The abruptness of John Fraser’s resignation as Treasury secretary last week was a surprise, but perhaps not as surprising that he lasted as long as he did, given how quick he was to start rather indiscreetly whinging about the job he started three-and-a-half years ago.
We’re left to wonder about the possible final trigger that led to his sudden resignation, especially whether it had anything to do with his comments last week stating the obvious about the stupidity of Donald Trump’s protectionism. The Australian government leads the world in trying to not offend the American president.
As to what the former investment banker achieved as Treasury secretary, the answer is clearer: not much.
Mr Fraser gave his own summation to the Australian Financial Review:
“I think we’ve changed the tax debate, which is encouraging. Foreign investment policy is good now. And I’ve put a lot of effort into recruiting people into the Treasury.”
Coincidentally, the AFR last week also reported a Fraser speech that included: “Judgement is required, together with a healthy scepticism about what economic models alone might be telling us.”
In the latter case, Mr Fraser was talking about lifting interest rates. It was ironic as Treasury’s effort in “changing the tax debate” has primarily consisted of some dubious modelling that found cutting company tax rates might result in a small rise in GDP well down the track, all other things being equal, maybe, and with the world being a nice place.
That modelling is in total contrast to the real-world experience of what happens with corporate tax cuts – stock buybacks and increased dividends.
As for the flattening of our progressive personal income tax system, as per the legislated plans for 2024 delivering big tax cuts for the top quintile, it smacks of discredited “trickle-down” economics. Or, as John Kenneth Galbraith so sweetly described the concept: “If you feed enough oats to the horse, some will pass through to feed the sparrows.”
The reality is that there is nothing like a tax debate in Australia. Malcolm Turnbull’s “everything on the table” tax reform agenda was broken up and used for firewood almost as soon as the phrase was uttered.
Trimming corporate and personal income tax rates amount to stuff-all in terms of economic management. If that’s all Mr Fraser has achieved, pushing a little American Republican Party-style income tax cutting, it’s a sad commentary on his time.
So exit John Fraser.
He started the job in controversial circumstances after a particularly narky effort by Tony Abbott in demanding Martin Parkinson be sacked – against the advice of just about everyone who mattered.
And his departure is just as controversial, thanks to the government’s rush to parachute Philip Gaetjens into the job. The long-serving chief-of-staff for Liberal treasurers Costello and Morrison was on his way to Paris as our ambassador to the OECD. This certainly doesn’t look like a planned or expected handing over of the baton.
The result is at least the perception that there’s a Liberal Party devotee in charge of one of our two most important economic bodies. And trickle-down will remain all the rage in Treasury.