When the thoughts of Megamandarin Ken Henry appeared in The Financial Review last week, the Treasury Head was quick to deny that he was criticising the Government’s policy or processes. He did not, however, resile from his assessment that policy on water and climate change would have been greatly superior had Treasury’s views been heard, or his warning that election year brought with it a risk of bad policy across the board.

His minister, Peter Costello, retorted that Treasury knew nothing about water, and John Howard’s water boy, Malcolm Turnbull, scoffed that the department did not know the cost of replacing a Detheridge wheel with a computerised flume gate. But the Prime Minister himself was more circumspect. The old man’s memory stretched back to 1975.

In the previous year, Gough Whitlam’s government, determined to push ahead with an ambitious program in the face of oil-price-induced inflation, decided to borrow $4 billion from the oil-rich countries to construct a national pipeline grid. Treasury was not consulted and when the department’s head, the legendary Sir Frederick Wheeler, found out, he was appalled. Unable to persuade Whitlam and his ministers to call off the project, or at least attempt it by more conventional means, he mounted an undercover campaign against it, and by extension against the government.

The opposition began receiving a series of well informed leaks on the subject; their ‘deep throat’ was known as “Mr Williams”, and was later identified under privilege by Labor Senator Peter Walsh as a deputy secretary of Treasury, Des Moore, now head of the conservative Institute of Private Enterprise. Moore denied responsibility, but whatever his source, shadow treasurer Phillip Lynch, backed by some seriously feral media, came up with enough information to derail the Whitlam Government completely; the loans affair, as it became known, became the excuse for the blockage of supply and subsequent dismissal of 1975.

Treasury is not the colossus now that it was then; Malcolm Fraser weakened it by building up his own Department of Prime Minister and Cabinet and hiving off the finance section into a separate department. But at least in its own mind, it remains the pre-eminent driver of policy, and Ken Henry, while no Fred Wheeler, is not a man to be crossed lightly. Once again, Treasury has been bypassed over a huge infrastructure project; and once again a damaging leak has appeared, the first real crack in the iron wall Howard has constructed around the public service.

It may be coincidence, but Howard would be wise to treat it as a warning shot across his bows.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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