There has never been a more important time to make absolutely sure all the machinery of government is working properly, Ian Harper (pictured), an economist, economics professor and current dean of the Melbourne Business School points out.

In the throes of efforts to stabilise the economy in the face of lockdowns and as a global pandemic continues to wash over society, the footprint of government will almost certainly continue to widen, Harper says during an interview with Investment Magazine.

In stark contrast to the mid-1930s when there was no expectation on government coming out of the Great Depression to “pull levers to keep things going”, today public capital is being used to stimulate growth by encouraging individuals and companies to spend all the while maintaining a base standard of living for the broader population, Harper says.

It is at this time of bigger or more prominent government the so called machinery needs to provide a check, Harper says during a wide ranging conversation that focuses particularly on the role of agencies including APRA and ASIC and the interplay between the leadership of these agencies and members of parliament.

“We need the machinery of government to be a check, to mitigate the concentration of power in the executive – mitigated by parliament, by the bureaucracy and by the courts. In this environment we need our bureaucracy and independent agencies to be working as effectively as they possibly can,” Harper, who is also a non-executive director on the board of the Reserve Bank of Australia and a former senior adviser to Deloitte Access Economics, says.

Indeed the scandals that have led to senior departures at ASIC and a subsequent independent investigation into use of public funds have only served to punctuate the challenges the securities as well as the prudential regulator have faced in recent years, some of which were highlighted by Kenneth Hayne during the royal commission hearings and subsequent reports. More recently the Morrison Government led by Treasurer Josh Frydenberg has been pushing forward with to overhaul ASIC management structure while chairman James Shipton has stepped aside as as independent review is ongoing.

Challenges these agencies are facing have also coincided with a shift of policy influence in the historical context towards the ministers’ offices, something Paul Tilley, an author and a former economic adviser to governments who worked for decades at Treasury outlined in a recent interview.

Checks and balances

At a time when major changes are expected to be imposed on the superannuation and retirement system in light of the Retirement Income Review, Harper retains faith in the checks and balances in the system, while pointing out that now is the time for people with “serious ability” to be attracted to our public service institutions.

“At the end of the day the Parliament is sovereign. If the government can muster the votes in the lower house and through the Senate then it can change the law. And the law, such as it is, gives the Minister the power to direct; the Treasurer has the authority under the law to direct APRA, to direct ASIC, to direct the ACCC,” Harper points out.

“The real shame of what’s happened with ASIC is that one of our top regulators is in disarray at a time when we clearly need them to be operating properly,” Harper, who in November was called as an expert witness to the Parliamentary Joint Committee overseeing ASIC, says. During his testimony to the Parliamentary Joint Committee Harper suggested an ASIC restructure lead to the formation of an independent board of directors separate to the executive leadership function consisting of part time non-executive directors.

Attracting people to government agencies like APRA and ASIC who are able to play the role of adviser to the government of the day without being beholden to government will be key to the system not only working but benefiting society, Harper says.

“How do you find people who are able to speak truth to power but at the end of the day to do so in a way power simply doesn’t chop their heads off? That is the skill of a true public servant,” he says.

Smith is head of content and managing editor of Professional Planner and Investment Magazine.
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