problematic was that Treasury was regularly used to cost bastardised versions of Labor policies that were then dropped to News Corp stenographers as sensationalist “Labor $10 billion hole exposed” fictions. Fraser himself may well have been underwhelmed at Treasury being used thus; on the most recent occasion in June, Fraser made clear that Treasury wasn’t costing Labor’s policies, but what was handed to them by Morrison’s office. He might also have been unimpressed when Morrison publicly criticised his own department on negative gearing, insisting he personally knew more than Treasury about housing.

Presumably bolstering Treasury’s hopeless housing policy area will now be a priority for Gaetjens, although perhaps he should be more focused on addressing how Treasury has got wage growth predictions so badly wrong for the last six years.

Morrison’s failed June costing stunt illustrated the growing problem for Treasury — there’s a new source of genuinely independent fiscal advice in town, the Parliamentary Budget Office, which can be used as a reality check for the government’s fiscal claims and provide rigorous costing of non-government policies. No more can governments declare, in the lead-up to an election, that an opposition policy contains some gaping hole, because the PBO now has more credibility than any costing from a politicised Treasury. That’s been made worse because Treasury has been hurt by repeated annual “efficiency dividends” which have reduced its staff by around 15% compared to a decade ago. The appointment of a Liberal Party warrior, however competent and experienced, will do nothing to fix the decline of Treasury’s reputation. Everything it produces under Gaetjens will be seen through the prism of his deep connections both to Scott Morrison and Costello. 

Even more seriously, Gaetjens will become, ex officio, a member of the Reserve Bank board. Thankfully the ousting of Tony Abbott prevented any hare-brained scheme to appoint an outsider to “fix” the RBA. But Morrison now has his man on the RBA board. Gaetjens might prove to be every bit as independent as he needs to be. But the RBA needs to be not just independent, but seen to be so.