tag:theconversation.com,2011:/us/topics/martin-parkinson-9769/articlesMartin Parkinson – The Conversation2023-09-25T10:40:27Ztag:theconversation.com,2011:article/2142622023-09-25T10:40:27Z2023-09-25T10:40:27ZView from The Hill: ‘Player’ Mike Pezzullo undone by power play<p>Mike Pezzullo, one of Canberra’s most powerful and certainly most controversial public servants, cannot survive the revelation of the trove of text messages showing him blatantly inserting himself into the political process. </p>
<p>Pezzullo, the secretary of the Department of Home Affairs, has been stood aside while his extraordinary behaviour, <a href="https://www.smh.com.au/national/power-player-20230925-p5e7fq.html">exposed by Nine Entertainment</a>, is scrutinised by a former public service commissioner, Lynelle Briggs. But the end of the story is predictable. </p>
<p>In the tsunami of encrypted texts, running over five years and sent to Scott Briggs (no relation to Lynelle Briggs), a Liberal insider and confidant of prime ministers Malcolm Turnbull and Scott Morrison, Pezzullo repeatedly lobbied for his departmental interests and his views. </p>
<p>He dissed ministers in the way of these interests or those (and other people) he didn’t rate. He used Briggs to seek leverage with the then PMs, asking for his opinions to be passed on. Briggs was happy to comply.</p>
<p>Nine <a href="https://www.9now.com.au/60-minutes/2023/episode-34">says it learned of the messages</a> “via a third party who obtained lawful access to them”. </p>
<p>Pezzullo is a one-off in today’s public service. He can perhaps be partly understood by referring back to the so-called bureaucratic “mandarins” of decades ago. They ran their departments with iron grips, and in some cases were, or tried to be, as powerful as ministers, or more so. They gave no quarter in bureaucratic battles.</p>
<p>The mandarins were “players”. Pezzullo is a “player”. </p>
<p>He’s tough and polarising, with supporters and bitter enemies. Critics have long questioned his judgement. On security matters, he’s the hawks’ hawk. While at first blush his texts appear highly partisan, that is too simplistic an interpretation. He fights bureaucratic and policy/ideological battles, rather than being directly party-political.</p>
<p>His addiction to texting is certainly bipartisan. Within the Albanese government they joke about it starting first thing in the morning and running well into the night. </p>
<p>As a public servant, Pezzullo has served both sides of politics. When in the defence department, he was lead author of the Rudd government’s 2009 defence white paper, which raised the hackles of China. Earlier, he was a senior staffer to Kim Beazley when Beazley was opposition leader. His primary interest is defence – he would have liked nothing better than to head the defence department.</p>
<p>When Anthony Albanese won government, some in Labor wanted Pezzullo gone. He survived not least because the new home affairs minister, Clare O'Neil, in charge of this huge, sprawling empire, needed an experienced hand. </p>
<p>In some ways, Pezzullo is a stickler for process – as we saw when Morrison was trying to make political use of a boat headed for Australia on election day – which makes these texts all the more shocking. But he portrayed himself as acting in broader interests, telling Briggs at one point during the 2018 battle over the prime ministership, “I say that from a policy perspective and not from a Liberal leadership perspective”. </p>
<p>Pezzullo lobbied relentlessly for the creation of the home affairs “super” department, which Turnbull set up in December 2017 to placate the ambitious Peter Dutton. </p>
<p>Those who resisted its establishment, particularly then attorney-general George Brandis, became Pezzullo’s targets. He accused Brandis of “lawyering” public servants “into a state of befuddlement”. </p>
<p>Pezzullo is particularly fond of military imagery. During the struggle to get home affairs up, he texted Briggs, “I am running deep and silent. Won’t come up to periscope depth for a while”. In another message he said the attorney-general’s department needed to be “put to the sword” on a matter, then “we can break out of the Normandy beachhead”. (In a 2021 Anzac Day message to staff Pezzullo caused a public ruckus when he wrote of “the drums of war” beating.)</p>
<p>Moderates were an all-round worry in the Pezzullo texts. Marise Payne, in the defence portfolio, was “completely ineffectual”, “a problem” and “doesn’t have a clear view of the national interest”. Julie Bishop received short shrift; he “almost had a heart attack” when she put her hand up as a candidate in the 2018 upheaval. He was sarcastically relieved when Briggs assured him she had few numbers.</p>
<p>In that battle, in which Dutton (Pezzullo’s minister) challenged Turnbull and Morrison ultimately emerged as prime minister, Pezzullo was concerned about who would end up his minister. </p>
<p>“You need a right winger in there – people smugglers will be watching”, he texted Briggs. </p>
<p>“Any suggestion of a moderate going in would be potentially lethal viz” for Operation Sovereign Borders, he said. </p>
<p>Pezzullo had little time for the head of the prime minister’s department, Martin Parkinson: he was not up to the job and “entirely lacking in self awareness”. In one of those nice ironies of politics, Parkinson was commissioned by the Labor government to lead O'Neil’s migration review.</p>
<p>Pezzullo, whose tug-of-war appearances at Senate estimates hearings are often compulsory viewing, complained to Briggs in 2020, after enduring a very long session, that the hearings were “actually a concern for our democracy”. But he boasted that “in batting terms we are 0-400”.</p>
