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Secretary's Review



As the Australian economy recovers from the effects of the global financial crisis, the Treasury has continued to pursue its goal of improving the wellbeing of all Australians through providing quality advice to government and assisting in the implementation of key policy initiatives.

Significant achievements in 2009-10

The Treasury’s recent achievements include advising on and implementing the Government’s fiscal strategy. The fiscal outlook has significantly improved with the 2010-11 Budget projecting a return to surplus in 2012-13.

The Treasury’s work in assisting the Government deliver the 2010 Intergenerational Report, Australia to 2050: Future Challenges, has helped shape the debate on the long term challenges that Australia will face over the next 40 years. The report, released in February 2010, outlined the need to support strong, sustainable economic growth in response to the economic and fiscal pressures of an ageing and growing population.

The Government has begun to address these challenges through a broad agenda that includes investments in infrastructure, skills, education and the health system, and adhering to a disciplined fiscal strategy.

The final report of the Australia’s Future Tax System Review was delivered to the Treasurer in December 2009. The Treasury advised the Government on the review’s recommendations and helped develop and implement the Government’s response, Stronger, Fairer, Simpler: a tax plan for our future.

Macroeconomic outcomes

The Treasury continues to consider productivity, population and participation effects in developing policies to promote economic growth. The Treasury’s advice and analysis focused on the economic conditions, including business and household development, external trade and financial flows, and on inflation and labour market developments. As the economy strengthens, policy priorities will shift towards improving the productive capacity of the economy to overcome a re-emergence of capacity constraints, particularly through investment in infrastructure and skills development.

The Treasury continued to assist the Government to take an active role in international forums and institutions to manage the transition from crisis to recovery. The G-20 has become the premier forum for international economic cooperation. Through the G-20, the Treasury has been involved in a number of important reform initiatives, including enhancing global standards for financial regulation and supervision, strengthening the legitimacy, credibility and effectiveness of the international financial institutions, particularly the International Monetary Fund and World Bank, and improving access to financial services amongst the poor.

Reflecting the increasing importance of China and India to Australia’s economic performance, the Treasury is increasing the resources devoted to monitoring and understanding these economies. The Treasury continues to advise the Government on Australia’s role in key international and regional forums.

Effective government spending arrangements

Effective government spending arrangements contribute to the overall fiscal outcome, influence strong, sustainable economic growth and improve the wellbeing of Australians.

During 2009-10, the Treasury assisted the Government in delivering the 2010-11 Budget, which showed an improved fiscal outlook. The budget contributed to the implementation of the Government’s fiscal strategy.

The Government’s fiscal strategy requires that the level of tax receipts be allowed to recover naturally as the economy improves, while taxation is maintained as a share of GDP below the 200708 level, on average. Once the economy is growing above trend, real growth in spending will be held to no more than 2 per cent per year until the budget is returned to surplus. It will then be held to 2 per cent, on average, until a surplus of 1 per cent of GDP is achieved. The implementation of the fiscal strategy means that an improved outlook for the Australian economy is associated with a significantly improved fiscal outlook.

In 2009-10, the Treasury played a significant role in contributing to the development of the National Health and Hospitals Network, which includes reforms to the financial framework and new health system governance arrangements, through the provision of policy advice and the modelling of healthcare costs.

Effective taxation and retirement income arrangements

During 2009-10, the Treasury continued to provide secretariat services to the Australia’s Future Tax System Review. The Government released the final report, together with its initial recommendations, on 2 May 2010. The Treasury provided assistance to the Government in framing its response.

The review considered how Australia could best structure its tax and transfer system to meet the challenges of the 21st century. The review aimed to set the strategic directions for the future development of the Australian tax and transfer system.

The review made 138 recommendations under nine broad themes — concentrating revenue raising on four efficient tax bases; configuring taxes and transfers to support productivity, participation and growth; an equitable, transparent and simplified personal income tax; a fair, adequate, and work supportive transfer system; integrating consumption tax compliance with business systems; efficient land and resource taxation; completing retirement income reform and securing aged care; toward more affordable housing; and a more open, understandable and responsive tax system.

The Treasury also worked with the Australian Financial Centre Forum as it prepared its report, Australia as a Financial Centre — Building on our Strength. This was released by the Government in early 2010.

The Treasury actively supports the international tax transparency agenda, with Australia being elected as Chair of the Global Forum on Transparency and Exchange of Information. The Global Forum is a multilateral initiative for the adoption and effective implementation of international standards in the area of transparency and exchange of information for tax purposes.

