A London-based executive of a scandal-plagued financial giant is set to become the nation’s next chief economist and most powerful bureaucrat. And The Mandarin could only find praise for the decision this morning.
John Fraser (pictured) heads the asset management group at Swiss bankers UBS. But he spent two decades in Canberra at the pointy end of Treasury and according to media reports will have unwanted Treasury secretary Martin Parkinson’s job by the end of the year.
The 63-year-old Monash-trained economist was Treasury’s point man in Washington under Paul Keating and become deputy secretary for a three-year stint in 1990. He then chased the obscene money in the private sector, joining the Swiss Bank Corporation in Australia which later merged with UBS.
Fraser was one of the few executives to keep his job in a post-GFC clean-out at UBS which came to the brink of collapse. He told The Australian earlier this year he was “appalled” at a series of scandals — the Swiss government had to bail out the bank after a series of missteps — and threatened to quit. “I resigned and gave my 12 months’ notice in August 2008 as I was so fed up with the whole situation,” he said.
He stayed, but the reputation of the bank didn’t improve. The New York Times noted in 2012 the bank’s “series of immunity, nonprosecution and deferred prosecution agreements” and “record of recidivism”. As one senior economist (who didn’t want to be named) told The Mandarin today UBS has an “appalling history” as “probably the most consistently criminal of the major banks”. Nevertheless, it has recovered to become a global leader in wealth management.
Saul Eslake was interviewed for his first job at Treasury by Fraser in 1978 and worked under him for a time. “He probably would have been a candidate for the job years ago if he had stayed,” Eslake said.
Eslake was appalled at the treatment of Parkinson — the government made it clear he wasn’t their pick but finally urged him to stay until this year — but believes Fraser would be an “inspired choice”. “There’s no doubt about his capacity to work with and understand the bureaucracy, but he also brings a hell of a lot more,” he said.[pullquote] “John is intelligent, articulate, gregarious, stimulating, humorous and debonair so would make a fine Treasury head.” [/pullquote]
Percy Allan, a former NSW Treasury secretary, knew Fraser well during his time in Canberra. He notes his “vast experience” in international finance during the GFC, “which would be invaluable back at Treasury”.
In 1996, Fraser was picked by Peter Costello to head the Howard government’s commission of audit and was an architect of the Charter of Budget Honesty. “Many states have replicated this model,” Allan told The Mandarin, “helping transform national and state elections in Australia from pork-barrelling exercises into competitions about who can offer the most credible fiscal policies.
“John is intelligent, articulate, gregarious, stimulating, humorous and debonair so would make a fine Treasury head. I can’t think of a better choice.”
Jason Murphy, an economist who spent three years as a policy analyst in Treasury, says Fraser is “well-regarded and obviously intellectually capable, and his markets experience is formidable”.
“Being Treasury secretary is a very different job from being an asset manager — and I’m not just talking about the pay cut,” he said. “But given Fraser’s background in public service, you’d assume he’s been keeping an eye on Australian policy debates during his many years in London. It should be possible for him to perform well in the role very quickly.”
Nevertheless, Murphy wonders, there will be disappointment at Treasury that an internal candidate wasn’t chosen.
There are clues on the economic philosophy of Fraser, also chairman of the Victorian Funds Management Corporation, in The Australian interview, where he warned of rising inflation and the danger of “playing” with monetary policy:
“I believe that we are in a remarkably experimental time. I worry about it. I am a traditional economist and if you play with monetary policy, you have to be very, very careful.
“We have been through a period since 2008 of massive expansion in the cash supply and the impact on the money supply has been unusual, to say the least. Only time will tell and, as we know from earlier periods, the impact can take a long time to be felt, both in terms of output and also inflationary expectation.”