The last 12 months have been a period of transition for the Australian and international economies, and has seen further transformation of the Treasury and its operating environment.
After a period of subdued growth, economic activity strengthened noticeably in the United States, United Kingdom and Japan, while remaining weak in Europe as a whole. Emerging economies, in contrast, saw growth ease back after being the predominant drivers of economic activity in the period since the global financial crisis (GFC).
Australia’s Presidency of the G20 therefore commenced against a backdrop of lingering after-effects of the GFC, high unemployment in many economies, ongoing weakness in banking systems and the threat of disruption and volatility as monetary policy moves back to more normal settings.
The focus of Finance Ministers and Central Bank Governors during Australia’s host year has, accordingly, been on ways to boost global growth, create more jobs, ensure more resilient financial sectors, and improve the operation of tax systems in order to contribute to more sustainable fiscal positions. The Treasury has supported the Treasurer, the Hon. Joe Hockey, MP in progressing this agenda and in influencing the shape of international economy policy discussions more broadly.
The Department has also continued to deepen Australia’s engagement with other global and regional economic forums, as well as our bilateral cooperation with strategic partners in the Asia-Pacific region. It has also boosted its strategic analysis and advice on regional economies.
Domestically, the economy continues its transition away from investment in the resource sector, as the key driver of growth, toward non-resource sectors. This transition has been slower than hoped and economic activity has recorded below trend growth rates for a number of years, resulting in a building output gap and a drift up in the unemployment rate. If Australia is to deliver economic growth sufficient to reduce unemployment and deliver living standard improvements similar to the last two decades, in the face of falling terms of trade, a key priority has to be given to boosting our productivity growth and ensuring fiscal sustainability.
Following the September 2013 election, Treasury supported its new Portfolio Ministers with the transition to Government. A key focus over the remainder of the year was on the delivery of election commitments, including through the Budget. In that context, the department provided extensive advice on pathways to fiscal consolidation over the medium-term and assisted the National Commission of Audit through the provision of staff, and information on the structure and components of government revenue and expenditure.
Boosting productivity takes time and a broad focus. The Government’s Financial System Inquiry and Competition Policy Review, along with a range of Productivity Commission reviews, the tax and federation White Paper processes and the deregulation agenda, all provide opportunities to deliver productivity-enhancing reforms.
Over the year, the department provided advice and developed legislation for the taxation system, and superannuation and retirement income policies. This work included implementing a number of the Government’s key election commitments as well as dealing with the stock of 96 announced but unenacted tax measures of former governments. Treasury also supported the G20 tax agenda, including by contributing to the development of the OECD action plan on base erosion and profit-shifting, and consulting with businesses on exchange of information proposals.
Throughout 2013-14, Treasury helped maintain a robust and dynamic financial system, and ensured that regulatory frameworks promote macroeconomic stability and market confidence. We implemented financial regulatory reforms, including rules that address the availability and quality of financial advice and made further progress in implementing internationally agreed regulatory reforms designed to support financial stability. Treasury also provided secretariat support to the Financial System Inquiry and the Competition Policy Review, which will provide recommendations to Government on how to ensure the financial regulation and competition policy frameworks are best positioned to support productivity growth and economic stability.
The new Government has elevated the importance of small business as a driver of Australia’s future growth, appointing a Small Business Cabinet Minister within the Treasury portfolio. As a result, the department took the lead in advising on whole-of-government policy settings to support the Australian small business sector. Treasury has also been actively pursuing ways to eliminate inefficient or unnecessary regulation in line with the Government’s deregulation agenda. We contributed to the first repeal day in Parliament and have been working closely with our portfolio agencies and stakeholders to identify opportunities to reduce red tape and regulatory burdens in a range of areas like taxation and the financial system, many of which would assist small business.
The last year has also been a period of transition in terms of Treasury as an organisation. The end of 2013 saw the completion of the Australian Public Service Commission Capability Review of Treasury. The findings of that Review reinforced our belief that we needed to change as an organisation if we were to be as successful and influential in the future as we have been in the past. We responded by developing a Capability Action Plan (incorporating some reforms which were already in train), which focuses on improving our performance in four main areas: leadership and change management; stakeholder engagement; innovation and knowledge management; and planning, budgeting and measuring. Each of these four broad themes has become a project stream led by a senior executive. I am very pleased with the progress on each stream and the support for change at all levels of the department.
Treasury’s work on Progressing Women has continued, and has organically widened to address diversity and inclusiveness more generally. The Inclusive Workplace Committee has supported this work, with the active involvement of the two private sector members who have brought a broader perspective to the representation of diversity.
The establishment of the Australian Treasury Advisory Committee (ATAC), with its strong private sector focus, has also provided an important external perspective on governance issues and on ensuring our strategic priorities reflect best-practice. ATAC’s counsel and governance advice to Treasury’s leadership provides some of the incentives and disciplines found in private sector corporations. I thank ATAC members for their commitment and for their insightful guidance to me as Secretary.
There has also been continuing development of Treasury’s two-way secondment program. Treasury staff have previously been seconded to Rio Tinto and the Business Council of Australia (BCA). While the BCA link continues into a third cycle, we have also now placed Treasury staff with BHP-Billiton, the Financial Services Council and the Australian Bankers Association. A further 26 staff have participated in secondments with other parts of the public sector, including the Reserve Bank of Australia, the Australian Taxation Office, the Australian Competition and Consumer Commission, Department of Foreign Affairs and Trade, the Australian National University’s Tax and Transfer Policy Institute and the Commission of Audit.
In addition, Treasury has provided opportunities for secondments from the private sector. During 2013-14, 13 individuals from a range of organisations, including Rio Tinto and Deloitte, undertook secondments within Treasury.
These two-way exchanges have been invalu
able for improving understanding of different perspectives and for bringing diverse practices and knowledge to bear in ways that can inform Treasury’s work.
This strong focus on improving Treasury’s knowledge base and organisational strategies has occurred against a backdrop of shrinking resources, with staff numbers required to shrink by around one-third from their peak in March 2011. Calendar 2014 will see much of this staff reduction occur as we ensure Treasury is “handover-ready” for the incoming Secretary.
Both in delivering on Government priorities and on the organisational reform agenda, the professionalism and resilience of Treasury staff shines through. Staff continue to provide high-calibre policy analysis and advice no matter how challenging the circumstances. As my departure approaches, I look back on my career at Treasury with gratitude and satisfaction. Treasury has provided me with huge opportunities and I hope that my successor and Treasury colleagues can help the Government seize new opportunities opening for Australia. While staff may come and go, and operating styles evolve, Treasury’s institutional commitment to improving Australia’s wellbeing remains unwavering.
Secretary to the Treasury