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The Treasurer’s pick

The resignation of Treasury Secretary John Fraser was too good an opportunity to miss.

With no consultation with the Opposition, Scott Morrison has appointed his chief of staff as the new Treasury head.  One would have thought there may have been others already working in Treasury who should have been considered first rather than making what appears to be a very politically motivated choice.

Philip Gaetjens was Scott Morrison’s chief of staff from 2015 until a month or so ago.  On June 4, Julie Bishop and Scomo issued a joint press release saying that Gaetjens had been appointed as Australia’s next Ambassador to the OECD in Paris.

The chance to put him in charge of the Treasury instead changed all that.

This is the man who served as Peter Costello’s chief of staff from 1997-2007, advising him when he conducted an asset fire sale, when he slashed taxes, and when he hugely increased concessions for the wealthy, skewing investment and locking in structural budget changes whose repercussions are being felt today.

According to the Australian, in 2005, Gaertjens had asked for detailed costings from Treasury on reforms including a flat tax, in which everyone would pay 30c in the dollar and the $6000 tax-free threshold would be abolished.  I suppose we should be thankful for small mercies that they were voted out in 2007 before that idea took hold.

Gaertjens was instrumental in developing and introducing the GST and establishing the Future Fund – a huge stash of money now under the control of none other than Peter Costello.

As at March 31, “the Board of Guardians now invests $166bn” – $140.8 billion in the Future Fund, $7.1 billion in the Medical Research Future Fund, $10.4 billion in the DisabilityCare Australia Fund, and $3.8 billion in both the Education Investment Fund and the Building Australia Fund.

Since its inception in May 2006, the Future Fund has had an average annual return of 7.7%.  For some unknown reason, they keep $21 billion of it in cash.  This enormous amount of money is supposedly sitting there to cover public servants’ superannuation – an entirely unnecessary measure for a sovereign currency issuing nation.

You may be pleased to hear that the Medical Research Fund is diversifying its portfolio and increasing its property holdings.  Or you may be like me, and prefer that it be spent on, yanno, medical research?  Or that the disability care fund be spent on training the workforce needed rather than invested in “a combination of short-term and medium-term debt instruments.”  Or that the education and building funds might bring a higher return than the 2% they are currently achieving if they were invested in education and building.

But hey, it’s Costello’s baby.

It will be interesting to see if Treasury’s assumptions for population growth, GDP, and taxation revenue change in light of Dutton’s personal cutting of immigration.  Many say they are already inflated so the next government may find it very difficult to deliver a surplus predicated on growth that Dutton is determined to be seen to be reducing.

It will also be interesting to see if the new Treasury Secretary continues his support for policies that increase inequality.


30 comments

  1. New England Cocky

    Now, now Kaye … when has rationality been a pre-requite for Liarbral Party thinking??

    I mean guaranteeing the destruction of the Australian economy for the benefit of foreign owned bankers cannot happen while competent professional public servants remain as leaders in the respective departments offering sound advice regardless of the latest political thought-bubble. As seen in Nazi Germany and Fascist Italy, you need rectum lickers intent upon self-aggrandisement to ensure that the political agenda dictated by foreign interests is carried out to the detriment of the Australian voters.

    We get the politicians we vote for … it is time for a thorough change.

  2. David Tyler

    Morrison’s made the perfect choice, Kaye. Given that ScoMo is himself economically illiterate and instead relies on graphs, unfounded assertions and a lot of shouting, the promotion of a subordinate incompetent makes sense. What a team. Each will be so busy admiring the other that neither of them will make the embarrassing chance discovery that neoliberalism is dead, buried and cremated. Or that Morrison has yet to come up with a single successful economic policy.

  3. Alpo

    Their you go, the Liberals want a Neoliberal bastard heading the Treasury… with the objective of heading out of Government at the coming election leaving not a “treasure” behind, but scorched earth, a massive debt, a huge deficit and rising real unemployment-subemployment.

    Bastards!…. You will never be forgiven.

  4. Kaye Lee

    David,

    Liberal Party graphs are great teaching aids. They employ every single technique for distorting information. I could list many of them but few people would be interested. But even a maths tragic like me, with a motive of fact checking so a reason to pay attention, glazes over at Scomo’s graph displays. It’s like a scattergun effect. All I see are the devices. I no longer bother even listening to whatever information he is pretending they portray. Which is I guess the point.

    When kids don’t know their topic and can’t speak off the top off their head for school news, it’s a good idea to give them props. If anyone asks a question, distract them with the prop.

  5. totaram

    David Tyler: “Or that Morrison has yet to come up with a single successful economic policy.”