<p>Free speech came well behind security in Pezzullo’s priorities. After an awkward story by reporter Annika Smethurst, who was subjected to a police raid, Pezzullo reportedly argued for a revival of the D-notice system, under which editors were requested not to publish certain information affecting defence or national security. It didn’t happen.</p>
<p>Pezzullo in one text asked Briggs, “Please keep our conversations confidential. Tricky tight rope for me”. Tricky indeed. The player obsessed by security has been undone by some unidentified power play that has left him totally exposed.</p><img src="https://counter.theconversation.com/content/214262/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Pezzullo is a one-off in the today’s public service. He can perhaps be best understood by referring back to the so-called bureaucratic “mandarins” of decades ago.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1224102019-08-26T11:05:02Z2019-08-26T11:05:02ZMartin Parkinson declares ‘entrenched disadvantage’ in Australia a disgrace<p>Outgoing secretary of the Prime Minister’s Department Martin Parkinson has condemned “entrenched disadvantage” in Australia, in his valedictory address on leaving the public service.</p>
<p>Parkinson also warned it was imperative that Australia did not allow “the kind of retreat from openness and vilification of differences” that had happened in some other countries.</p>
<p>During his long career Parkinson headed the climate change department (now defunct) and treasury (from which he was sacked by Tony Abbott), as well as the prime minister’s department, where he will now be succeeded by Phil Gaetjens, formerly Scott Morrison’s chief of staff and most recently head of treasury.</p>
<p>In his Monday address Parkinson said Australia had not had “the rising income inequality at the top end” of the United States and much of western Europe, “although wealth has become more unequally distributed off the back of rising house prices”.</p>
<p>But this was a “low bar”, he said.</p>
<p>“Our history has bequeathed a degree of entrenched disadvantage that should be seen as a disgrace in any country, but particularly one as developed as Australia,” he said.</p>
<p>More than half of those in the bottom decile in 2000 were still in the lowest 20% 15 years later, he said.</p>
<blockquote>
<p>Ideally, people should only be at the bottom of the income distribution spectrum temporarily due to life events, not whole families and communities sentenced to it for generations.</p>
<p>If you want a single thing to blame for the disadvantage we see in Australia, particularly in our remote areas, look no further than an understandable lack of hope. With those kind of odds, anything else would be irrational.</p>
</blockquote>
<p>A key to evening people’s chances was to have the best education system that could be achieved and a culture valuing learning, Parkinson said.</p>
<p>He said Australia would need to use all its advantages to sustain its prosperity and security in the future. These included its multicultural society, a merit-based culture and a market-based approach.</p>
<blockquote>
<p>There are really only two choices for this country. We can take pride in our diversity and use it as an advantage when interacting with the world, or we can hunker down behind borders and slowly gnaw at each other.</p>
</blockquote>
<p>Parkinson said that “to their credit, our parliamentary leaders have maintained a remarkable commitment to an open economy and social cohesion, despite immense pressures the other way”.</p>
<p>On the international front, Parkinson said many regional and global institutions, including the International Monetary Fund and the World Bank, the G20 and APEC, were struggling.</p>
<blockquote>
<p>It’s particularly hard for the WTO to enforce trade rules when the largest countries are openly flouting them.</p>
<p>The United States largely built this order in its own image, under-writing it with security guarantees. We benefit immensely from this order and must help support it wherever we can.</p>
</blockquote>
<p>Parkinson reflected on his disappointment at his dismissal as treasury secretary. “I received the ‘wooden spoon’ as head of the treasury in 2013 – a job I enjoyed and in which I aspired to follow the nation-building work done by predecessors such as Chris Higgins, Ted Evans and Ken Henry. </p>
<p>"It was a drawn out departure, and I couldn’t even look forward to sitting on the couch to watch a care free game on the weekend as the Essendon Bombers also had a terrible season.”</p><img src="https://counter.theconversation.com/content/122410/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>In his valedictory address, outgoing secretary of the Prime Minister’s Department Martin Parkinson, condemned “entrenched disadvantage” in Australia.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/1209732019-07-25T02:52:03Z2019-07-25T02:52:03ZMorrison brings his own man in to head the Prime Minister’s department<p>Scott Morrison has appointed his one-time chief of staff Phil Gaetjens to head the prime minister’s department. He replaces Martin Parkinson, who finds himself out of a top public service job for the second time under the Coalition government.</p>
<p>Gaetjens has most recently been secretary of the Treasury, a position to which he was appointed when Morrison was treasurer. </p>
<p>Morrison told a news conference: “Following the election, the secretary of Prime Minister and Cabinet and I have agreed that it is an opportune time for new leadership of the Department of Prime Minister and Cabinet”.</p>
<p>Parkinson, a highly respected career public servant, was sacked as Treasury secretary by the Abbott government, and brought back to the public service as head of the prime minister’s department by Malcolm Turnbull. His current contract ran until early 2021.</p>
