On Ken Henry

It seems Ken Henry will retire to the accolades of many. He and the government must be hoping that the Christmas spirit will lead to some charity – but I’m afraid not. Also announced today is yet another Rudd-Gillard government failure – the Green Loans scheme. To be fair the Green Loan scheme was a 2007 election promise and not one of Henry’s big spending ideas. But still poetic I think.

Here is Joe Hockey showing again why he is unfit to be Treasurer.

The Coalition thanks Dr Ken Henry for his long and constructive contribution to the Australian Public Service.

Here is Milton von Smith reminding us of Henry constructive contributions.

1. “Few of us will ever see a hairy-nosed wombat”. At the height of the most severe economic shock since the Great Depression and at a time when the RBA was due to hold a critical Board meeting, Dr Henry took a holiday, deciding to redefine the economic concept of the “social welfare function” by including wombats in its domain of definition. The rest, as they say, is history: Dr Henry invented an entire new economic apparatus: the social wombat function (and just for good measure, he redefined the concept of freedom to include the freedom to see wombats). Wombats must like high interest rates – at the July 2008 meeting, at the height of the GFC, the RBA decided to leave the cash rate unchanged at 7.25 per cent. Three months later, Australia’s economic growth plunged into negative territory. But hey, never mind: at least the wombats were happy.
2. “Go early, go hard, go households.” Based on this pearl of economic wisdom, Henry presided over Australia’s largest ever postwar budget deficit, and some of the most wasteful (and indeed, ultimately, extremely lethal) government spending in Australia’s history;
“Assume a multilateral, globally enforced can opener.” Treasury confirmed the community’s worst prejudices about economists when Henry’s department released modelling of the government’s proposed emissions trading scheme, which assumed that all other countries would also implement an emissions trading scheme. To paraphrase Dr Phil: how’s that assumption workin out for ya?
3. “A tax of 99 per cent would have no effect on investment incentives.” On the back of this galactically stupid piece of economic idiocy, the Rudd government attempted to implement the RSPT, which threatened to cripple the very industry that helped Australia avoid the worst of the global financial crisis. In the end, it crippled Kevin Rudd’s prime ministership. Given subsequent political events, the jury is very much still out on whether this has improved matters. Somehow, I doubt it.
4. “Build it and they will slide into bankruptcy come”: the National Broadband Network. The corporate plan notes that 13 per cent of households are currently wireless only, but assumes that by 2040, wireless penetration will rise to a massive…16.4 per cent. And not a single word of criticism from Treasury. Do I really need to say more?

In comments Harry Clarke tells us that Henry is a top civil servant and a good bloke. Maybe, I don’t know Henry – but others have told me he is ‘a good bloke’ too. His legacy as a civil servant, however, is not good. The 2007 speech should have seen his resignation or sacking, the ‘go hard, go early, go household’ spendathon has badly damaged our public finances, and his participation as chair of the tax review was wholly inappropriate. He did do a good job on the GST, but that was a long time ago.

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22 Responses to On Ken Henry

  1. Ev630

    Whether he is a good bloke or not is bloody well irrelevant, Clarke. The man was a fucking disaster as head of Treasury and did measurable damage to the economy.

  2. conrad

    I disagree, I think he was great — try comparing him to similar people in other countries, not perfection in hindsight.

  3. Sleetmute

    I have a lot of problems with Henry, starting but not ending with the 2007 speech, but I’m not sure he should be attacked for taking a holiday in mid 2008. Can he only ever take a holiday when the maco-economy is in perfect shape? The RBA’s decision to leave interest rates on hold at that time was for the RBA.
    Also, I think the “go households” thing was OK in so far as it just referred to the stimulus spending in late 2008. Sure, much of it was saved but (i) it would have been difficult for the government to do nothing after a panic that saw the stockmarket fall 30% almost overnight (after falling by an earlier 30%) and (ii) it was relatively harmless. Sure, a permanent tax cut would have been better, but at least the stimulus payment was quick to implement and probably wasn’t predominantly wasted. If that’s all the government did in response to the GFC, it wouldn’t have been a bad outcome. But I agree that Henry was wrong to endorse the BER and other spending measures.
    It’s true the RSPT was a debacle but the NBN was not a Treasury idea. It came from government, so it’s harsh to blame Henry for it proceeding.

  4. Ev630

    I disagree, I think he was great — try comparing him to similar people in other countries, not perfection in hindsight.

    That’s like saying, “Rudd was a better PM than if we’d had Hitler.” It’s a bullshit analogy. You’re basically saying, “sure he came up with shit policies that harmed the economy (See Smith’s list above) and was toxically partisn, but – hey – he was better than if we had put Chopper Read in the job!”

    “Great”. What a maroooon.

  5. Tom Valentine

    3-4 years ago I would have agreed with Hockey.Since then Ken Henry has been a disaster.I particularly deplore his speech telling academic economists that they should get behind the worst government we have ever had.

