Late yesterday afternoon, Prime Minister and Cabinet head Terry Moran revealed he was resigning, returning to Melbourne to reunite with his family, of whom he has surely seen too little in the last three years. Defence and former Finance Secretary Ian Watt replaces Moran, with National Security Adviser Duncan Lewis taking on the Herculean labours of Defence.

It’s now hard to recall the state of the Australian public service when Moran arrived.

At the end of the Howard years, it was best described as cowed. One of the finest public servants of his generation, Ken Henry, had been humiliated by Howard and lost a performance bonus when his perfectly correct internal observations about the need for Treasury to restrain the excesses of government — excesses later confirmed by Peter Costello — became public.

While lacking Max Moore-Wilton’s apparent malice toward the service he led, Peter Shergold had been complicit in the creeping politicisation of the service, and engaged in a public argument with Andrew Podger when Podger suggested all was not well in Canberra. Ministerial advisers ran rampant over senior bureaucrats; Secretaries who tried to preserve some semblance of independence, like Helen Williams, were given short shrift.

It’s a considerably different service now, in many ways. One of the first things Kevin Rudd did was ditch performance pay for Secretaries. There was no Night of the Long Knives for senior bureaucrats; Labor MPs were furious that the loathed Halton was allowed to remain at Health. But there was a regular turnover of Secretaries and, department by department, the service was overhauled from the top. The products of the more focused, objective assessment process for future leaders, established by Moran, have emerged. And there is a faint whiff of independence again. Last year, on retiring from the National Water Commission, Ken Matthews had railed at the transformations of the bureaucracy into a “docile and unassertive service” and called for bureaucrats to stop “bending unthinkingly” to ministerial advisers — or “meretricious cameo-players” as he called them.

For a few public servants, it was a bit rich coming from Matthews, who’d been a a Howard-era favourite, on his way out the door. Nonetheless, they were public remarks — made in front of Moran and a number of other Secretaries — that would never have been uttered under Howard.

Moran himself picked up the theme in his Paterson Oration last week — named for the late public policy guru John Paterson, a key contributor to the great reform era of the 1980s and 1990s — when he made some pointed remarks about ministerial staff and the “murky” accountability mechanisms applying to them, their uncertain role and their impact on the notion of ministerial responsibility. They were observations that Shergold and Moore-Wilton would never have made and, in the latter’s case, probably never even considered.

But Moran’s speech ranged far more widely than that, into issues well beyond his direct responsibility, but which he considered fundamental to the future of public policy and quality public service. In particular, Moran sees in social media significant potential for improving public debate and the relationship between government and citizens — and between the public service and citizens:

“The advent of social media is changing political debate, by increasing the channels of communication, and giving politicians and the public avenues for sidestepping the traditional media and the filtering it applies. Some of this is noisy and ugly; but other features of this change are encouraging. The new media will continue to evolve, strengthened by the National Broadband Network, and will create further new channels of debate. My hope is that a new generation of trusted institutions will provide the means for a new breed of online analysis and commentary, driven by serious contributors to the policy debate who can bypass the mass media and go directly to the sources of information and to their audiences… the new media hold tremendous potential for creating better ways of engaging with citizens. The internet and social media provide us with tools that have great potential to improve both democratic debate, and the way government is conducted.”

This is big-picture stuff from a head of Prime Minister and Cabinet, but of a piece with Moran’s focus on better engagement between the public service and the community, whether as clients or citizens. It was in this area that the worst problems occurred on Moran’s watch — the failures in program implementation at the Department of the Environment that saw scandals in the Housing Insulation and Green Loans programs. In both cases, the relevant Minister — Peter Garrett — was kept in the dark or misinformed by his Department, the senior management of which did not have an effective grip on how its programs were going off the rails.

Moran himself had, well before then, spoken about the need to improve the Public Service’s program delivery capacity, including through a kind of toolkit of service delivery skills that could be rolled out in agencies — like Environment — that had limited program experience.

An important villain in both cases, though, had been the Government’s (Kevin Rudd’s) determination that the stimulus programs — of which HIP was one — and Greens Loans — an election commitment — be rushed out as quickly as possible, despite warnings that the delivery timetable was problematic. But that was merely one of the many ways in which 24/Kevin added years to his chief bureaucrat’s age.

Moran’s longer-term legacy, though, may not rest so much with a healthier, more strategic Public Service — his Ahead of the Game reforms, though defunded by politicians, continue to roll out — but his role in the Rudd Government’s finest moment, its anticipation of and handling of the GFC. While Treasury and the RBA deservedly get the kudos for moving early, quickly and effectively in responding to the crisis, Moran and PM&C were closely involved, particularly in monitoring the ominous developments overseas throughout 2008, convening every morning to learn that latest disasters overnight.

It prepared the ground for what would become the most effective stimulus response in the world and which would see the establishment of the G20 as the key international economic policy forum.

Along with Ken Henry and Glenn Stevens and their senior staff, Moran was put to the test in the GFC, and proved his mettle, to the lasting, if unappreciated, benefit of hundreds of thousands of Australians even after the much-hyped problems in implementation.

As we perhaps confront another emerging economic crisis, Dr Watt may find himself similarly tested, alongside another recent promotee, Martin Parkinson at Treasury.