<p>He said in a statement to departmental staff on Thursday: “This timing works for me personally and allows the PM to make a transition to a secretary who will be able to support him through the full parliamentary term”.</p>
<p>He was quoted in Thursday’s The Australian as saying, “Absolutely I would not want anyone to think there was anything about my relationship with the Prime Minister that was leading me to leave”.</p>
<p>Although prime ministerial sources dispute that Parkinson was pushed, it had been rumoured since the election that Morrison wanted a change at the top of his department.</p>
<p>Gaetjens’ public service career appeared doomed only months ago when a Labor government seemed likely. Then-shadow treasurer Chris Bowen had criticised his appointment as political and made it clear he would be removed under a Shorten government.</p>
<p>The new head of Treasury will be Steven Kennedy, who is now secretary of the infrastructure department.</p>
<p>Earlier Kennedy was a deputy secretary in the prime minister’s department. In that position, he was in charge of innovation and transformation, as well as leading work on cities, regulatory reform, public data and digital innovation. He was an economic advisor to prime minister Kevin Rudd and also served in the office of Julia Gillard when she was prime minister, seconded as the director of cabinet and government business and senior economic adviser. </p>
<p>Morrison pointed out both Gaetjens - who was also Peter Costello’s chief of staff - and Kennedy had had experience in the political realm, noting that while Gaetjens had worked on the Coalition side Kennedy had worked on the Labor side.</p>
<p>The PM was ready for a question suggesting the choice of Gaetjens would be seen as politicisation of the public service, reeling off appointments Labor had made of people who had worked in the political arena.</p>
<p>Morrison left the way open for further shake ups at the top of the service. “I will always reserve that right to make further changes where I believe they are necessary. I think these are the ones that are necessary right now”. There will be an acting secretary in the Infrastructure department for the time being.</p>
<p>Morrison is Minister for the Public Service and has strong ideas on how it should operate. At his news conference he once again stressed the emphasis he is placing on its responsibility for efficient implementation. </p>
<p>He summed up his attitude: “When it comes to the public service, my view is to respect and expect”. </p>
<p>Asked about the service’s role in giving advice, he said, “It is the job of the public service to advise you of the challenges that may present to a government in implementing its agenda. That is the advisory role of the public service. […] But the government sets policy. The government is the one that goes to the people and sets out an agenda, as we have”.</p>
<p>Parkinson in his statement to his departmental staff told them: “I want to continue to encourage you to have a view, be curious, understand what is happening at the forefront of policy and policy-related research, engage widely with stakeholders from all parts of the community, and be resolutely committed to advocating for truly evidence-based policy”.</p><img src="https://counter.theconversation.com/content/120973/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Michelle Grattan does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>Scott Morrison has appointed his one-time chief of staff Phil Gaetjens head of the prime minister’s department, replacing Martin Parkinson.Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/544792016-02-11T00:10:47Z2016-02-11T00:10:47ZWill heads roll? Ministerial standards and Stuart Robert<figure><img src="https://images.theconversation.com/files/110956/original/image-20160210-12143-ew4g58.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">Labor has accused Stuart Robert of breaching ministerial guidelines by misusing public office.</span> <span class="attribution"><span class="source">AAP/Mick Tsikas</span></span></figcaption></figure><p>Human Services Minister Stuart Robert continues to <a href="http://www.smh.com.au/federal-politics/political-news/human-services-minister-stuart-robert-refuses-to-answer-key-questions-about-china-trip-20160209-gmpiqk.html">face questions</a> about a 2014 trip to China, where he met senior Chinese government officials and attended the signing of a mining deal involving his close friend and major Liberal Party donor, Paul Marks, and Chinese company Minmetals. </p>
<p>Minmetals issued a <a href="http://www.minmetals.com/english/News/201505/t20150528_68729.html">press release</a> trumpeting the involvement of Robert – then assistant minister for defence. Although Robert <a href="http://www.theaustralian.com.au/national-affairs/foreign-affairs/stuart-roberts-900-taxpayer-bill-on-way-to-china/news-story/a5aa1c030c0d617eaa0a346056850a29">has claimed</a> this was a private trip, the press release said he was at the signing ceremony “on behalf of the Australian Department of Defence”. Robert <a href="http://www.heraldsun.com.au/news/victoria/secret-china-deal-puts-federal-mp-stuart-robert-under-pressure/news-story/93814fd0d2349fc64be07565cfac7992">owns shares</a> in companies linked to Marks.</p>
<p>The opposition has accused Robert of breaching ministerial guidelines by misusing public office. </p>
<p>While Robert asserted that he <a href="http://www.abc.net.au/news/2016-02-09/stuart-robert-confident-he-'acted-appropriately'-on-china-trip/7153540">“acted appropriately”</a>, Prime Minister Malcolm Turnbull has asked the secretary of his department, Martin Parkinson, to report on whether Robert breached the ministerial standards.</p>
<h2>So, what are the ministerial standards?</h2>
