Ken Henry (Australian public servant)
Encyclopedia
Dr. Kenneth Ross "Ken" Henry AC
(born 27 November 1957 in Taree, New South Wales
) is an Australia
n economist and public servant. He served as the Secretary of the Department of the Treasury
from 2001 to 2011. On 1 June 2011, he was appointed as Special Advisor to the Prime Minister. He was first appointed to as Treasury Secretary by Liberal Party Treasurer Peter Costello
in April 2001, and reappointed by Costello in 2006, and retained by the Rudd government
. He chaired the Australia's Future Tax System Review, informally known as the Henry Tax Review
, that was published in 2010. On December 21, 2010, he announced his retirement from the Treasury, effective in March 2011.
, and then lectured in economics at the University of Canterbury
in New Zealand
while studying for his Doctor of Philosophy
degree at the same institution. From September 1986 to June 1991, Dr Henry worked as a senior adviser to the Labor
Treasurer, Paul Keating
, providing advice on taxation policy and administration, retirement incomes policy, industry policy and microeconomic reform (including telecommunications reform).
In June 1991 he returned to the Treasury, becoming head of the Microeconomic Modelling Unit. In July 1992 he took up the position of Minister (Economic and Financial Affairs) in the Australian Delegation to the OECD in Paris. During this time, he has served as an Australian representative to the Organisation for Economic Co-operation and Development
(1992–94). He was the Treasury department secretary from April 2001 until March 2011; and therefore an ex-offfico member of the board of the Reserve Bank of Australia
.
Henry remained head of Treasury in the transition from Liberal to Labor Governments in 2007. In 2008 he headed Australia’s Future Tax System Review Panel, charged with examining all aspects of the Australian tax system with a view to reform.
. That package contained as a central element a goods and services tax
, similar to both the Option C developed by Henry for the Hawke Labor government in 1985, and the GST developed for the Howard Liberal Government in 1997. Henry rejects the claim that Treasury acted improperly, saying “We rejected that charge at the time. I would always reject it. There was nothing improper in what we did." He did concede, however that "it is the case that our work was used by the Government to attack publicly an Opposition policy." In reference to the Option C modelling he had previously worked on, Henry said:
When Fightback! came out, the model the team had developed enabled the identification of a major failing in the package. Income tax bracket creep had been used to fund the package but bracket creep had not been used in the analysis of the after tax income various taxpayers would receive. Treasury was accused by the Coalition of having acted improperly.
, Glenn Stevens
, to Henry was reported on in the media. No text was published, however the Australian newspaper alleged that the email expressed concerns of the Reserve Bank about a ‘flight to safety’ caused by the unlimited guarantee of deposits in Authorised Deposit-taking Institutions, and the consequent loss of liquidity in secondary credit markets. It claimed that Stevens called for a cap on the amount of an deposit guarantee ‘...the lower the better’ and that he also said ‘If this situation is allowed to continue, foreign bank branches will not be able to source funding in the local market as a flight to guaranteed deposits occurs.’
In the Senate hearing, Henry denied there had been any disagreement between Treasury and the Reserve Bank, and that the two bodies were ‘of one mind’ on the Bank Deposit Guarantee Scheme. Henry said that the Opposition's claim that Mr Rudd had ignored Reserve Bank warnings was based on a report in The Australian newspaper. Dr Henry called that report unfortunate, fallacious, unhelpful, and "W-R-O-N-G"
The Reserve Bank Governor backed Henry, stating that "steps in these directions, in the context of what other countries were doing, were sensible, and the RBA supports them."
The classical Keynesian response embodied in the stimulus package, the desire to maintain expenditure in the economy, and the desire to avoid the destruction of human capital from a recession was encapsulated in the phrase attributed to Henry.
Henry stated that the stimulus package would either reduce future Government spending or drive up taxes, but he also said that this would occur in "a period of faster growth in private sector activity and the judgment that has been made is that in those circumstances . . . the Government will have the ability to repay debt without doing damage to gross domestic product growth".
, commented that he had never seen a piece of Treasury advice so clearly designed to be released to the media.
Further,graphs printed in the budget papers purporting to show that there was a statistically significant correlation with the size of G20 member countries' stimulus packages and their respective economic performances, however the data had been cherry picked and only 11 G20 economies had been inculed in the analysis. When all G20 economies were analysed, no correlation existed. Treasury later withdrew the graph. IMF research showed statistically significant links between the form of stimulus, and the success or otherwise of various countries through the recession.
