In a phrase that will resonate across the public service in Wellington, a high-powered report into Treasury describes it as the “Department of No.”
The review was conducted by two long-time inhabitants of the Wellington swamp, the inaugural CEO of the Ministry of Business Innovation and Employment, David Smol, and Jann Bestwick, a government-appointed director at various times of at least six Crown entities.
Their findings are generally critical of Treasury.
Treasury Secretary Iain Rennie welcomed the report but said there was clear room for improvement and for faster change in several aspects of the department’s performance.
The report found that staff turnover was high.
“The Treasury is operating in a highly constrained labour market and is no longer perceived as the premier public sector talent incubator it historically was,” it says.
“Gross and unplanned staff turnover peaked dramatically in 2022 (36.5% and 31.7% respectively) and remained elevated through 2025 due to workload burnout and a perceived culture of risk aversion.”
That culture of risk aversion is referenced repeatedly throughout the report with criticism of the department’s conservatism and reluctance to embrace new ideas.
However, the report also details the pressures facing Treasury.
They find that these are both as might be expected from an economy that persistently underperforms compared with its OECD counterparts, but also with a New Zealand political environment that is becoming more challenging.
“New Zealand’s three-year political cycle and electoral system is contributing to an increasingly more contested policy environment than in the past,” the report says.
“This is reducing continuity and policy certainty over time and is resulting in increased efforts to deliver short-term, immediate impact.
“New Zealand’s short-term political cycle is additionally posing significant strategic challenges, as it is making it difficult to sustain action on long-term, system-wide challenges, such as climate change, affordable superannuation, and productivity. Public service departments, through their stewardship role, can help inform debate.
“Trust and confidence in New Zealand’s public institutions have come under pressure over the past decade.
“Greater reliance on unregulated media, economic and social impacts of the COVID-19 pandemic, and continuing cost-of-living pressures have all contributed to greater dissatisfaction and lower trust, resulting in reduced ability to have informed national debate and build sustained consensus on major fiscal and economic choices.”
That has been demonstrated this week with both New Zealand First and Labour refusing to budge on any changes to the eligibility age for New Zealand Superannuation.
There will be a suspicion within some political parties in Parliament that this report has been influenced by Finance Minister Nicola Willis.
In October 2024, she told POLITIK that she wanted Treasury to be two things.
“First, I want it to be the leader in the development of ideas to grow the New Zealand economy faster, to make the New Zealand economy more productive, more prosperous, and to deliver better choices and opportunities for New Zealanders,” she said.
“I want Treasury to be both a thought leader and a driver of that activity.
“Treasury should always be the voice in every room saying, well, that’s one way of approaching it, but if you wanted to do it in a way that would grow the economy fastest and would make the biggest contribution to skills development, capital deployment, innovation, you would do it this way to be the guardians and custodians of the growth narrative and impetus.
“I also want Treasury to fulfil its traditional role of being the guardians of the purse strings, to always ask the question, Is there a way we could drive more value from this investment?
“What is the opportunity cost of spending this money this way, and what more could they have done to achieve elsewhere?
“I want it to be rigorous about assessing the costs, the financial implications, and what that all adds up to.”
The report suggested Treasury must pivot away from a system incentivised by marginal, near-term choices toward long-term fiscal planning.
It said Treasury needed to act as a bold, outward-facing economic voice.
It must translate productivity frameworks into actionable ideas grounded in commercial realities, particularly regarding emerging cross-cutting issues like economic security and AI integration.
The report’s authors interviewed a range of public sector agencies in Wellington and a limited number of private sector entities in Auckland.
The interviewees wanted a more assertive Treasury.
“Interviewees, including some from the Treasury, considered that the Treasury has under-contributed at the economy-wide level in recent years,” the report found.
“A recurring theme was that the Treasury did not appear to be bringing enough practical thinking to the Government’s Going For Growth agenda.
“Some interviewees felt it had few concrete ideas to contribute, including on the “next big idea”, while others questioned whether its thinking remained too shaped by the economic orthodoxy developed internationally in the 1980s and 1990s, much of which is still relevant but may no longer be sufficient.”
That last statement may ruffle a few feathers on the centre-right, particularly within ACT, who remain wedded to the small, non-interventionist government ideas often described by critics as “neo-liberal.”
But the reviewers also found some problems with Treasury’s core “bean counting” operations.