<p>Ministerial standards set out the standards of conduct expected of ministers. The principle underlying the standards is that ministers should uphold the public’s trust as they wield a great deal of power deriving from their public office.</p>
<p>Turnbull’s <a href="https://www.dpmc.gov.au/pmc/publication/statement-ministerial-standards">Statement of Ministerial Standards</a> proclaims:</p>
<blockquote>
<p>Ministers and assistant ministers are entrusted with the conduct of public business and must act in a manner that is consistent with the highest standards of integrity and propriety.</p>
</blockquote>
<p>The standards prevent ministers from giving advice or assistance to private enterprises in their official capacity as ministers – other than in a disinterested manner. Ministers must also avoid conflicts of interest arising from their shareholdings.</p>
<p>Under the standards, ministers must resign if they are convicted of a criminal offence or if the prime minister finds that they have breached the standards in a substantive and material way. </p>
<p>In 1998, John Howard became the first prime minister to establish a ministerial guide. Breaches of Howard’s <a href="http://www.accountabilityrt.org/wp-content/uploads/2009/10/The-original-Howard-Guide.pdf">A Guide on Key Elements of Ministerial Responsibility</a> led to six ministerial resignations. </p>
<p>When Kevin Rudd came into office, he released new <a href="http://transparency.org.au/wp-content/uploads/2012/07/Dec-2007-Aust-Federal-Govt-Standards-of-Ministerial-Ethics.pdf">Standards of Ministerial Ethics</a>. Rudd’s standards imposed stronger obligations on ministers, including new rules on dealing with lobbyists. Under Rudd, one minister – <a href="http://www.smh.com.au/national/joel-fitzgibbon-resigns-as-defence-minister-20090604-bwjs.html">Joel Fitzgibbon</a> – resigned for breaching the standards. </p>
<p>Julia Gillard adopted similar ministerial standards, but there were no resignations. </p>
<p>In 2013, Tony Abbott issued a <a href="https://www.dpmc.gov.au/sites/default/files/files/Statement_of_Ministerial_Standards.pdf">Statement of Ministerial Standards</a>. These had more stringent requirements, forbidding ministers from employing family members in their ministerial or electorate offices. In Abbott’s time in office, an assistant minister – Arthur Sinodinos – <a href="http://www.abc.net.au/news/2014-03-19/arthur-sinodinos-stands-aside-as-assistant-treasurer/5331388">stood aside</a> pending investigations by a state anti-corruption body.</p>
<p>There has already been one ministerial resignation and one minister standing aside on Turnbull’s watch. Turnbull <a href="http://www.smh.com.au/federal-politics/political-news/jamie-briggs-inappropriate-bar-incident-was-serious-malcolm-turnbull-20151230-glx0bv.html">found</a> that Cities Minister Jamie Briggs’ behaviour on an overseas trip breached the ministerial standards and “did not live up to the standard required of ministers”, prompting Briggs’ resignation.</p>
<p>Special Minister of State Mal Brough <a href="http://www.smh.com.au/federal-politics/political-news/minister-mal-brough-resigns-over-peter-slipper-police-inquiry-20151229-glw90i.html">stepped aside</a> pending the outcome of a police investigation into his alleged role in copying the diaries of former Speaker Peter Slipper.</p>
<p>Ministerial standards are one element of an interlocking ministerial integrity system involving the operation of criminal laws and a lobbying code of conduct, alongside parliamentary and ombudsman scrutiny.</p>
<h2>Are they effective?</h2>
<p>The prime minister promotes and enforces ministerial standards. Turnbull’s standards give him the power to decide whether a minister should stand aside if the minister is officially investigated for illegal or improper conduct. </p>
<p>The prime minister can change the standards at any time. Ministerial standards do not have any legal effect and cannot be enforced in a court. </p>
<p>Prime ministerial enforcement of ministerial standards has been patchy. Whether a minister resigns depends on the prime minister of the day and if there is media furore and public outrage over an issue. This will likely determine if Robert becomes the next Turnbull minister to fall on his sword.</p>
<p>The standards are an important guide that codifies what we expect of ministers as holders of public office. But, in the end, politics decides which ministers stand and which fall.</p><img src="https://counter.theconversation.com/content/54479/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Yee-Fui Ng does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>The principle underlying the ministerial standards is that ministers should uphold the public’s trust as they wield a great deal of power deriving from their public office.Yee-Fui Ng, Lecturer, Graduate School of Business and Law, RMIT UniversityLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/512602015-11-25T12:34:53Z2015-11-25T12:34:53ZMartin Parkinson has last laugh over Tony Abbott and Peta Credlin<p>The yet-to-be-announced appointment of former treasury secretary Martin Parkinson to head the Department of Prime Minister and Cabinet is a tale of justice restored, with a touch of Gilbert and Sullivan.</p>
<p>Parkinson fell victim as soon as Tony Abbott became prime minister because he had once headed the climate change department; Abbott’s chief-of-staff Peta Credlin was his critic. Bizarrely, the government kept him on in his treasury role for more than a year after his dismissal.</p>
<p>Now Abbott is out and Parkinson will be back, and in an even more powerful position. Turnbull is giving him the pinnacle public service job, and by doing so is saying several things. He is recognising Parkinson’s superior talents as a public servant. He is effectively deploring how he was treated. As well, Turnbull implicitly is sending a wider message about valuing bureaucratic advice, although it will take a while to see how that turns out.</p>