    He doesn’t need to come up with anything – the IPA is the think-tank that does it all. ScoMo then has to “defend” the polices using the spin manufactured by the IPA and Co. None of these polices are designed to help the Australian population at large, they should just appear to be so by the usual methods of spin and propaganda. I wish neoliberalism was dead, buried and/or cremated, but as long as these two, and the rest of this govt. are in charge they will carry on the good work the neoliberal way. Watch carefully as they get the big business tax-cuts through by wheeling and dealing with the grifters on the cross-bench, and then ensure a future for coal with their dodgy NEG. With enough luck, they will ensure that neoliberalism is cemented in for many years after they are gone. Howard and Costello did the same thing and Labor were unable to undo the damage to any great degree. They even let Costello have a sinecure as the head of the shonky “future fund”, where he still rules the roost and comes out to approve the next wave of neoliberal damage by doing some dodgy “audit”, whose outcome has been pre-ordained. The same will be repeated after we get rid of these crooks, unless Labor has the guts to do a proper clean-out.

  6. David Tyler

    I’m gobsmacked by the lies, Kaye. You’d be up with most of the following but they may be of interest to other readers keen to follow the Coalition’s outrageous appointment of a head of treasury who will act as an echo chamber for the government’s propopaganda

    Alan Austin who lives in France does a great job pursuing Morrison’s lies – most of which are ignored by the majority of the MSM – and most of which are repeated so so often they have become accepted as fundamental truths. Here’s a few of Austin’s fact-checks:

    June 21
    Morrison’s June 21 media release titled “Lower, fairer and simpler taxes for all working Australians” contains three false assertions.

    The first is that the government’s personal income tax plan will ensure “all Australians paying tax will be better off”. This is not true. The changes will not relieve the millions of Australians hit by the range of hefty indirect taxes but who do not pay direct income tax.

    Morrison’s claim that “Australia will continue to have a progressive income tax system, with those on the highest incomes paying most of the tax” would be true only if tax evasion — which currently relieves many top income earners of paying any income tax at all — is tackled. Evidence of widespread evasion is readily available. The Coalition has no credible plans to address this. NATSEM modelling confirms that Morrison’s proposed tax system from 2024-25 is less progressive than the current system. Tax cuts will benefit the rich more than the poor.

    Finally, history shows that the belief that Labor is standing “for higher taxes on all Australian wage earners” is untrue. Judging by tax data found in statement 11 of the May budget papers, we can see that taxation receipts (table 3, page 11-9) as a percentage of gross domestic product through the Hawke/Keating Labor period averaged 21.84% each year. This increased significantly through the Howard years to 23.44%. The average then fell through the Rudd/Gillard years to just 20.80%. It rose again during the Abbott/Turnbull period to 22.20%.

    June 18
    Morrison’s June 18 release asserts that “Labor’s higher taxes can never keep up with their higher and uncontrolled spending.”

    Not true. Spending as a percentage of GDP is shown in table 1 (page 11-5) of statement 11 of the budget papers. Through the Labor years this averaged just 24.84% of GDP. That is despite the vast outlays — as they were depicted at the time — of nearly $89 billion in stimulus spending in 2008-09.

    So spending to GDP should have fallen back dramatically under the Coalition, if Morrison is to be believed. But no. It has increased to an average of 25.28%.

    June 6
    There were three falsehoods in just one sentence in Morrison’s June 6 media release on annual GDP growth: “Australia has climbed back to the top of the global leaderboard, leading the major advanced economies of the world, bettering the average growth of the OECD and all G7 nations once again.”

    Firstly, Australia is nowhere near the leaders. Of the 183 countries whose annual GDP growth is listed with trading economics, Australia with 3.14% ranks equal 106th. That’s down in the bottom half.The average growth for those 183 economies in 3.71%, well above Australia’s 3.14%. Global leaders today are China on 6.8%, India on 7.7% and Ireland on 8.4%.

    Australia is not “Bettering the OECD average”. Average growth for the 35 wealthy members of the Organisation for Economic Cooperation and Development (OECD) is 3.17%. Australia’s 3.14% is lower.

    Data on all countries can be found here. Australia’s growth can be calculated from ABS file 5206 (table 2, column DT).

    But perhaps Morrison’s worst deception comes from the phrase “once again”. He wants us to believe Australia’s fortunes have finally been restored. He claims earlier in the same release that “the Turnbull Government’s plan for a stronger economy is working, and we need to stick to that plan.”

    The opposite is true. Australia’s GDP growth now ranks 16th in the OECD — lower than virtually the entire Labor period. For most of the Rudd/Gillard years, Australia was in the top six. By December 2008, with the developed world impacted by the global financial crisis, Australia’s annual growth was second highest. In the next two quarters, Australia was clear first.

