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Grattan on Friday: Should a lobby group chair the Audit Commission?

With this week’s announcement of the government’s Audit Commission members and terms of reference, Tony Abbott is starting to get his Rudd-like list of inquiries and reviews on the go. The beginning is…

There are many questions surrounding Tony Abbott’s commission of audit. AAP/Bianca De Marchi

With this week’s announcement of the government’s Audit Commission members and terms of reference, Tony Abbott is starting to get his Rudd-like list of inquiries and reviews on the go.

The beginning is the easy part. But will the PM be able to manage the robust outcomes presented to him?

The commission will land a couple of boxes of firecrackers in the government’s lap in January and March. Abbott, Treasurer Joe Hockey, and senior ministers will have to decide which to ignite and when - and which to leave in the box.

The fruits of audits are inevitably tricky for politicians. The remit for this one is extremely wide; it is looking at all the federal government does and delivers, what it should and shouldn’t do, and overlaps with the states. It is to recommend savings that would be enough to deliver a surplus of 1% of GDP before 2023-24.

By choosing to have Business Council of Australia president Tony Shepherd chair the inquiry – as distinct from being one of its members - the government is, to a considerable extent, outsourcing the driving of the project to a Man with a Plan.

Shepherd before the election released the BCA’s Action Plan for Enduring Prosperity. Canvassing the need for an independent, whole-of-government audit (already promised by the Coalition), it said such an inquiry must “come to terms with the appropriate size of government” and “a fundamental issue to be examined must also be the roles and responsibilities of the Commonwealth and the states”.

With his appointment as chair and the audit’s sweeping terms of reference, Shepherd has hit the jackpot. After difficult years with Labor, the big end of town is back at the centre of Canberra town.

The issue with Shepherd as chair is not a narrow conflict of interest - Shepherd, incidentally, this week steps down as chairman of Transfield, a move previously foreshadowed - it is that the government has handed the most important post on its commission to the head of a lobby group.

This is a contrast to 1996 when then treasurer Peter Costello’s audit commission was chaired by Bob Officer, who was an academic at Melbourne University’s Business School.

Moreover, the secretariat for the current audit is to be led by Peter Crone, chief economist for the BCA, who helped prepare the BCA plan.

Crone used to work for John Howard and at the Treasury. He brings a lot of knowledge to the task, and is said to get on well with people around the public service.

But his appointment to head the secretariat is unusual and reinforces the point that the government wants to make sure the audit isn’t “captured” by the current bureaucracy.

The other members of the team are former secretaries of Treasury (Tony Cole) and Finance (Peter Boxall), a former senior Western Australian public servant (Robert Fisher), and former Howard government minister Amanda Vanstone. Given the BCA’s pivotal position, and the experience of the others in policy making, the dynamics will be interesting.

The reports will be in time for the budget, allowing for some proposals to be included. They won’t be released before the budget.

The idea has been floated from government circles of including certain controversial measures at the tail end of the budget’s four year forward estimates, with the Coalition avoiding the issue of broken promises by saying it would seek a mandate for them at the 2016 election. One wonders how the politics of that would play.

There is little doubt another audit is desirable, and the only time to do it is at the start of a first term when a new government has plenty of capital in the bank. It is equally clear that it is likely to be a testing exercise for the tyro PM, in terms of managing business expectations, his promises, electoral politics, and senior colleagues.

As things stand Abbott is hedged in by many commitments – and one of his mantras is the importance of keeping his word. These include not to cut (in overall terms) spending on health, education and some other areas. Also, his election policies – such as the much-criticised paid parental leave scheme – are no-go areas for the commission.

The Howard government shied away from much in the Officer report as being too difficult. But Officer still urges this commission to put up strong recommendations. “If the Audit Commission worries about the politics they are letting the government down,” he told The Conversation.

When the BCA was preparing its blueprint, Shepherd said: “The plan we’re putting forward for Australia requires political leaders who are prepared to lose their jobs to get things done.”

This is not likely to be the new PM’s frame of mind.

The response to the audit’s recommendations could be an early test of the relative priorities of Abbott and Hockey.

Hockey identifies with the big end of town more than does Abbott; he is the stronger economic rationalist. He will want to build a reputation as a reforming treasurer and is probably willing to spend a reasonable amount of his political capital to do so. Abbott is likely to be pragmatic with a greater eye to the voters.

History tells us relations between a prime minister and treasurer often develop a special and difficult nature.

Bob Hawke supported Paul Keating’s drive for economic reform but also reined in Keating on political grounds (notably, to Keating’s fury, in 1985 when the political costs of pushing for a broad based consumption tax became too great).

Peter Costello was critical of what he considered John Howard’s spendthrift habits, as Howard used whatever funds were available to massage the voters.

In the Hawke/Keating and Howard/Costello dealings there was also the element of political competition, which manifested itself increasingly as the years wore on.

Abbott and Hockey (who could have got the leadership ahead of Abbott if he had played his cards differently) are blood brothers in these early days of power. But this will be one of the most interesting relationships in this government and the budget, with its response to the audit, could write its first chapter.

Listen to Nick Xenophon on the Politics with Michelle Grattan podcast, available below, by rss and on iTunes.