Five fractures in Swan's treasured friendship

The relationship between the Department of Treasury and treasurer appear to be under levels of strain not seen since the Khemlani loans affair.

Behind the government’s bad opinion polling is more than just the actions of the prime minister — for the first time since 1975 we are seeing a serious break down in co-ordination between the treasurer and Treasury.

And just as the 1975 break down between treasurer and Treasury was a major cause of the destruction of the Whitlam government, so the latest breakdown looks set to be an important part of the defeat of the Gillard government.

Back in 1975 the then treasurer Jim Cairns supported the efforts to get a Pakistani banker called Tirath Khemlani to raise money for the Australian government. The head of treasury, the legendary Frederick Wheeler was enraged.

Nothing like that has happened in the latest break down but, like 1975, the political agenda has got in the way of smooth co-ordination between Treasury and the treasurer.

What makes the current break down so surprising is that both Treasurer Wayne Swan and his department head Martin Parkinson are good people, with Parkinson ranking high among department heads.

They might publicly deny a break down but the facts tell another story. Here are five public breakdowns with my allocation of blame between Swan and Parkinson.

— The original Ken Henry mining tax proposal, which Swan and the then Prime Minister Kevin Rudd agreed to implement. Ken Henry was a brilliant former head of Treasury who was known as a person who sometimes had way out ideas.

Henry had undertaken a comprehensive examination of the tax system but clearly did not understand the effect of his proposal for the mining industry. Whether Treasury would have picked this up is not known but the Rudd-Swan decision to implement the Henry mining tax proposal was the mistake that led to the downfall of Kevin Rudd as prime minister and to the later to the treasurer/ Treasury breakdowns. (Blame score: Swan 10, Parkinson nil)

— The so-called MRRT mining tax. Treasury say they were not consulted and so did not understand how the tax worked and as a result false MRRT revenue estimates were published. Has treasury read Business Spectator and many other commentaries they would have understood how the tax worked and got the anticipated revenue closer to the negligible mark. (Blame: Swan 7, Parkinson 3)

— Then came the later budgets where this false methodology was carried forward and estimates of revenue that had no hope of being achieved were inserted into the budget and then spent on specific government causes. By this time it was clear that no miner was going to pay anything like the Treasury estimates and Parkinson should have known this (Blame: Swan 3, Parkinson 7)

— The carbon tax. Treasury correctly estimated the carbon tax revenue and the government then spent the money and more. Then later the government effectively halved the future carbon tax leaving a back hole. (Blame: Swan 8, Parkinson 2)

—The government wanted to discover what the so-called subsidies were in superannuation so it could take to Australian savers with a machine gun. Treasury got the sums mathematically wrong, used dubious assumptions, forgot to incorporate the pension reduction benefits of superannuation and left out the enormous public servant subsidy to those with lifetime unfunded indexed pensions, (How Treasury mucked up its super sums, February 8). The errors were so blatant that Swan should have picked them up. ( Blame: Parkinson 8, Swan 2)

I am sure both Wayne Swan and Martin Parkinson will not be happy with these scores but they may help improve coordination in the final months of this parliament.

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