    At the end of Labor’s last full calendar year, 2012, Australia ranked a solid fifth. Does ranking 16th really mean Australia has risen to the top “once again”?

  7. Kronomex

    Gosh, I wonder if the Moneybox Secketterryz position pays more, a lot more, than being a dreary old Ambassador? In this case I can see Labor doing the same thing, we must not forget (even if the LNP are past masters at it) “Jobs for the boys (persons?)” rules.

  8. David Tyler

    Depends where you are posted, Kronomex but Treasury head was elevated to $840,000 after a bit of a pay rise last year.

    On the bigger issue – there’s another excellent response from Glenn Dyer and Bernard Keane in Crikey, which would be pay-walled off from many readers but which supports Kaye’s outstanding work.

    Here’s the lead para:

    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.

    https://www.crikey.com.au/2018/07/13/phil-gaetjens-should-not-lead-treasury/

  9. Frank Smith

    Kaye Lee, as a scientist I am also bemused by Scott’s “scattergun” graphs. Accompanied by his motormouth commentary (designed to hide his ignorance) he should have a permanent spot on Stephen Colbert’s late night comedy show. But, no doubt his antics provide a great aid in teaching young minds how NOT to communicate facts – much like John Cleese and Monty Python.

    Perhaps your excellent research could tell us what this “Future Fund” is actually for and when are we going to reach the “Future” when presumably the Nation can start drawing down on it to fund essential services and infrastructure to assist its people, rather than a mob of dodgy bankers and “hangers-on”.

  10. David Tyler

    Keane and Dyer remind us of the role of Tony Abbott:

    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.

    https://www.crikey.com.au/2018/07/13/phil-gaetjens-should-not-lead-treasury/

  11. diannaart

    Thank you, Kaye Lee

    You may be pleased to hear that the Medical Research Fund is diversifying its portfolio and increasing its property holdings. Or you may be like me, and prefer that it be spent on, yanno, medical research? Or that the disability care fund be spent on training the workforce needed rather than invested in “a combination of short-term and medium-term debt instruments.” Or that the education and building funds might bring a higher return than the 2% they are currently achieving if they were invested in education and building.

    Yet, these bozos claim they are the fiscal managers.

  12. Paul

    The Treasurer’s pick?
    Or the IPA’s nomination?

  13. Matters Not

    Re:

    governments of both sides have been criticised for politicising Treasury

    Not just Treasury and not just at the Federal level. Not unusual for incoming governments of all persuasions to replace public service heads at the State level as well. It’s why they are on contracts and are very well paid – sure their remuneration doesn’t match that of the private sector – but they don’t finish on struggle street either.

    Seems to me that Philip Gaetjens arrives at a very opportune time. Probably on a 4 year contract that in all probability will be terminated with 3 years remaining – with a payout of some note in the pipeline.

    The times they are a changing. And not always for the better.

    As for dodgy graphs – also not confined to one side of the aisle.

  14. townsvilleblog

    Kaye, why would this mob consult the Opposition before appointing such a position, they are the most arrogant, self-opinionated group of incompetents I can ever remember making it to the government benches.

  15. Kaye Lee

    I also missed this about the Future Fund….

    The last budget announced a new Aboriginal and Torres Strait Islander Land and Sea Future Fund to replace the $2 billion Land Account.

    “The new Fund will be managed by the Future Fund Board of Guardians (FFBG) which will ensure this critical Indigenous endowment fund is up to $1.5 billion better off over 20 years compared to current investment parameters.”

    We may as well just hand the lot over to Costello to sit on and hatch.

  16. Frank Smith

    Hatch!! The perfect word Kaye Lee. Yes, this “Future Fund” seems to be a cunningly devised means of financing the extravagant lifestyles of dodgy bankers, stock exchange brokers, wealth managers, ex-politicians, ex-political staffers, and sundry other leaches on our society at the expense of the Nation. Hatch-ers, hatch-ers, hatch-ers, (if there is such a word) the lot of them!

  17. Kaye Lee

    Frank,

    The remuneration tribunal sets the pay for the board. I can’t find it specifically but the 7 people who are on the management committee received $6,250,382 in 2016-17.

    In 2016-17….

    Contracts with investment managers $254,382,038
    Board remuneration and allowances $908,032
    Agency remuneration and allowances $38,842,944
    Consultants and advisers to the Board and Agency $16,064,403
    Agency operations $23,646,429

    It’s costing us hundreds of millions every year for them to invest our money of which only 28% is invested in Australia – 36% is invested in the US.

  18. Frank Smith

    Thanks Kaye Lee, Ummghhh, and what are we the citizens of this so called democracy who own this “Fund” getting for all this expenditure? I rest my case.

