Changing guards at Capital Palace
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Changing guards at Capital Palace

Paul Keating, warning against John Howard, and later, Howard warning against Kevin Rudd, told voters that if you change the prime minister you change the country. Likewise when you change the head of the Department of Prime Minister and Cabinet you impose change on the prime minister.

Terry Moran, put in by Kevin Rudd to meet Rudd's priorities, and retained, if not much listened to by Julia Gillard, is going next month after three years. He'll almost certainly be a vice-chancellor in Melbourne when next we hear of him.

Ian Watt, best known for his seven years as secretary of Finance, but, for the past two, head of Defence, is to succeed him. Just as the personality and style of the department changed from 1996 as it shifted from the leadership of Dr Mike Keating to Max Moore-Wilton, and, after him, to Peter Shergold, then Moran, the role and functions of PM&C will inevitably change under Watt.

Right now, hundreds of public servants across departments are wondering how. And why. And what signals Gillard is sending out in choosing Watt as leader of the public service. He is a very likeable person of great ability, but one not known for fast feet, intense political nous, a big personality, or for attachment to particular policy goals.

It will not be for achievements at Defence. This is no reflection on Watt. Like his past half-dozen predecessors, he has struggled to be on top of the portfolio, to be on top of the politics, policies, programs, purchases, and to be anywhere near the wavelength of the minister.

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Defence is a diabolical place to run. In recent decades, only Tony Ayers has seemed, in retrospect a perfect fit - perhaps because of, rather than in spite of, his being a social worker and pacifist. Since him, only Ric Smith has walked out of the jungle entirely of his own accord, and it was his survival rather than any special achievement that was remarkable. He was hardly ever allowed to look out the window - as he was trained to do. Other secretaries regarded first for strategic sense (such as Nick Warner) were made to concentrate on the pennies - while people actually trained as managers and strong on policy such as Allan Hawke and Paul Barrett lost the confidence of their ministers in ways that seemed to reflect more on the ministers than on the secretaries.

Ministers have been difficult, and, increasingly, publicly critical.

The strain has been increased by major deployments - the one in Afghanistan actually costing lives, generally pointlessly - and by rapidly changing strategic circumstances.

The intellectual calibre of the department - and, in certain non-fighting respects, of the services - has declined, just when the capacity for defence surprises has increased.

Given the problems of bad budgeting, mismanagement of acquisition programs and a host of of crises, Watt has had to micromanage - first just to get the number of scandals to manageable levels. The casual observer might think that he has failed - given the disasters of recent months - but this would be slightly unfair, because a significant proportion of the scandals the public knows about (such as sexual abuse) involve bad conduct by soldiers, sailors and airmen and women and mismanagement by service chiefs.

Yet the civilian side has big, if less noisy, problems. Problems with equipment and maintenance and pay and personnel. More are on the horizon, not least as government struggles - sometimes incoherently - to decide what it wants to do, with what, and where.

Ian Watt was recently given approval to appoint two new associate secretaries to help him manage the tasks. One was to focus on issues of materiel, defence production, maintenance and acquisition, and the other to be a chief finance officer to manage a budget rather bigger, on average, than the entire gross domestic products of most of the countries our Defence forces are pointed at.

That will now be for his successor, Duncan Lewis, but the decisions are now even more critical. Lewis has extensive service experience, but no particular reputation for management, strategic overview or mastery of administrative detail. As a soldier he was more the leader of men than the military bureaucrat. He reached Major General (the public service equivalent of a first assistant secretary before being retired on age/ rank grounds. John Howard, a personal admirer, at one stage fancied him as head of Army but could find no enthusiasm for him.

After terrorism became the big game in town after 2001, and government became enamoured of gungho ideas of paramilitary operations, daring rescues and secret teams, the charms of Lewis - a former head of the SAS - occurred to Dr Shergold.

Lewis was made national security adviser (at associate secretary level) by Rudd in 2008. Some, including me, think he did a lacklustre job of protecting Howard, and the national interest, over the Haneef debacle of 2007.

He is the first person with a service background to head Defence. That may not be an asset. He will have views about equipment purchases, force development and Australian overseas engagements. The challenge for him is not, however, of proving himself uncaptured by the service side. It will be, first, in leading the departmental side in the political debates about defence, and in managing an operation of incredible range and complexity. And in managing and pleasing a minister who is well informed but openly unhappy and critical of his advisers - civil and military.

The appointment is a surprise.

More experienced people - for example Dennis Richardson of Foreign Affairs and Trade, Jane Halton of Health and Andrew Metcalfe of Immigration - would have been far safer choices. They might equally have been safer choices at PM&C.

The appointment of Watt to PM&C means that a very high proportion of the secretarial first XI are Treasurytrained economists. There's not only Martin Parkinson, at Treasury, Comley Blair, at Climate Change (Parkinson's most likely ultimate successor), David Tune at Finance, Paul Grimes at Environment, and, now back in service, Don Russell at Innovation.

Some of these, and some of the others such as Jane Halton (Health) and Mike Mrdak (Infrastructure) also have senior executive service in PM&C in their curriculum vitaes, but those who see the main game of bureaucratic politics being the struggle for influence between PM&C and Treasury now have no doubt about who, currently at least, is on top.

This may be very sensible, given the uncertain waters in which the nation is sailing, not least with the economic problems of the United States, Europe and Japan and some early signs of a housing bubble in China. Australia is still, in many respects, far better equipped than most countries, to work its way through a real crisis, if it develops, but, this time, we have even less control over what is happening than before, and, probably, fewer ways of priming the pumps. Treasury and PM&C, and the Cabinet, may need all the economic skill they can get.

But they will also need all of the wise political advice they can get, and this is the real challenge for Ian Watt.

Watt will also have to live with different needs and expectations. He is Gillard's choice - nominated by Public Service Commission head Steve Sedwick as the person for her needs, her strengths, her weaknesses.

Terry Moran was selected for Rudd. Rudd, for example, had a far stronger interest in and enthusiasm for the Council of Australian Governments than Gillard has been able to muster. That was one reason why Rudd grabbed Moran from his job in the Victorian Premier's' Department: they were old colleagues from Rudd's days at the heart of Queensland government. Gillard, on the other hand, faces largely hostile premiers, and may find that providing the bondage and discipline through officials is increasingly more politic and effective.

It was by no means necessarily the fault of Terry Moran, or his department, that it lost influence and clout with Kevin Rudd in early 2010, and that it failed to establish a strong relationship with Gillard. That, rather, was a measure of the way both prime ministers leaned primarily on and listened more closely to their own minders. It has been the Prime Minister's Office rather than the Prime Minister's department that has tended to have charge of managing the message, of coordinating government activity around central goals, and of vetting proposals to see how they weave into the broader themes of government. PM&C has still been there - but not for a long time has it been at the heart of the action. Not since the days of Mike Codd or Geoff Yeend in Bob Hawke's time has the head of PM&C been the first and most trusted adviser of the prime minister of the day.

It is noteworthy that the past three PM&C secretaries, most recently Moran in the John Patterson Oration on July 28, have ended their public service careers expressing public reservations about the growth of ministerial offices. The complaints are not about minders being too political. Or about their intrusion into actual executive responsibility.

It is, as ever, about accountability and about responsibility, whether and when minders speaks or act with the authority of the minister, and when, or whether, ministers accept responsibility for what minders do. Maybe secretaries who nag away about it know something.