The Gerard affair and 'due process'

It might be said of Robert Gerard, the Adelaide businessman and Liberal Party benefactor who resigned last Friday from the Reserve Bank of Australia board, that nothing so much became him as his going. From last Tuesday, when the Australian Financial Review's front page shone a compelling light on his conduct of his former company's taxation affairs, Gerard's resignation was inevitable. As Bernie Fraser then said, if the facts were as stated, Gerard should do "the decent thing" and resign.

I often disagree with my successor, but he got that right. It is only surprising that Gerard took three days to do so. And if, according to John Howard last Friday, the government had not and would not have sought his resignation, that is even more surprising.

This and other newspapers have now devoted many words to this topic. Rather than repeat them, I wish to focus on the Gerard appointment process, and on the light that may shed on the decline of our Westminster system standards under successive governments during the past 20 years. In particular, what does the episode reveal about the nature of relationships between ministers (and their private offices) and the commonwealth public service?

My immediate predecessor as secretary to the treasury, Fred Wheeler, used to say that integral to Australia's public service was "due process". This involved formality in relationships between ministers and their officials (as distinct from the closer relationships now only too common) and a rigid adherence to committing advice (and relevant conversations) to paper either as minutes or "notes for file".

Twenty years ago, the treasury regularly monitored all appointments within its minister's portfolio. As an appointee's term drew to its close, the relevant treasury division prepared a minute to the treasurer, which might either recommend reappointment for a further term, or replacement. In either case, it usually included a handful of possible alternative names for the treasurer's consideration, with associated CV material. Where an RBA board appointment was involved, the treasury (whose head sits ex officio on that board) naturally consulted closely with the bank. Any minute that went forward was effectively agreed between them.

It was then up to the minister. He might agree with the department on reappointment (if recommended) or he might not. If not, he might select one of the alternatives put forward, or he might simply nominate his own candidate. If the latter (and it was entirely his prerogative), then in my experience he would normally ask Treasury to "check out" his nominee without, of course, approaching that person.

Such due process achieved two important ends. First, it ensured a written record of all significant government decisions. Second, should a decision later come under question, it protected the minister.

So what was the process with Gerard? Prior to the RBA board vacancy falling due, did treasury advise Peter Costello at all? If so, in writing? If so, was Gerard's name among possible appointees listed (surely not)? Either way, when did the treasurer (or his private office) inform treasury of his decision? Was treasury informed at all prior to its announcement? Was it asked to check out Gerard? Or did the treasurer rely only on his private office staff to do so? (If so, given the reported quality of that staff, he was most unwise.)

The role, or non-role, of the treasury in this sorry affair is one thing. But an even more interested party, and one with his own direct access to the treasurer, is the governor of the bank. Did he send advice to the treasurer (which would surely not have included Gerard's name)? Whether he did or not, did the treasurer (or his private office) inform the governor, in advance, of his intended appointment? Did he ask the governor to check out his intended appointee? If not, why not?

Gerard is merely a memorial to the fact that not having been convicted of breaking the law is not the same as behaving ethically. The spotlight this week switches to the minister who appointed him, and who last week made such a poor fist of defending that appointment.

No doubt Labor will be asking (as it should) some of the questions above. However, in now calling for Costello's resignation, it should be careful what it wishes for. After all, Costello's replacement as treasurer by someone (Alexander Downer?) who actually believes in tax reform would strengthen the government, not weaken it. I look forward to that.