  19. Kaye Lee

    In Alaska, every resident gets an annual payment from their Future Fund earnings ($1600 this year) provided they haven’t committed a felony or multiple misdemeanours. An interesting way to encourage people to be good and to stimulate the economy at the same time.

  20. Lawrence Winder @shanewombat)

    Hopefully, if Labor wins the next election, the first weeks of re-alignment will make the “Night of The Long Knives” look like the Teddy-Bear’s Picnic!

  21. paul walter

    Interesting.

    Watching the Drum this arvo, even Peter Van Onselen was moved to comment on it.

    There really is a laager mentality afoot with these mean and out of touch people.

  22. john lord

    An appointment such as this only goes to prove that they are still in born to rule mode and expect to win the next election.It might turn out to be a very short appointment indeed.

  23. John Lord

    The appointment absolutely reeks of jobs for the boys and that they expect to win the election.

  24. Kaye Lee

    It gets worse….

    The deputy secretary position has been given to Simon Atkinson, a former chief of staff to Finance Minister Mathias Cormann, and Michael Brennan, a staffer to former Finance Minister Nick Minchin and former Victorian treasurer Kim Wells, has been appointed the new chairman of the Productivity Commission.

  25. Ricardo29

    I read the Crikey article and that started a slow burn of anger, flames further fanned by this post. What really gets to me is the pure unadulterated cynicism of these appointments. Morrison and co. must know that these are politically inappropriate unless they are brain-dead but go ahead anyway. Can we expect any of the mainstream media to question the suitability of Gaetjens etc., or will they be the usual cheer squad? I just hope Labor are keeping score but, more to the point, are honing their blades.

  26. Matters Not

    Re:

    It gets worse….

    Perhaps. Whom are we talking about here – because these developments can be viewed from any number of perspectives, including (but not limited to) that of particular individuals. It’s probably the case that some public servants thought they were the next in line for a particular position. Chances are they are very unhappy campers at the moment – as are the ones below who were also eyeing a subsequent promotion. There’s ripples in many directions. There’s hate in the air.

    Clearly there’s a new dynamic in play. Disgruntled public servants are known to leak. (It comes with the territory). Sometimes to the media. Sometimes closer to the political bone. I suspect that Opposition Shadows will be inundated with juicy tactical and strategic info. Alliances will form. Promises – unsaid, implied or alluded to – will be on the table.

    Politicians often forget that public servants are humans with the full range of emotions and often with intelligence far superior to that of their political masters. So for me – things could get a whole lot better. The more destruction the better. Hopefully, it’s a dying government and this will hasten their demise.

  27. Kaye Lee

    I really don’t think it is appropriate for politicians to be the ones appointing public service, judicial and board positions. I do understand that any body would be open to similar empire building and rewarding of allies but an independent body would at least have to have some sort of actual process rather than the ‘Tim Wilson’ approach – “I like the boy”

  28. Matters Not

    KL. while I appreciate the sentiment, the fact is – it’s individuals (with all their failings) who will make the decisions – sometimes directly but often via an intermediary. Howard used Max the Axe to cut a swathe through the Federal Public Service. Wayne Goss used Kevin Rudd to do something similar in Queensland. Abbott used Credlin. etc.

    One should not forget that Turnbull appointed Greg Moriarty (his Chief of Staff) to head Defence. Not much of an outcry them. Ken Henry once worked in Keating’s office. etc etc. Further in the US, it’s many times worse. Did you know, for example, one doesn’t have to be judge or have any legal experience to be appointed to the US Supreme Court. Can’t happen here although Newman promoted one judge way above his level of competence.

    Not sure we have any magic formula here. But I agree we can makes things somewhat better – more transparent etc. Perhaps in a democracy we should elect the judges – or the law officers like they do in the US. Many possibilities. Not all good.

  29. Wayne Turner

    This is what fascists do – Appointment their biased mates to positions of influence.

    https://rense.com/general37/char.htm

    This government has an example for every point in this link. In this case:-

    Rampant Cronyism and Corruption – “Fascist regimes almost always are governed by groups of friends and associates who appoint each other to government positions” and use governmental power and authority to protect their friends from accountability. It is not uncommon in fascist regimes for national resources and even treasures to be appropriated or even outright stolen by government leaders.

  30. ozibody

    The following link about the fate of ‘Capitalism’ may/could be interesting …….From “Dandelion Salad”

    with Chris Hedges

    RT America on Jul 14, 2018 ……… Chris Hedges and Richard Wolff: The Coming Collapse of the American Economic System Michael Hudson: China’s Export Competitiveness = Underpaying […

    .

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