The sad demise of the once great Australian Treasury

In January 2003, the day before the bushfires engulfed Canberra, I departed Melbourne with my girlfriend (now wife) to commence a job at the Australian Treasury as a graduate economist.

We were inducted by then Secretary Ken Henry and his deputies who drilled into us the Treasury’s rich history of giving “frank and fearless” advice to the federal government, based upon rigour and evidence.

We were instructed to examine issues rationally with a clear mind and free of prejudice, and not to be afraid of putting forward dissenting advice. Analytical excellence was the priority, as was protecting the “wellbeing” of Australians.

I reluctantly departed the Treasury in 2006 and headed back to Melbourne. It was (and remains) the best job I ever had, even though I witnessed three years of gradually creeping political influence from ministerial advisers.

Sadly, the Treasury that exists today is a shadow of its former self and has become deeply politicised. Evidence of the Treasury’s politicisation is hiding in plain sight.

Take, for example, Treasury’s endless propaganda in favour of mass immigration. This was most egregiously on display in Treasury’s report, Shaping a Nation. This report claimed that migrants are more productive than locals. It said they create higher productivity and generate higher GDP and GDP per capita. However, there isn’t a shred of evidence given to support these claims. Nor did the report bother to properly assess the many costs of high population growth, such as greater traffic congestion, less affordable housing, or environmental degradation.

Yet the empirical evidence clearly shows that migrants (even skilled) earn less than the general population and suffer higher unemployment. Australia’s productivity growth and wages also collapsed over the prior 15 years of extreme immigration, due in no small part to its capital shallowing effects:

Australia’s labour productivity collapsed after mass immigration commenced in 2005.

Despite the damning empirical evidence, the Australian Treasury continues to push for a return to ‘Big Australia’ levels of immigration, and indeed projected so in last week’s federal budget, backed by Treasury’s new propaganda unit, the Centre for Population:

A return to Big Australia.

Late last year, Treasury Secretary Steven Kennedy (who I worked alongside in 2003-04) stated that it “would be good to see Australia’s migration return to our previous levels” – a view backed in Kennedy’s post-Budget briefing to the Australian Business Economists on Monday.

Not only do the economics not stack up, but returning to Big Australia migration levels is deeply unpopular within the community, which suffered a decade of stagnating real wage growth and falling productivity on the back of high immigration, alongside declining amenity. And still the Australian Treasury, ignoring all evidence and reason, wants to repeat the same mistake again. So much for safeguarding the “wellbeing” of Australians.

Treasury’s demise was also on display with its dodgy company tax cut modelling, which showed all the hallmarks of politicisation. Like its Shaping a Nation immigration report, this modelling was torn apart by experts and portrayed a politically corrupted government agency writing for its master, rather than conducting a rigorous assessment of the evidence.

Treasury has also been corrupted intellectually, as evidenced by its dodgy wage growth forecasts. During the 15 years of extreme immigration, Treasury always projected that stronger wages were just around the corner:

Years of Budget wage blunders.

Weirdly, now that immigration has turned negative, Treasury has projected that real wages will also turn negative. In fact, real wage growth is not projected to return until ‘Big Australia’ migration levels are restored in 2024-25:

No real wage growth until mass immigration is restored. WTF?

It’s as if Treasury believes that flooding the labour market with an additional 180,000 to 200,000 workers every year will magically drive up wage growth. This despite the actual empirical evidence showing that wage growth crashed to record lows while immigration ran hot:

Australian wage growth collapsed as migrant workers flooded the labour market.

Treasury’s own Shaping a Nation propaganda report even admitted that most new jobs created in Australia in the five years to 2016 went to migrants:

Recent migrants accounted for two-thirds (64.5 per cent) of the approximately 850,000 net jobs created in the past five years. For full-time employment, the impact is even more pronounced, with recent migrants accounting for 72.4 per cent of new jobs created.

Thus, how can Australia possibly hope to lower the unemployment rate and drive wages higher if we return to pre-COVID levels of immigration? We can’t. So why won’t Treasury be honest and say so?

Sadly, the Treasury that I worked from 2003 to 2006 no longer exists. It is now a propaganda arm of the federal government, which sadly is just what Prime Minister Scott Morrison wanted all along:

Scott Morrison said he saw the bureaucrats’ role as implementing the government’s policies. Their advisory role was limited to advising the government of any problems that might arise during that implementation…

Treasury gives much information to the treasurer, but avoids giving written policy advice it believes would be unwelcome.

Vale “frank and fearless” advice. Vale the Australian Treasury.