Stakeholders, The Treasury, and economic failure

The Treasury runs a survey of external stakeholders every couple of years, and usually publishes the results on their website quite quickly.  Last year, the results weren’t very good, so they delayed publishing them.  In fact, it was only a few days ago, in response to an OIA request from Eric Crampton at the New Zealand Initiative, that they finally released them.

As Eric notes the results aren’t all bad, but

Among those people interacting with Treasury about its core business of economics, macroeconomics, and fiscal projection, satisfaction dropped from 70% in 2015 to 47% in 2017. The proportion of stakeholders viewing Treasury staff as well-informed dropped significantly, as did overall confidence that staff do a good job, that Treasury challenges thinking on critical issues, and that Treasury can offer insights.

Eric has been concerned for some time about The Treasury’s de-emphasis on core economics and finance skills in Treasury’s recruitment.  For example, apparently

Only four of fifteen hired by Treasury in the 2019 graduate recruitment round had at least Honours-level training in economics and finance.

And then there are specific survey results like this (the blue bits are those respondents who think Treasury is improving)

Tsy stakeholder 1

and in the same vein

tsy stakeholder 2

Not exactly positive results for an agency whose website blares at people that

“The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy”

In some ways, I’m not sure what to make of the survey results.  After all, if one goes to the demographics at the back of the survey document, in the latest survey an even larger proportion than usual of the respondents are from elsewhere in the public sector itself (the blue bars are the latest survey).

tsy stakeholder 3

Consistent with that, an even larger proportion than usual of respondents live in Wellington (58 per cent, up from 50 per cent in the previous survey).

There are, I’m sure, still plenty of individual good people in the public sector (including in The Treasury), but if in the land of the blind the one-eyed man is king, what happens when the entire kingdom is blind.  The public sector more generally is greatly diminished in its policy capabilities –  the sorts of concern Victoria University’s Simon Chapple raised last week – and it isn’t clear to me why, for example, one would trust the Ministry for the Environment (of flakey analysis of plastic bags and emissions) or the Productivity Commission (this week’s Green Party cheerleading) to recognise a good, or bad, Treasury when they saw one.   Either that, or The Treasury is now so poorly performing that even the rest of the public sector recognises it –  and this survey was taken last year, before the “wellbeing Budget” silliness, championed by Treasury, got underway.

Much as I lament the reduction in the extent to which Treasury is hiring people with strong economics and finance skills, I think that is a symptom rather than the cause of the problem.  In fact, at the upper levels of the organisation there is less of a vacuum of economics skills now than there was a few years back.  At one stage, I could spot only one person with a solid economics record in their senior management group, but now there are at least three, all of whom I’ve worked with previously.

But there is still little useful analysis or advice on turning around decades of economic underperformance.  Instead, what economics skills are being deployed seem to be being used on exercises in distractions –  focusing on all manner of aspects of “wellbeing” (recent papers on Asian and Pacific New Zealander dimensions of “wellbeing” –  are we soon going to see ones on European New Zealanders’ wellbeing, or middle-aged people’s wellbeing? ), while avoiding the elephant in the room, decades of economic failure, for which The Treasury seems to have given up thinking hard about serious answers.

In putting this post together, I noticed that the Secretary to the Treasury had actually given a speech this week about productivity.  Glancing through it – I may come back to it in detail next week – it seems about as devoid of serious analysis and answers as most of the rest of Treasury’s work during the term of Makhlouf’s stewardship.   He notes that productivity matters  –  but blind Freddy knows that –  and there are lots of conventional rhetorical tropes, but he appears to have nothing to offer the government or citizens on what might make a real and sustained difference to New Zealand’s fortunes.  He can employ all the economists graduating from our universities and it won’t much any difference unless the Secretary –  or his replacement next year –  and his senior management are really interested in digging a lot deeper, and asking uncomfortable questions about why economic policy, with the best of intentions, has done so poorly for such a long time.  He is now, perhaps, somewhat constrained by the government’s commitment to the feel-good “wellbeing Budget”, but that is no excuse –  they were led down that track by a Treasury not doing its core job well, and with nothing substantive on offer for a new government had it been interested in seriously addressing the productivity growth failure.

The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.The Treasury is New Zealand’s lead advisor to the Government on e

The Treasury is New Zealand’s lead advisor to the Government on economic and financial policy.

11 thoughts on “Stakeholders, The Treasury, and economic failure

  1. I chatted to a Treasury manager about why I failed pre-shortlist chat a few months ago. When I mentioned that people who are really good at talking are often not so good at doing he said to be honest the job doesn’t really involve much analysis!

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    • You probably failed because you did not say the magic words. In NZ it is important that you stick to the Politically Correct mojo “10 million cows are smarter, more intelligent and inherently more productive than 4.5 million humans”.

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  2. Maybe the Treasury should be less concerned about its survey of external stakeholders. Looking at one of the questions if asked ‘whether in my opinion the Treasury was increasing its influence’ and assuming I was an external stakeholder with some idea of what the Treasury actually does then my answer would be influenced by circumstances that the Treasury has no control over. For example I would probably not make filling in the survey the centre piece of my working day; first thing on a Monday morning my degree of enthusiasm for everything usually depends on how the Auckland Warriors performed over the weekend or when in a hurry I tend to tick the middle box. Then again I may have given a very +ve answer last year so if I believe the Treasury was really influential a year ago then it simply would have no room for further increase of influence. Surprised they didn’t just publish without getting Eric Crampton riled.

    My conspiracy theory: is it possible the Treasury has all the answers; it really does know exactly what is needed to achieve NZ’s financial success and how to do so with minimal risk and optimal ‘well-being’. However the solution has to be kept secret for political reasons; say involving closing down 95% of all university places, encouraging women to stop working when they have children, nationalising all residential property. My theory explains why they are not employing graduates in finance and economics; they are not needed if all the analysis has been completed.

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    • I think everyone knows that the key to higher productivity would be moving away from Primary Industries and Tourism/International students towards manufacturing industries filled with automation robots rather than people. The difficulty resides in whether that $3 billion called the Provincial Development Fund given to NZFirst and Shane Jones should actually have been used as our Technology innovation and manufacturing innovation fund instead.

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      • Actually, more robots in the primary sector would make sense – rather than importing cheap labour, farmers should automating? Some already are but with land prices so high farmers generally don’t like investing yet more capital.

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      • Air NZ has already started off with its inflight vegan beef lookalike burgers. 3D protein burgers are available from next year. It is only a question of when MacDonalds decides it will no longer use Prime Beef in its burgers.

        As for milk, I guess Fonterra’s venture into fake plastic milk in China did not fare too well. But it is inevitably protein milk products will also be manufactured rather than milked from livestock perhaps with less plastic would be more successful.

        Our primary industries are in the last gasp phase in what we usually call the cashcow stage of the business cycle.

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      • Anthony, you are on your way to a job at Treasury or the RBNZ soon. You have learned the narrative. “Cows that eat grass are even more smarter, more highly skilled and also more productive than humans.”

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  3. Agree that the hiring practices are symptom – why an organisation should choose this path is important. Just getting funding to hire some economists doesn’t really get to the core problem. If a DHB had staffed up with lawyers rather than surgeons, changing the staffing mix is important in getting the immediate job done, but fixing whatever got them to that spot in the first place is rather important over the longer term.

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