<p>As it happens, Parkinson’s views on current problems in the system have just been published in Australian Financial Review journalist Laura Tingle’s Quarterly Essay, titled <a href="https://www.quarterlyessay.com/essay/2015/12/political-amnesia">Political Amnesia: How We Forgot How to Govern</a>.</p>
<p>Parkinson told Tingle:</p>
<blockquote>
<p>The blurring of boundaries between the public servant and the political adviser, and the relentless focus on message over substance, results in a diminution of the ‘space’ in which the independent adviser can operate.</p>
</blockquote>
<p>He believes there has been:</p>
<blockquote>
<p>… a decline in the quality of advice and an erosion of capability, to the detriment of good government.</p>
</blockquote>
<p>Parkinson’s way should be smoothed by the fact Turnbull is keeping on Drew Clarke as his permanent chief-of-staff. Clarke, head of the Communications Department, stepped in as chief-of-staff on a temporary basis after his boss became prime minister. </p>
<p>History suggests that having a bureaucrat in the chief-of-staff position in the Prime Minister’s Office (PMO) is usually helpful. Think Graham Evans, Sandy Hollway and Dennis Richardson under Bob Hawke. Arthur Sinodinos, who served John Howard well, had a Treasury background, although he had worked for Howard in opposition.</p>
<p>While Parkinson’s appointment is encouraging, the public service will never claw back the position it once held in the advisory process. Tingle canvasses factors that have changed it, among them contracts for department heads, which build in insecurity and moving around, and cutbacks. She writes:</p>
<blockquote>
<p>The periodic mass axing of public service heads upon the arrival of incoming conservative governments has created a caution in the culture. The bureaucracy has been cowed both by the prospect of being sacked and by a reward system which punishes taking risks.</p>
</blockquote>
<p>Governments of either hue have come to be suspicious of the public service, demanding more so-called responsiveness from bureaucrats. The days of the high-status “mandarins” are gone. The advice market is more crowded, not just with the plethora of political staff but as lobby groups and think tanks have proliferated.</p>
<p>The advisory world has transformed forever, but there can still be some rebalancing if the government of the day has the will for it.</p>
<p>Parkinson takes the place of Michael Thawley, who had a distinguished diplomatic career and served as John Howard’s international adviser. He was brought back by Abbott from the private sector to head the Department of Prime Minister and Cabinet, suffering more than a few frustrations given the way the PMO operated under Credlin. His departure back to the private sector is not surprising. Sooner or later, prime ministers install their own person as their departmental head.</p>
<p>John Fraser, who had also left the bureaucracy for a lucrative career in the private sector, was another high-profile returnee under Abbott. He is head of Treasury, with the inevitable speculation now about his future. But there is no sign of his moving. Sources say he and Treasurer Scott Morrison are getting on well. Assuming Fraser is there for next year’s budget, the dynamic between him and Parkinson will be interesting.</p>
<p>Change is also on the way in Foreign Affairs, where secretary Peter Varghese will leave mid-next year to take the job of chancellor of the University of Queensland.</p>
<p>A front-runner for his job is Frances Adamson. She was the first woman to be Australian ambassador to Beijing, and would be the first to head the Foreign Affairs department. Adamson is in Turnbull’s office as international adviser and accompanied him on his recent trip. Her current position and the timing of Varghese’s leaving would suit a transition to secretary.</p>
<p>There will be consequential changes to come. Parkinson’s wife, Heather Smith, is a deputy secretary in the Department of Prime Minister and Cabinet. She would move, but suggestions that she would become the head of the Communications Department are being dismissed.</p>
<p>While the Parkinson affair has set up in lights a contrast between the Abbott and Turnbull regimes, the point shouldn’t be pushed too far. Although nothing like as tribal as Abbott turned out to be, Turnbull too has an in-crowd and an out-crowd – something already discernible that will probably become more obvious over time.</p>
<iframe id="audio_iframe" src="https://www.podbean.com/media/player/jxur9-5a4eac?from=yiiadmin" data-link="http://www.podbean.com/media/player/jxur9-5a4eac?from=yiiadmin" height="100" width="100%" frameborder="0" scrolling="no" data-name="pb-iframe-player"></iframe><img src="https://counter.theconversation.com/content/51260/count.gif" alt="The Conversation" width="1" height="1" />
The yet-to-be-announced appointment of former treasury secretary Martin Parkinson to head the Department of Prime Minister and Cabinet is a tale of justice restored, with a touch of Gilbert and Sullivan…Michelle Grattan, Professorial Fellow, University of CanberraLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/253132014-04-07T20:09:05Z2014-04-07T20:09:05ZEasy as, bro - raising the GST, New Zealand style<figure><img src="https://images.theconversation.com/files/45750/original/xb3csmkp-1396848810.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=496&fit=clip" /><figcaption><span class="caption">New Zealand has increased its GST several times since it was introduced, so why does Australia find it so hard?</span> <span class="attribution"><span class="source">Image sourced from www.shutterstock.com</span></span></figcaption></figure><p>When long-time Kiwi expat John Clarke was asked why he left New Zealand, he said: “Because it was there.” Clarke at least knew what being “there” meant, in contrast to most of his new compatriots, whose interest in and knowledge of their ANZAC cobbers (or “bros”, as we would say) extends little beyond the usual clichés. </p>
