Treasury tribute

Issue 19 | May 2007

Victorian Treasurer John Brumby recently delivered the first Monash University Ian Little Lecture in honour of the respected Monash alumni, who died suddenly in June 2006 aged 50, weeks after framing the State Budget as the Secretary of the Department of Treasury and Finance.

Mr Little graduated from Monash University with an honours degree in Economics in 1977, before completing a Master of Science (Economics) at the London School of Economics in 1984.

Mr Brumby's oration, on the role of the economic policy adviser in Australia's growth and reform, was attended by media, friends, family, Chancellor Jerry Ellis and Vice-Chancellor, Professor Richard Larkins.

This is an edited text of the speech.

It is both a great honour - and a great sadness - to deliver this inaugural Ian Little Oration.

For 12 years, Ian served the people of Victoria with great distinction as Deputy Secretary and then Secretary of the Department of Treasury and Finance. He was an outstanding public sector leader and a highly effective and much-respected economic policy adviser.

Here in 2007 economic policy advisers can no longer see themselves as confined exclusively to 'State' or 'Federal' matters. These days, governments demand a global and national perspective.

Nor can advisers limit themselves to working within a narrow, strictly 'economic' or fiscal framework. The reform agenda is much bigger and broader than that.

By its very nature, delivering economic reform tends to have an extended time scale. This is not simply because the issues are complex. It's also because a lot of good economic reform tends to be not especially popular.

One of the best political aphorisms I've heard is by Winston Churchill, who said that "whenever a Chancellor of the Exchequer does something which is popular, he has probably done something which is unwise".

In essence, good reform is about seeing the opportunities for growth. It's about recognising our changing circumstances and adapting to them, while preserving the best elements of our economy and society.

Of course, being an effective economic policy adviser is not only about coming up with new designs for economic policy.

It's also about understanding your role in a political economy - that not-so-perfect place that tends to mess with those nice, clear-cut theories you learned back in Economics 101.

In Australia , that means understanding how the reform imperative fits within the framework of a federation.

Let me give you one example: health.

In the old days, people use to die from injury or infection - and we built our health system around treating those things, most evident in our investment in drugs and acute hospitals.

Now, the developed world has undergone an epidemiological transition. Now, it is non-communicable or chronic diseases that will take most lives.

For example, it's estimated that the number of adults in Australia with diabetes has trebled since 1981 - and that almost one in four people over 25 have diabetes or a pre-diabetic condition.

Pretty clearly, we need to shift the focus of our health system more towards preventing these diseases - and not just for the sake of better personal health. It's also crucial for developing a more productive workforce and for increasing participation in the workforce.

Making that shift is not about a bit of minor tweaking. A very substantial national reform effort is needed.

And - as in many other areas - it's a bit difficult to see how we can succeed in that effort while we continue to cling to constitutional arrangements that are now more than 100 years old - and while we stick with an inherently unfair and unbalanced fiscal relationship between the Commonwealth and the States and Territories.

While I was thinking about what I wanted to say in this speech, I started thinking about what advice Ian might give to young economic policy advisers starting out in government.

First, I think he would tell them to always provide frank and fearless advice (although perhaps not too fearlessly and being ready to duck where necessary!). It's not always an easy thing to do, but public policy makers do want to know the full range of policy options.

Second, I think Ian would also say that you need to 'get out of the ivory tower'. Working in a Treasury department can sometimes be isolating - and you must always think through what particular reforms will mean for business and the wider community.

Thirdly, you need to be clear about ends and means. You need to understand that a strong economy is not an end in itself. Good policies, a strong budget and a strong economy are the means to improved opportunities, a better quality of life and a higher standard of living for Australians.

Fourthly, you need to respect and understand markets. A market isn't always perfect, but it is a long way ahead of any other option. Victoria 's irrigation system is the most efficient in Australia because we let water move to where it adds most value - and understanding that principle is critical to making good public policy.

Fifth, Ian would also say you need to take the long-term view and think beyond political cycles. All the big economic reforms of the past 20 years have involved short-term pain for long-term gain. But where would Australia be today without those long-term reforms such as floating the dollar, means-testing pensions, deregulating financial markets, National Competition Policy and superannuation?

You also need to make sure that the facts are right. Treasurers need to be 100 per cent confident that the information we're relying upon is 100 per cent accurate.

Finally, I think Ian would tell you that communication is vitally important. A great idea will never become an influential idea unless it is effectively expressed.

Ian had all of these qualities - and some eight months after his death, I still miss his passion, his knowledge, his enthusiasm and his commitment to Victoria.