The policy approach that doesn't add up
Former Treasury official Geoff Carmody, former Queensland auditor-general Len Scanlan and the former head of the Prime Minister's department Peter Shergold are anything but pushovers.
Carmody in particular wears the scars of having repeatedly told both sides of politics truths they don't want to hear. As co-founder and long-time head of Access Economics, he has assessed policies for leaders from Hewson to Beazley and from Latham to Howard. In 25 years of dealing with Carmody I have never known him to tell people anything but what he thought, especially when it was what they didn't want to hear. The trio have been working with Hockey for months. Hockey says they will sign off on a public list of his costings a week or so before the election.
Contrast that with 2010. The agreement between the Liberal Party and the two Perth accountants specifically blocked them from making "any assessment or comment on the reasonableness or otherwise of the assumptions". They were to carry out procedures primarily "not of an audit nature".
How did it happen? The costings rules are rigged against whoever is in opposition - both sets of rules, those introduced by the Coalition's Peter Costello as part of the Charter of Budget Honesty and the new set introduced by Labor in setting up the Parliamentary Budget Office.
Costello's rules allow the opposition to ask Treasury to cost its policies, but only after the campaign has started and only after it has publicly released them. Treasury then publishes the outcome on its website, exposing the opposition to humiliation from which it can't escape. Faced with such a scenario oppositions of both colours have baulked and either not submitted their policies or submitted them too late to be costed.
Hockey found things doubly difficult in 2010. Access Economics had decided it no longer wanted to cost opposition policies. Hockey believed the government had lent on each of the big four accountancy firms. Each denied the charge, although each said it refused to do political work for oppositions as a matter of course.
It left Hockey with few places to turn. The Perth office of Horwath had costed policies for the Western Australian Liberals. But it was a firm of accountants. It had no expertise in economics. It agreed to primarily review the "arithmetic accuracy" of the Coalition's costings - to check the adding up.
Treasury later found a raft of errors including double counting. The accountants were fined for breaching professional standards by allowing their work to be misrepresented as an audit.
Labor's new rules were supposed to end the circus. They allow the Parliamentary Budget Office to cost whatever the opposition wants in confidence, but with a catch. Those costings requested after the campaign begins have to use the old Costello rules - they have to go straight up on the web, exposing the opposition to ridicule.
Hockey is right not to cop it. Proper costing is a back-and-forth process. A party asks what something would cost, finds out, and then varies it to get something cheaper. Both sides of politics have shamefully skewed the rules against the opposition. It would be a mark of Hockey's maturity as treasurer - if he gets there - if he ended the farce and genuinely levelled the playing field.
Twitter: @1petermartin
Frequently Asked Questions about this Article…
The Coalition has said it will submit its policy costings to three highly experienced and independent reviewers — Geoff Carmody, Len Scanlan and Peter Shergold — and publish a public list of those costings about a week or so before the election, aiming to produce costings that can be believed.
Geoff Carmody is a former Treasury official and long-time head of Access Economics, Len Scanlan is a former Queensland auditor-general, and Peter Shergold is a former head of the Prime Minister's department. The article says they are independent-minded and unlikely to be pushovers, which should boost the credibility of any policy costings they sign off on.
In 2010 the Coalition engaged a small Perth accounting firm that was limited to checking arithmetic accuracy rather than assessing economic assumptions. That approach missed errors — Treasury later found problems including double counting — and the accountants were fined for allowing their work to be misrepresented as an audit.
The Costello rules let the opposition ask Treasury to cost its policies, but only after the campaign has started and only after policies are publicly released. Treasury then publishes the assessment online, which can expose the opposition to public embarrassment and discourages them from seeking costings early or at all.
Labor’s PBO rules allow the Parliamentary Budget Office to cost opposition policies in confidence. The catch is that anything requested after the campaign begins must follow the old Costello rules and go straight online, so late costings still risk public exposure.
The Perth accountants were limited to checking arithmetic and lacked economic expertise; Treasury later found errors like double counting and the accountants were penalised for misrepresentation. For everyday investors, the lesson is to treat policy costings with caution and look for independent, expert sign-off rather than just arithmetic checks.
Proper costing involves dialogue: a party proposes a policy, costers estimate the cost, the party tweaks assumptions to find cheaper options, and the process repeats. The article argues current rules that force public, one-way costings during campaigns prevent that iterative, realistic process.
Leveling the playing field would mean removing rules that systematically disadvantage the opposition — for example allowing confidential, iterative costing work before publication — so both government and opposition can have robust, independently checked costings rather than rushed, one-off public assessments.
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