<p>Of course, lack of mutual understanding is, well, mutual. For example, I am a NZ economist interested in policy matters. I did know that Australia had followed NZ (and many other countries) in adopting a general retail sales tax, known in both countries as the GST, and I also happened to know that – like Canada and other countries, but not NZ – the Australian government had made the usual capitulation to the farm lobby by excluding food from the tax.</p>
<p>I didn’t know that the Australian GST was introduced so long ago (in July, 2000), I didn’t know its level (then and now set at 10%) and I certainly hadn’t been told that its list of exclusions extends to such upper-middle class trinkets (as they are in NZ, anyway) as private health care and private school fees.</p>
<p>I found out these snippets when asked to comment on remarks made by your Treasury Secretary, Martin Parkinson in a “hard-hitting” speech last week to the Sydney Institute, with the prime minister Tony Abbott in the Chair. </p>
<p>Dr Parkinson did indeed offer an unusually frank and far-reaching set of comments on how Australia best should deal with long-run prospects somewhat less sanguine than those until recently enjoyed by the “lucky economy” that, uniquely in the OECD, sailed through the global financial crisis without recession on a torrent of mineral revenues (did I get that right?).</p>
<p>In a response to a question about increasing the GST, Dr Parkinson said that he was “not going to speculate on what tax changes Australia might want to do”, and then went right ahead with some quite forthright speculations. (Good for him.) In particular, he referred to the political ease with which GST increases were introduced in NZ along with cuts in personal income taxes, after “long public debate”. There are “probably some lessons” there for Australia, he said.</p>
<p>Ok, that gives me three questions to address: Is the Treasury Secretary on target with respect to political aspects of the changes in NZ? Are comparisons in any case valid? And what do I think of the economics of sales versus income taxes?</p>
<p>The NZ GST was introduced in 1986 at 10% and increased the first time to 12.5% in 1989. While I was living in Canada at the time, I do know that its introduction was linked to a truly massive halving of the top marginal income tax rate from 66% to 33% – quite an attractive trade-off there, at least for higher income taxpayers! And when the most recent increase to 15% was made, in 2010, it was packaged with a cut in the top income tax rate from 39% (where the Helen Clark government had raised it) back to the 33% rate. My recollection is that there wasn’t particularly long or intense public debate before the increases, nor much of a political kerfuffle following them.</p>
<p>What about the appropriateness of the comparison? Here I would be more cautious. In New Zealand, with our remarkably (uniquely?) comprehensive GST, just about everyone is paying the same, and if it goes up everyone shares that equally, too. That won’t be true in Oz. If you raise without broadening, you will be widening already problematic disparities between taxed and untaxed sectors. And if you try now to broaden the tax base, after your leaders didn’t have the guts to do it right at the beginning in 2000 – well, that really will be opening a political can of worms, won’t it? I’ll definitely be paying attention to that!</p>
<p>On the economic issues, Dr Parkinson claimed “research consistently demonstrated that relying more on indirect (ie, sales) taxes, than income taxes, can support higher growth and living standards.” I expect he means that sales taxes (if comprehensive!) are less distortionary than income taxes, in particular in terms of the supposed discouraging effect that high marginal tax rates have on wealthy folks’ willingness to get up and go to work in the morning. </p>
<p>I’d say that the research of the brilliant Australian economist Andrew Leigh (formerly at ANU, now a federal MP) along with Tony Atkinson of Oxford University, does show that the income tax taken from the top 1% of earners can increase when marginal rates are dropped from some levels. </p>
<p>But this doesn’t mean that produced income has increased (it may just be less avoidance), and these are complex issues. Good luck, Australia!</p><img src="https://counter.theconversation.com/content/25313/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Tim Hazledine does not work for, consult, own shares in or receive funding from any company or organisation that would benefit from this article, and has disclosed no relevant affiliations beyond their academic appointment.</span></em></p>When long-time Kiwi expat John Clarke was asked why he left New Zealand, he said: “Because it was there.” Clarke at least knew what being “there” meant, in contrast to most of his new compatriots, whose…Tim Hazledine, Professor of Economics, University of Auckland Business School, University of Auckland, Waipapa Taumata RauLicensed as Creative Commons – attribution, no derivatives.tag:theconversation.com,2011:article/252022014-04-04T01:12:44Z2014-04-04T01:12:44ZRaise the GST: the conversation we have to have?<p>With eight months left on his contract, Treasury Secretary Martin Parkinson decided to jump into the GST debate on Wednesday night. In a <a href="http://www.treasury.gov.au/PublicationsAndMedia/Speeches/2014/Fiscal_sustainability">speech</a> to the Sydney Institute, Parkinson declared the federal budget could not return to surplus unless the tax mix became biased towards consumption taxes.</p>