Notwithstanding this criticism, a raft of economic advice and analysis has subsequently supported Australia's actions. The OECD's 2009 employment outlook said that while "generally have not had a strong effect in cushioning the initial decline in employment caused by the crisis...Australia is a notable exception." Australia's unemployment figures remain about 3% lower than the OECD average, and it also avoided recession throughout the GFC.
Henry's advice throughout the GFC has been characterised as "within the mainstream of economic orthodoxy". As of December 2009, Australia's unemployment rate is thought to have peaked at 5.8 percent after several months of job growth. This is much lower than previous Treasury estimates of up to 8.5 percent
on 2 May 2010. There are changes to superannuation, resource rent tax on the mining sector and tax reform for small businesses.
The Resource Super Profits Tax
(RSPT) proposed by Henry proposed to tax the super profits
of mining companies.
Following criticisms of the measures proposed in the Henry Tax Review by mining giant Xtrata and the Minerals Chamber, Henry said:
Henry was criticized for wanting to avoid debate of his ideas.
. The government claimed that miners paid as little as 17 per cent tax on their profits, mining companies claimed they paid 43%, but Australian Taxation Office
figures indicate that "the average tax take across the mining industry is about 27 per cent" with many paying much less than this.
During negotiations with mining companies, Henry advised that the initial estimates of $12 billion had been revised up to $24 billion due to higher commodity price estimates in the two months since the release of the initial RSPT proposal.
announced Henry had been appointed by the Governor General as a Special Adviser on a part-time basis in her portfolio. He was directly appointed by the Governor General under section 67 of the Constitution of Australia
, and outside the Public Service Act 1999.
, Catherine Livingstone
, Chair of Telstra
, and Mr John Denton, of the Business Council of Australia
. Dr Gordon de Brouwer, Dr David Gruen, Deputy Secretary of the Department of the Treasury and Dr Heather Smith, Deputy Secretary of the Department of Foreign Affairs and Trade will form a Secretariat.
and will commence on 1 November 2011.
in 2001.
Order of Australia
The Order of Australia is an order of chivalry established on 14 February 1975 by Elizabeth II, Queen of Australia, "for the purpose of according recognition to Australian citizens and other persons for achievement or for meritorious service"...
(born 27 November 1957 in Taree, New South Wales
Taree, New South Wales
Taree is a city on the Mid North Coast, New South Wales, Australia. Taree and nearby Cundletown were settled in 1831 by William Wynter. Since then Taree has grown to a population of around 20,000 people and is the centre of a significant agricultural district. It is 16 km from the sea coast,...
) is an Australia
Australia
Australia , officially the Commonwealth of Australia, is a country in the Southern Hemisphere comprising the mainland of the Australian continent, the island of Tasmania, and numerous smaller islands in the Indian and Pacific Oceans. It is the world's sixth-largest country by total area...
n economist and public servant. He served as the Secretary of the Department of the Treasury
Department of the Treasury (Australia)
The Department of the Treasury is an Australian Government department. Its role is to focus and develop economic policy.-History:The Commonwealth Treasury was established in Melbourne in January 1901....
from 2001 to 2011. On 1 June 2011, he was appointed as Special Advisor to the Prime Minister. He was first appointed to as Treasury Secretary by Liberal Party Treasurer Peter Costello
Peter Costello
Peter Howard Costello AC is an Australian politician and lawyer who served as the Treasurer in the Australian government from 1996 to 2007. He is the longest-serving Treasurer in Australian history. Costello was a Member of the Australian House of Representatives from 1990 to 2009, representing...
in April 2001, and reappointed by Costello in 2006, and retained by the Rudd government
Rudd Government
The Rudd Government refers to the federal Executive Government of Australia of the Australian Labor Party from 2007 to 2010, led by Kevin Rudd as Prime Minister. The Rudd Government commenced on 3 December 2007, when Rudd was sworn in along with his ministry...
. He chaired the Australia's Future Tax System Review, informally known as the Henry Tax Review
Henry Tax Review
The Australia's Future Tax System Review, informally known as the Henry Tax Review was commissioned by the Rudd Government in 2008 and published in 2010...
, that was published in 2010. On December 21, 2010, he announced his retirement from the Treasury, effective in March 2011.
Education and early career
He studied economics at the University of New South WalesUniversity of New South Wales
The University of New South Wales , is a research-focused university based in Kensington, a suburb in Sydney, New South Wales, Australia...
