On Treasury's conservative estimates, the super profits tax on miners, as well as foreclosing new projects, is a grab on profits of existing investments amounting to over $9 billion a year. In present value terms that's a $50 billion confiscation from the mining companies' shareholders.
This added to a trifecta of reckless, costly and unprecedented policy excesses that the Rudd Government has embarked upon in its short two years of government.
It follows the $43 billion plus for a new nationalised telecommunications system, and the $11 billion bribe to Telstra to sign a no-compete clause and to mollify the firm's shareholders. It was subsequent to Prime Minister Kevin Rudd trying to catapult Australia into a unilateral carbon emission reduction policy costing $20 billion a year. And it was hard on the heels of the ill-conceived $40 billion economic plus stimulus package.
But unlike the other measures, the mining super tax directly threatens businesses with expropriation, and they cannot simply allow proceedings to pan out.
How could such policy errors have been made in such a short period of time? Why has no previous government dealt itself such a destructive hand?
The answer appears to lie in the nature of decision-making. Rudd and his inner Cabinet are probably no hungrier for votes and buying cash than previous administrations and all governments have some hopes of developing and fulfilling grand designs.
But there are major differences.
The Rudd Government's key advisers in his own and other tumescent ministerial offices have massively increased influence compared to their peers of earlier years.
In addition, until recently departmental officials were seasoned bureaucrats. Those in Treasury dominated policy-making and did so with a loyalty that was first and foremost aimed at protecting revenues and the nation's economic integrity. In the post-John Stone era, Treasury Secretaries Bernie Fraser, Chris Higgins, Tony Cole and Ted Evans were all open or closet ALP supporters. Yet they owed a far stronger loyalty to the Treasury view than to a political party and indeed, one of them Cole may have paid the price for being too obstinate in the face of the then Treasurer's spending preferences.
John Howard and Peter Costello could live with partisan public servants. They used the public service for confidential advice, and as a buffer against ideas that might backfire.
Unfortunately, the Rudd ascendancy has changed all of this. It has done so in various ways. One is in having many matters resolved outside of Cabinet's collective decision-making that was previously a cornerstone of government. In addition, Rudd has created a public service that is no longer detached from the political government.
Treasury in particular has jettisoned its role as the praetorian guard against excesses in spending and policy development. Ken Henry would be the first Treasury chief to tell a Government confronted with an economic crisis to combat it by spending money it did not have, still less to spend it on stimulating consumption.
Treasury has promoted outsiders into senior positions who share the prime minister's contempt of ''neo-liberalism''.
And this goes well beyond the Treasury.
With Rudd being the most messianic Prime Minister since Whitlam, this bureaucratic capture has created an explosive brew. In particular the Treasury can no longer be trusted to give ''frank and fearless'' advice unless this accords with ministerial interventionist inclinations. In its ''modelling'' for the carbon tax, it showed a willingness to promote the Government's policy by conjuring up predictions based on technology forecasting, about which it is inexpert, and demand and supply reactions to price shocks outside of any previous experience. Under the Westminster system, a neutral bureaucracy is essential since, unlike in the US system, there is no independent legislature to act as a check on government proposals. It may be impossible to unscramble the partisan policy omelette created in these past two years. This presents an ALP Government with serious issues about how it gets neutral advice and presents even bigger headaches for a Coalition government.
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