In 2009-10, 31 bills containing 80 tax and superannuation measures were introduced into the Parliament. These included amendments to tax law to: introduce a new framework for the protection of taxpayer information; introduce a significant step towards achieving a single income tax assessment act; and implement a new tax incentive for research and development activities.

Achieving well functioning markets

Well functioning markets underpin strong, sustainable economic growth and enhanced living standards. The Treasury supports well functioning markets through initiatives that promote competition and efficiency, and reduce the regulatory burden on business. Particular attention has been given to key infrastructure, housing, financial and labour markets.

This includes work to further the reform agenda of the Council of Australian Governments designed to reduce the regulatory burden on business, including developing a national approach to consumer policy and consumer credit; improving housing supply and affordability; and implementing Standard Business Reporting, a multi-agency program led by the Treasury, to reduce the business-to-government reporting burden. Standard Business Reporting is being implemented progressively from July 2010 and the Treasury will continue to lead its ongoing design and continuing enhancement, and report progress to government.

A major focus in 200910 was providing policy analysis and advice to improve Australia’s productivity and international competitiveness, and deepen the supply potential of the economy, in the wake of the global financial crisis and
global recession. These policies focused on promoting economic growth and supporting employment, ensuring the financial system remained robust and dynamic, and that regulatory frameworks promoted macroeconomic stability and market confidence.

2010-11 outlook

The Australian economy has grown faster than was expected during the global financial crisis. The Treasury’s analysis and advice to government on domestic monetary and fiscal stimulatory responses, along with Australia’s robust institutional and regulatory systems, has made a contribution to ensuring that our economy has weathered the crisis in good shape.

Ensuring that our financial system remains robust, competitive and dynamic promotes macroeconomic stability and market confidence. The Treasury will pursue policy advice to the Government aimed at enhancing the frameworks for competition and consumer policy, modernising credit regulation, and removing impediments to the efficient operation of the housing market. Additionally, the Treasury will implement the agreed recommendations from the Review into the Governance, Efficiency, Structure and Operation of Australia’s Superannuation System (the Cooper Review).

In 2010-11, the Treasury will have a primary role in assisting the Government to implement its tax reform agenda following the release on 2 May 2010 of the Government’s response to the final report on the Australia’s Future Tax System Review. Key reforms will ensure that Australia can meet both challenges and opportunities arising over the coming decades.

Our organisation

The Treasury is committed to nurturing and strengthening its core organisational capabilities and is constantly seeking better ways of doing business. An organisational review was conducted in 2009-10, to consider how the Treasury could sustain its capacity to contribute to policy outcomes while preserving and reinforcing people management values and principles. The review examined the department’s governance arrangements and key organisational systems and behaviours.

As a result, the Treasury made structural changes, including forming a Policy Coordination and Governance Unit (to facilitate high level policy coordination and wholeofdepartment organisational corporate strategy) and a Ministerial and Communications Division (to provide ministerial, parliamentary, publishing and communication services to the department).

Our effectiveness continues to rest on an ability to anticipate the developments that will affect Australia’s economy, and to respond rapidly to those that we do not anticipate. The outcomes of the organisational review will further position us to mobilise resources to those ends.

During 2009-10, the Australian National Audit Office conducted a performance audit of events that occurred in relation to the Treasury’s operations in 2008-09. The audit into Representations to the Department in Relation to Motor Dealer Financing Arrangements did not make any recommendations to the Treasury; however, the Department has reviewed its practices in light of the matters raised in the audit, to strengthen our capabilities in resource allocation, project management and record keeping.

In relation to our financial performance, the Treasury ended 200910 with a surplus of $5.5 million, compared to a $3.9 million deficit in 200809. Employee expenses increased by $11 million from 2008-09 which was associated with a staffing increase of 71 financed by additional funding provided in budget measures. The Treasury received from the Australian National Audit Office an unqualified audit report on the 200910 financial statements.

Several staff received awards and scholarships in the reporting period. Mr Matthew Bowd and Ms Litsa Vavakis were granted Partial Post Graduate Study Awards to complete their Masters of Economics and Masters of Science (Local Economic Development) respectively. Short term Economic Research Projects were also awarded to Ms Ewa OrzechowskaFischer and Ms Yong Yan under a Memorandum of Understanding with the Australian National University. The Treasury also provided two scholarships for Australian National University economics students who demonstrate an interest in pursuing a career in public policy.

In the past 12 months Treasury staff have demonstrated ongoing commitment to pursuing outcomes that will ensure that the wellbeing of future generations of Australians is at least as high as the wellbeing we enjoy today.

I want to thank all Treasury staff for their continuing professionalism, enthusiasm and adaptability in facing the considerable challenges and opportunities that lie before us.

Ken Henry
Secretary to the Treasury