, and then lectured in economics at the University of Canterbury
University of Canterbury
The University of Canterbury , New Zealand's second-oldest university, operates its main campus in the suburb of Ilam in the city of Christchurch, New Zealand...
in New Zealand
New Zealand
New Zealand is an island country in the south-western Pacific Ocean comprising two main landmasses and numerous smaller islands. The country is situated some east of Australia across the Tasman Sea, and roughly south of the Pacific island nations of New Caledonia, Fiji, and Tonga...
while studying for his Doctor of Philosophy
Doctor of Philosophy
Doctor of Philosophy, abbreviated as Ph.D., PhD, D.Phil., or DPhil , in English-speaking countries, is a postgraduate academic degree awarded by universities...
degree at the same institution. From September 1986 to June 1991, Dr Henry worked as a senior adviser to the Labor
Australian Labor Party
The Australian Labor Party is an Australian political party. It has been the governing party of the Commonwealth of Australia since the 2007 federal election. Julia Gillard is the party's federal parliamentary leader and Prime Minister of Australia...
Treasurer, Paul Keating
Paul Keating
Paul John Keating was the 24th Prime Minister of Australia, serving from 1991 to 1996. Keating was elected as the federal Labor member for Blaxland in 1969 and came to prominence as the reformist treasurer of the Hawke Labor government, which came to power at the 1983 election...
, providing advice on taxation policy and administration, retirement incomes policy, industry policy and microeconomic reform (including telecommunications reform).
In June 1991 he returned to the Treasury, becoming head of the Microeconomic Modelling Unit. In July 1992 he took up the position of Minister (Economic and Financial Affairs) in the Australian Delegation to the OECD in Paris. During this time, he has served as an Australian representative to the Organisation for Economic Co-operation and Development
Organisation for Economic Co-operation and Development
The Organisation for Economic Co-operation and Development is an international economic organisation of 34 countries founded in 1961 to stimulate economic progress and world trade...
(1992–94). He was the Treasury department secretary from April 2001 until March 2011; and therefore an ex-offfico member of the board of the Reserve Bank of Australia
Reserve Bank of Australia
The Reserve Bank of Australia came into being on 14 January 1960 as Australia's central bank and banknote issuing authority, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank to it....
.
Henry remained head of Treasury in the transition from Liberal to Labor Governments in 2007. In 2008 he headed Australia’s Future Tax System Review Panel, charged with examining all aspects of the Australian tax system with a view to reform.
Consumption tax modelling
Ken Henry has been criticised for his role in modelling the Hewson Liberal opposition reform package known as Fightback!Fightback!
Fightback! was a radical economic policy package, 650 pages long, proposed by then Liberal Party leader John Hewson.-Key elements:The key elements of Fightback! were:...
. That package contained as a central element a goods and services tax
Goods and Services Tax
A goods and services tax or value added tax is a tax on exchanges.By country:*Goods and Services Tax *Goods and Services Tax *Goods and Services Tax *Goods and Services Tax...
, similar to both the Option C developed by Henry for the Hawke Labor government in 1985, and the GST developed for the Howard Liberal Government in 1997. Henry rejects the claim that Treasury acted improperly, saying “We rejected that charge at the time. I would always reject it. There was nothing improper in what we did." He did concede, however that "it is the case that our work was used by the Government to attack publicly an Opposition policy." In reference to the Option C modelling he had previously worked on, Henry said:
When Fightback! came out, the model the team had developed enabled the identification of a major failing in the package. Income tax bracket creep had been used to fund the package but bracket creep had not been used in the analysis of the after tax income various taxpayers would receive. Treasury was accused by the Coalition of having acted improperly.
Pre 2007 election Speech
In April 2007, the Australian Financial Review’s Laura Tingle ran a story information about Henry’s semi-annual speech to staff. In the wake of the Howard Government's development of a $10 billion policy proposal without contacting Treasury, Henry was reported as saying that there was a 'greater than usual risk of the development of policy proposals that are, frankly, bad' in the lead-up to the federal election.’ Former Howard Government ministers suggested that it was a deliberate attempt to have Henry’s critical views aired publicly to the detriment of the Howard Government, and called it ‘a deliberate piece of political positioning by Henry’ prior to the 2007 federal election. Following the initial controversy, Henry released the full text of the speech, along with clarification. It said, in part, that- The Government, our ministers and other agencies are under no compulsion to rely on our advice. In respect of water, that point is all too obvious. We are competing for influence with other central agencies, line agencies and independent policy advisers, such as think-tanks, commentators and consultants.... As I have noted on other occasions, I have never known the Treasurer to not welcome frank and honest advice when it is provided in-confidence and in good faith.|
Bank Deposit Guarantee Scheme
Immediately prior to Henry's appearance at a Senate hearing into the Rudd Government’s unlimited Bank Deposit Guarantee Scheme, an email from the Governor of the Reserve Bank of AustraliaReserve Bank of Australia
The Reserve Bank of Australia came into being on 14 January 1960 as Australia's central bank and banknote issuing authority, when the Reserve Bank Act 1959 removed the central banking functions from the Commonwealth Bank to it....