“An area of concern raised by interviewees was the apparent lack of clarity about the Treasury’s role in relation to the fiscal and value for money performance of some of these large entities for which the Treasury is not the monitor, particularly Health New Zealand (Health NZ) and to a lesser extent Kainga Ora and the New Zealand Transport Agency (NZTA),” the report says.
“Health NZ has the largest annual operating cost of any Crown entity, as well as a significant programme of investment in hospital and other health facilities.
“The Ministry of Health is its monitoring agency.
“Unanticipated and material cost overruns in 2023/24 affected Ministers’ trust and confidence in the advice they were receiving from Health NZ, the Ministry of Health and the Treasury.”
Interviewees pointed to some notable weaknesses.
“Monitoring of ACC was seen as having failed to identify and escalate emerging performance issues, contributing to multiple independent reviews and active engagement by the Public Service Commission, although the Treasury has since increased the resource and capability applied to ACC monitoring.
“Ministers did not regard the Treasury’s commercial advice on replacement Interislander ferries as robust, which reduced their confidence in the Treasury’s capability in commercial transactions more generally.
And in a criticism that has been made repeatedly over the years about Treasury from business leaders out of Wellington, some interviewees questioned whether the Treasury had enough senior leaders with deep commercial expertise.
“The Treasury is regularly involved in supporting Ministers in relation to commercial issues and transactions beyond the regular monitoring of Crown entity performance and will not always have the requisite expertise in-house,” the report says.
“Interviewees consistently described the Treasury as risk-averse.
“While strengthened governance and controls following a 2023 Budget incident were widely seen as appropriate, they appear to have contributed to a broader “tight-tight” control culture and intensified a low-risk posture.”
(That incident was the accidental publication of sensitive Budget figures on the polytechnics merger.)
“While senior leaders appear to have a clearer and more balanced view of risk, staff and members of RAC (Treasury’s Risk and Audit Committee) were less certain that this flows consistently through the organisation,” the report says.
“Different parts of the Treasury appear to operate with varying interpretations of acceptable risk.
“External stakeholders also expressed a desire for a bolder Treasury, acknowledging that this would involve greater tolerance of risk.”
And so the report has proposed a series of recommendations. Among them are that:
• Treasury must prioritise maintaining and growing the trust and confidence of senior Ministers. This involves proactively delivering on Ministerial priorities, strengthening fiscal discipline across the system, and escalating issues quickly if dissatisfaction arises.
• Treasury needs to upgrade its budget, vote, investment management, and monitoring systems.
• Treasury should refresh its diagnosis for unlocking productivity growth (such as integrating AI). It must coordinate with key economic agencies to ensure timely advice, grow in-house expertise in long-term priority areas, and build an external network to rapidly mobilise against emerging risks.
• An internal view of priorities must be developed. They should be strictly aligned with the Minister of Finance and central agencies.
• Treasury must invest in targeted recruitment and professional development to bridge its capability gaps.
It would seem that the Government is taking the report seriously.
Public Service Commissioner, Sir Brian Roche, said in a statement included in the report that in the coming months, the Public Service Commission and the Department of the Prime Minister and Cabinet would work alongside the Treasury to support implementation of the review, including brokering support across the system to remove barriers and help build the momentum needed to lift the Treasury’s influence and impact.
However cynics might note that Treasury was last reviewed in 2014 and some of the findings in that review bear a startling similarity to those of the review published yesterday.
“Working closely with other government agencies, the Treasury must drive the thinking and support the intervention design needed to deliver on a significant lift in overall economic performance,” the 2014 review said.
“The Treasury needs to be the ‘financial strategist’ for New Zealand.
“To do this, it must be a stronger and more active participant in the debate about the economy and more frequently promote the big and bright ideas, not just in Wellington but throughout the country.
“Currently, the Treasury’s voice in the economic policy debate is not as strong as it needs to be, and this must be addressed urgently.”
The2014 report, unlike yesterday’s, did stress that Treasury would need to maintain its political neutrality in any debate it got involved in.
“The required improvement in New Zealand’s economic performance will not be achieved by doing more of the same,” it said.
“Traditional policy approaches and beliefs need to be challenged, and sometimes experimental and high-risk approaches applied. “
That was 12 years ago, and it would seem not much has changed.
Treasury has not been called the Department of No for no reason. Whether it can become the Department of Yes would seem to be a very large challenge.