<p>That’s code for “raise the GST”.</p>
<p>The flying circus continued on Thursday. The ink had barely dried on Parkinson’s speech when RBA governor Glenn Stevens <a href="http://www.rba.gov.au/speeches/2014/sp-gov-030414.html">weighed into the fray</a>. Stevens said:</p>
<blockquote>
<p>Here I refer to the very important speech given last evening by my colleague, Treasury Secretary Martin Parkinson. Our situation is not dire by the standards of other countries but neither are the issues trivial. A conversation needs to be had.</p>
</blockquote>
<p>The first time is happenstance. The second is coincidence. If a third senior bureaucrat calls for a tax debate, it’s coordinated enemy action.</p>
<p>The GST has been at the crux of the Australian taxation debate for 30 years. It undermined Paul Keating’s reform agenda at the 1985 Tax Summit; it destroyed John Hewson’s political career in 1993; and it almost consigned John Howard to the dustbin of history as a one-term prime minister in 1998.</p>
<p>Treasurer Joe Hockey was clearly aware of the content of Parkinson’s speech. However, both he and foreign minister Julie Bishop ruled out GST changes.</p>
<p>This is consistent with Hockey and prime minister Tony Abbott’s <a href="http://www.afr.com/p/home/hockey_slaps_barnett_over_gst_E4gTfOWqCUwOba8BoEvUYM">position during the 2013 election</a>, even as current and former Liberal premiers and cabinet ministers urged consideration of the broadening of the indirect tax base, as well as GST rate rises.</p>
<p>In 2013, WA Premier Colin Barnett was slapped down for <a href="http://www.afr.com/p/home/hockey_slaps_barnett_over_gst_E4gTfOWqCUwOba8BoEvUYM">stating</a> that state premiers “in private” support GST reform.</p>
<p>Of course they do. Never stand between a state premier and a GST increase.</p>
<h2>The taxation conundrum</h2>
<p>Consider this: would you rather pay more taxes to get the public services and infrastructure you want?</p>
<p>Or would you prefer to see budget cuts, while governments maintain or reduce current taxation levels?</p>
<p>Of course, the Commonwealth government could simply borrow more (which it does via bond issues, not from foreign banks). In fact, according to Stephen Koukoulis, the federal government could comfortably <a href="http://www.abc.net.au/news/2014-04-03/koukoulas-our-rolls-royce-budget-can-handle-a-flat-tyre/5363402">double the fiscal deficit</a> and not worry about its credit rating.</p>
<p>Or the Commonwealth could address the issue of Base Erosion Profit Shifting (<a href="http://theconversation.com/g20-finance-ministers-agree-to-growth-target-experts-react-23566">BEPS</a>) by corporations transferring revenues to low-tax jurisdictions. But we don’t have space to get into that here.</p>
<h2>Broadening the taxation base</h2>
<p>As the name suggests, the GST taxes the consumption of goods and services. A major reason for its introduction was that services – from tattoos to tailors – routinely did not attract services charges at all. As services comprise 80–90% of the Australian economy, governments were clearly missing out on an enormous, virtually-untapped revenue source.</p>
<p>Prior to the 2000 implementation of the GST, high-value professional services could evade the GST. In order to raise revenues, state governments levied a raft of wholesale sales taxes (WSTs) that applied to financial securities, leases and mortgages.</p>
<p>The GST replaced most WSTs, although states and territories continue to realise considerable revenues from a range of duties, including the much-loathed stamp duties on most property sales.</p>
<h2>Regressive vs progressive</h2>
<p>When the ATO isn’t busily <a href="http://www.smh.com.au/business/tax-office-forced-to-pay-rupert-murdoch-880m-20140217-32weo.html">paying Sir Rupert $800 million</a>, it is actually in the business of tax collection. However, it relies primarily upon sole proprietors and enterprises to collect payroll and GST revenues. In <a href="http://www.abs.gov.au/AUSSTATS/abs@.nsf/Latestproducts/5506.0Main%20Features32011-12?opendocument&tabname=Summary&prodno=5506.0&issue=2011-12&num=&view=">2011–12</a>, the GST accounted for 13% of total taxation revenue, versus individual income taxes, which comprised 39% of the tax cake.</p>
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<img alt="" src="https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=507&fit=crop&dpr=1 600w, https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=507&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=507&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=637&fit=crop&dpr=1 754w, https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=637&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/45583/original/ywc2hzcn-1396569558.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=637&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Since the 1980s, there was a broad consensus between the major political parties that Australia should maintain a progressive income tax system, albeit supplemented by a system of indirect taxation. Low-income earners pay little or no tax, while high-earners pay up to 45 cents in the dollar in income taxes.</p>
<p>But critics argue the GST is regressive. From 2000, the GST taxed consumption explicitly, thus widening the net considerably. Put simply, that means average income earners (around A$76,000 currently) will pay not only income tax, but virtually every dollar of their net income that they spend on goods and services is taxed at 10%.</p>
<p>If a consumer saves, rather than consumes, and earns interest, the ATO will target those earnings as income tax.</p>