, Glenn Stevens
Glenn Stevens
Glenn Robert Stevens is an Australian economist and the current Governor of the Reserve Bank of Australia.-Early life and education:...
, to Henry was reported on in the media. No text was published, however the Australian newspaper alleged that the email expressed concerns of the Reserve Bank about a ‘flight to safety’ caused by the unlimited guarantee of deposits in Authorised Deposit-taking Institutions, and the consequent loss of liquidity in secondary credit markets. It claimed that Stevens called for a cap on the amount of an deposit guarantee ‘...the lower the better’ and that he also said ‘If this situation is allowed to continue, foreign bank branches will not be able to source funding in the local market as a flight to guaranteed deposits occurs.’
In the Senate hearing, Henry denied there had been any disagreement between Treasury and the Reserve Bank, and that the two bodies were ‘of one mind’ on the Bank Deposit Guarantee Scheme. Henry said that the Opposition's claim that Mr Rudd had ignored Reserve Bank warnings was based on a report in The Australian newspaper. Dr Henry called that report unfortunate, fallacious, unhelpful, and "W-R-O-N-G"
The Reserve Bank Governor backed Henry, stating that "steps in these directions, in the context of what other countries were doing, were sensible, and the RBA supports them."
Stimulus package
Treasury, under Henry, gave advice supporting the Rudd Government’s stimulus package, which was designed to lessen the size of an economic recession in Australia following the global financial crisis. The package has been described by Nobel Prize winning economist Joseph Stiglitz as 'one of the most impressive economic policies I've seen, ever'. The stimulus package foreshadowed $42 billion in spending measures.The classical Keynesian response embodied in the stimulus package, the desire to maintain expenditure in the economy, and the desire to avoid the destruction of human capital from a recession was encapsulated in the phrase attributed to Henry.
Henry stated that the stimulus package would either reduce future Government spending or drive up taxes, but he also said that this would occur in "a period of faster growth in private sector activity and the judgment that has been made is that in those circumstances . . . the Government will have the ability to repay debt without doing damage to gross domestic product growth".
Effect of stimulus package
Henry provided advice to the Rudd Government that without the continuation of the stimulus package, 100,000 jobs would be lost, and GDP would reduce by 1.5 per cent. No modelling was made public to support either of these contentions. After the release of advice, Shadow Treasurer and Minster in the former Howard Government, Joe HockeyJoe Hockey
Joseph Benedict "Joe" Hockey , is an Australian politician and member of the Australian House of Representatives, representing the Division of North Sydney for the Liberal Party of Australia since 1996....
, commented that he had never seen a piece of Treasury advice so clearly designed to be released to the media.
Further,graphs printed in the budget papers purporting to show that there was a statistically significant correlation with the size of G20 member countries' stimulus packages and their respective economic performances, however the data had been cherry picked and only 11 G20 economies had been inculed in the analysis. When all G20 economies were analysed, no correlation existed. Treasury later withdrew the graph. IMF research showed statistically significant links between the form of stimulus, and the success or otherwise of various countries through the recession.
Notwithstanding this criticism, a raft of economic advice and analysis has subsequently supported Australia's actions. The OECD's 2009 employment outlook said that while "generally have not had a strong effect in cushioning the initial decline in employment caused by the crisis...Australia is a notable exception." Australia's unemployment figures remain about 3% lower than the OECD average, and it also avoided recession throughout the GFC.
Henry's advice throughout the GFC has been characterised as "within the mainstream of economic orthodoxy". As of December 2009, Australia's unemployment rate is thought to have peaked at 5.8 percent after several months of job growth. This is much lower than previous Treasury estimates of up to 8.5 percent
Henry Tax Review
The Australian Government released the contents of the Henry Tax ReviewHenry Tax Review
The Australia's Future Tax System Review, informally known as the Henry Tax Review was commissioned by the Rudd Government in 2008 and published in 2010...
on 2 May 2010. There are changes to superannuation, resource rent tax on the mining sector and tax reform for small businesses.
The Resource Super Profits Tax
Resource Super Profits Tax
The Minerals Resource Rent Tax is a proposed tax on profits generated from the exploitation of non-renewable resources in Australia. It is the replacement for the proposed Resource Super Profit Tax ....
