EXCLUSIVE

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Peter Costello (left) and John Howard: Supported Dr Martin Parkinson and Dr Ian Watt.

The Abbott government defied the advice of John Howard and Peter Costello when it axed the nation's top economic official, Treasury Secretary Martin Parkinson.

Fairfax Media can reveal Treasurer Joe Hockey approached Mr Howard and Mr Costello in the days before the September 7 election to discuss the future of Dr Parkinson, along with the Department of the Prime Minister and Cabinet secretary Ian Watt and other top mandarins.

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Treasurer Joe Hockey: Approached former prime minister and Australia's longest serving treasurer.

The former prime minister and Australia's longest serving treasurer both backed Dr Parkinson and Dr Watt as highly respected officials and suggested they be retained.

But Mr Abbott, who has sole power to appoint departmental secretaries, announced in his first statement after being sworn in that Dr Parkinson would go.

Resources department secretary Blair Comley, industry secretary Don Russell and agriculture secretary Andrew Metcalfe were also axed and successors named, but a successor to Dr Parkinson has not yet been announced.

The intervention of Mr Howard and Mr Costello may have earned Dr Parkinson his stay of execution; he was asked to remain in place until mid-2014.

It is understood Mr Costello argued Dr Parkinson, with whom he worked closely for years in Treasury, was well respected on the international stage. Mr Howard backed his glowing assessment.

Mr Howard and Mr Costello also expressed a high opinion of Dr Watt, who was finance secretary in the Howard years and has remained as head of the Department of the Prime Minister and Cabinet.

Speculation has grown in recent months among the nation's top bureaucrats that Dr Parkinson could be asked to stay on until the end of the year to assist Mr Hockey as Australia hosts the G20 in November.

The front-runner for the position is NSW Treasury Secretary Philip Gaetjens, who is a former chief of staff to Mr Costello.

Lowy Institute G20 program director Mike Callaghan, who is a former International Monetary Fund and Treasury official and another ex-chief of staff to Mr Costello, is also in the mix, while, inside the department, David Gruen is widely viewed as one of the nation's top economic boffins.

Before the election, the Coalition was critical of Treasury's economic forecasting while Dr Parkinson was viewed with suspicion in some circles because of his role heading the former Department of Climate Change and his involvement in Kevin Rudd's failed carbon pollution reduction scheme in 2009.

However, Dr Parkinson's decision to intervene in the campaign - along with Finance secretary David Tune - to repudiate Labor's claim of a black hole in the Coalition's costings was seen as turning point and partly rehabilitated his standing.

It is understood that some in the Coalition's ranks are now having second thoughts about axing Dr Parkinson. Mr Hockey and Dr Parkinson have developed a good relationship in the first six months of government.

Shadow treasurer Chris Bowen said the sackings had been a mistake.

Mr Howard and Mr Costello declined to comment. Mr Hockey's office also declined to comment.

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