<p>Treasury forecasts cited by Dr Parkinson show that income taxes will exceed 50% of total taxation revenues by 2023/24 due to wage-inflation bracket creep. This, Parkinson argued, was insufficient to cover fiscal shortfalls, as well as undesirable.</p>
<p>Dr Parkinson argues that the federal government’s tax review should consider increasing the GST in order to lower the taxation burden on corporations and individuals.</p>
<p>The <a href="http://www.taxreview.treasury.gov.au/content/html/commissioned_work/downloads/KPMG_Econtech_Efficiency%20of%20Taxes_Final_Report.pdf">Henry Tax Review</a> also made this point: namely, that comparatively high rates of income tax and corporate tax were welfare negative relative to the revenue gains governments made in tax collection.</p>
<h2>Don’t tax too much</h2>
<p>As the <a href="http://www.investopedia.com/terms/l/laffercurve.asp">Laffer Curve</a> tells us, find a Goldilocks solution. Tax too little (0%) and government will raise no revenue. Tax too much (100%) and the government still gets zilch, while Paul McCartney is forced to record the <a href="http://en.wikipedia.org/wiki/London_Town_%2528Wings_album%2529">worst of his 1970s output</a> on a boat in the Virgin Islands to avoid taxes. Get the tax rates just right.</p>
<p>Income tax cuts were the modus operandi of the Howard government. But both ALP and Coalition governments have backed themselves into a corner. Once income tax cuts became the “new normal”, particularly under former treasurer Peter Costello, it became politically impossible to raise them again.</p>
<p>What about raising corporate taxes? That just sends business the wrong message and they start laying off people to make their displeasure known.</p>
<p>And we already know what happens if governments dare to impose mining and/or resources taxes that aren’t fully tax-deductible. </p>
<p>That leaves increasing the GST: paid by you, the over-burdened and unfortunate consumer.</p>
<h2>What are GST rates in other countries?</h2>
<p>Dr Parkinson argues we should <a href="http://www.smh.com.au/business/the-economy/australia-could-learn-from-new-zealand-says-martin-parkinson-20140403-35zlq.html">look at New Zealand</a>. NZ started with a 10% GST in the 1980s, but ultimately increased it to 12.5% and then 15%, while cutting income taxes.</p>
<p>Now, to frighten you, here’s a table of GST (Value-Added Taxes) rates charged in the European Union (see table below).</p>
<p>Scared much? You should be. This is the future. Your future.</p>
<figure class="align-center ">
<img alt="" src="https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&fit=clip" srcset="https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=600&h=855&fit=crop&dpr=1 600w, https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=600&h=855&fit=crop&dpr=2 1200w, https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=600&h=855&fit=crop&dpr=3 1800w, https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=45&auto=format&w=754&h=1074&fit=crop&dpr=1 754w, https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=30&auto=format&w=754&h=1074&fit=crop&dpr=2 1508w, https://images.theconversation.com/files/45572/original/3rcf3gtj-1396566824.jpg?ixlib=rb-1.1.0&q=15&auto=format&w=754&h=1074&fit=crop&dpr=3 2262w" sizes="(min-width: 1466px) 754px, (max-width: 599px) 100vw, (min-width: 600px) 600px, 237px">
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<p>Source: <a href="http://ec.europa.eu/taxation_customs/resources/documents/taxation/vat/how_vat_works/rates/vat_rates_en.pdf">European Commission</a> (2014).</p>
<p>The UK started with 10% and now levies VAT at 20%. Germany’s standard rate is 19% and France’s is 21%. Of course, like Australia, there are exemptions. But it would be tempting for a Commonwealth government to include items currently on the GST-free schedule. Like (some) education services, fresh foods and (some) medical services.</p>
<p>As governments compete for investment, they flatten corporate tax rates as different tax jurisdictions engage in a race for the bottom.</p>
<p>To offset these revenue losses, governments have increasingly relied upon increasing indirect taxes, the burdens of which fall largely upon individual consumers.</p>
<p>If you believe Australian governments will never increase the GST, I have an excellent harbour bridge in Sydney to sell you…</p>
<h2>No magic pudding</h2>
<p>It is impossible to develop a tax system that combines an optimal mix of efficiency, equity and incentive. There is no such thing as a tax regime without losers.</p>
<p>The Australian taxation system rewards winners. But it is also peculiarly distorted: it provides perverse incentives to engage in property and securities speculation at the expense of investment in the real economy; it is structured so the states and Commonwealth engage in lowest common denominator bargaining over GST revenues, leading to a hollowing-out of state finances and underinvestment in critical state services and infrastructure; and it exacerbates this problem via a ramshackle system of fiscal federalism that promotes the uneven distribution of financial resources among states, rather than equity.</p>
<p>None of these distortions will be addressed simply by increasing the GST.</p><img src="https://counter.theconversation.com/content/25202/count.gif" alt="The Conversation" width="1" height="1" />
<p class="fine-print"><em><span>Remy Davison's Chair is funded by the European Union Commission.</span></em></p>With eight months left on his contract, Treasury Secretary Martin Parkinson decided to jump into the GST debate on Wednesday night. In a speech to the Sydney Institute, Parkinson declared the federal budget…Remy Davison, Jean Monnet Chair in Politics and Economics, Monash UniversityLicensed as Creative Commons – attribution, no derivatives.