(RSPT) proposed by Henry proposed to tax the super profits
Superprofit
Superprofit , is a concept in Karl Marx's critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers.-The origin of the concept in Marx's Capital:...
of mining companies.
Following criticisms of the measures proposed in the Henry Tax Review by mining giant Xtrata and the Minerals Chamber, Henry said:
- Whenever an idea is ventured publicly by a person, whether that person is a policy advisor or whether it's a government minister, there's at least a handful of academics who will contest it. I've seen it on both sides of politics - this is not a partisan comment at all - but for governments, government ministers who are seeking to get ideas legislated - it is unbelievably frustrating, incredibly frustrating. But I think there are occasions on which economists might, at least for a period, put down their weapons and join a consensus.
Henry was criticized for wanting to avoid debate of his ideas.
Resource Super Profits Tax
Ken Henry proposed a Resource Super Profits Tax (RSPT) on all mining companies' super profitsSuperprofit
Superprofit , is a concept in Karl Marx's critique of political economy, subsequently elaborated by Lenin and other Marxist thinkers.-The origin of the concept in Marx's Capital:...
. The government claimed that miners paid as little as 17 per cent tax on their profits, mining companies claimed they paid 43%, but Australian Taxation Office
Australian Taxation Office
The Australian Taxation Office is an Australian Government statutory agency and the principal revenue collection body for the Australian Government. The ATO has responsibility for administering the Australian federal taxation system and superannuation legislation...
figures indicate that "the average tax take across the mining industry is about 27 per cent" with many paying much less than this.
During negotiations with mining companies, Henry advised that the initial estimates of $12 billion had been revised up to $24 billion due to higher commodity price estimates in the two months since the release of the initial RSPT proposal.
Special Advisor to the Prime Minister
On 1 June 2011, Prime Minister Julia GillardJulia Gillard
Julia Eileen Gillard is the 27th and current Prime Minister of Australia, in office since June 2010.Gillard was born in Barry, Vale of Glamorgan, Wales and migrated with her family to Adelaide, Australia in 1966, attending Mitcham Demonstration School and Unley High School. In 1982 Gillard moved...
announced Henry had been appointed by the Governor General as a Special Adviser on a part-time basis in her portfolio. He was directly appointed by the Governor General under section 67 of the Constitution of Australia
Constitution of Australia
The Constitution of Australia is the supreme law under which the Australian Commonwealth Government operates. It consists of several documents. The most important is the Constitution of the Commonwealth of Australia...
, and outside the Public Service Act 1999.
"Australia in the Asian Century"
He will lead a government project to write a White Paper on the topic "Australia in the Asian Century", to be publicly released in mid-2012. He will be assisted by Professor Peter DrysdalePeter Drysdale
Peter David Drysdale AM is Emeritus Professor of Economics and Visiting Fellow in the Crawford School of Economics and Government in the College of Asia and the Pacific at The Australian National University. Until 2002, he was Executive Director of the Australia-Japan Research Centre .Drysdale is...
, Catherine Livingstone
Catherine Livingstone
Catherine Brighid Livingstone is an Australian businesswoman, having held influential positions in some of the country’s major industry players including the , Macquarie Bank and Telstra....
, Chair of Telstra
Telstra
Telstra Corporation Limited is an Australian telecommunications and media company, building and operating telecommunications networks and marketing voice, mobile, internet access and pay television products and services....
, and Mr John Denton, of the Business Council of Australia
Business Council of Australia
The Business Council of Australia represents the chief executives of approximately 100 large Australian corporations. It was formed in 1983 by the merger of the Business Roundtable - a spin-off of the Committee for Economic Development of Australia - and the Australian Industry Development...
. Dr Gordon de Brouwer, Dr David Gruen, Deputy Secretary of the Department of the Treasury and Dr Heather Smith, Deputy Secretary of the Department of Foreign Affairs and Trade will form a Secretariat.
Directorship
Henry was appointed as a director of the National Australia BankNational Australia Bank
National Australia Bank is one of the four largest financial institutions in Australia in terms of market capitalisation and customers. NAB is ranked 17th largest bank in the world measured by market capitalisation...
and will commence on 1 November 2011.
Awards and honours
Henry was made a Companion of the Order of Australia in 2007, and received the Centenary MedalCentenary Medal
The Centenary Medal is an award created by the Australian Government in 2001. It was established to commemorate the Centenary of Federation of Australia and to honour people who have made a contribution to Australian society or government...
in 2001.