  6. Mother Hubbard's Dog

    If you think Henry is a dud, wait till you see what his successor can do. Parkinson thinks Ben Bernanke is a “fantastic, absolutely brilliant individual” (http://www.theaustralian.com.au/news/nation/heir-apparent-ponders-life-in-the-economic-hotseat/story-e6frg6nf-1225974686615). God help us.

  7. jtfsoon

    err who other than insane goldbugs and Wanniski acolytes have a problem with Bernanke?

    Stephen Kirchner certainly doesn’t

  8. JC

    err who other than insane goldbugs and Wanniski acolytes have a problem with Bernanke?

    Stephen Kirchner certainly doesn’t

    And they shouldn’t. He’s been a terrific Fed chairman. however I must say that the recent attack on debit cards lowering the commission by 70% is overreach.

  9. conrad

    Ev360,

    which reserve bank of which country has done a better job in the last decade?

  10. Mother Hubbard's Dog

    err who other than insane goldbugs and Wanniski acolytes have a problem with Bernanke?

    How about millions of Americans who have lost their jobs and/or homes?

  11. hc

    Tom Valentine, I attended the speech that you attribute to Ken Henry and what you say is a total distortion.

    He was talking about climate change debates and saying that academic economists who venture into policy debates should be careful of what they write.

    If you are interested in addressing climate change and the government endorses an ETS then don’t blunder into a policy debate and say that an ETS would be a disaster and that a carbon tax is better. You will end up getting nothing.

    Take up the academic issues involved in alternative policies and be as critical as you like – Henry identified this as a strength of economics – but in policy debates take care addressing second-order concerns since you may end up with nothing.

    Of course that’s exactly what happened withy the governments CPRS even though all economists contributing to this area supported action on climate change and all would have preferred an ETS to doing nothing.

    Of course Ken Henry would never be so stupid – or politically inastute – to suggest people had to back the government. How would he ever have survived in this position with Liberal and Labor administrations if he had been so incautious?

    Henry received strong bi-partisan support because he is so talented.

  12. JC

    Henry received strong bi-partisan support because he is so talented.

    Harry, forgive me for saying it, but you wouldn’t know talent if it hit you across the right side of the head 30 times over a period of 24 hours.

    Henry’s comments at the time were pretty much in direct response to the very talented and very able Professor Warwick McKibbin’s criticism’s of that bordello of a policy you and some other mediocrities were cheering.

    Professor McKibbin masterfully took apart the CPRS and left it on the ground like a skinny dead chook with all its feather missing, which of course you supported and doesn’t in the least leave me (and others) surprised.

    After that the only thing Wombat Henry was left with was an appeal to emotion and tribalism which of course you went for hook line and sinker seeing that’s about the only thing you understand.

    As a refresher I suggest you read McKibbin’s stinging critique. If you need help understanding just holler and I’m more than happy to go through it with you.

  13. jtfsoon

    How about millions of Americans who have lost their jobs and/or homes?

    Bernanke was behind the GFC? you need to elaborate on your claims further.

  14. JC

    I’ll repeat, Uncle Ben has done an excellent job. He went of his way to calm people down by doing lengthy interview on a popular show like US 60 minutes to in order to convey a message of calm competence.

    And if people want to debate the effects of QE2they will need to explain why the US Dollar is around 8% across the currency board after the announcement compared to before.

  15. Mother Hubbard's Dog

    Bernanke was behind the GFC? you need to elaborate on your claims further.

    OK. IMO, the GFC flowed from two main causes: pressure on lending institutions in the US to lend money for housing to people who were not credit worthy, and excessively low interest rates that further encouraged the creation of an unsustainable bubble. Bernanke and the Fed cannot be blamed for the first, but they sure can for the second. The bubble became the GFC because the US lending institutions securitized the loans and sold them to banks world wide as lower risk than they really were, aided and abetted by incompetence in the ratings agencies.

    I suggest Thomas Sowell’s The Housing Boom and Bust for further insights.

  16. Mother Hubbard's Dog

    PS to jtfsoon, the Fed is supposed to have maintenance of full employment as one of its objectives. Obviously it has failed. Bernanke has to take some responsibility.

  17. Ev630

    which reserve bank of which country has done a better job in the last decade?

    Your point of reference is flawed. It’s like the old joke – “How do you get out of Vegas with a million bucks? Start with two.” You need to analyse the performance of Henry based on the conditions and resources he had at hand – and squandered – not by contrasting him with people elsewhere. The fact is he could have done a lot better and didn’t. Stop misdirecting and start analysing what happened.

  18. JC

    To be perfectly honest, there could be two criticisms of uncle Ben.

    1. In the tightening phase he may have gone too tight and tipped everything over.

    2. He was a little slow to understand the full ramifications of what were getting into and the Fed lost control for a while.

    I don’t really fault him of the first and in terms of the second, who would not have lost their ballast for a little while.

  19. conrad

    Ev630,

    I’ll just assume here that you can’t think of any, which suggests he really did do a good job.

    By your logic, Einstein could have done a better job too — he spent years chasing things that turned out to be fruitless. The only reason he’s great is that compared to everyone else, he really was better.

  20. Sinclair Davidson

    conrad – Henry wasn’t in the Reserve Bank, he is in Treasury.

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