The Treasury and the Global Financial Crisis (A) 2011-119.1

Ken Henry, the Secretary of Australia’s federal Department of Treasury, knew shortly after the collapse of US financial giant Lehman Brothers that he and his colleagues’ fears were confirmed. Despite the solidarity of its own economic fundamentals, Australia was going to be significantly affected by the fallout from the meltdown of the US financial system that had been building momentum throughout the year. The Treasury, though a powerful and robust central agency, had not performed well in the last big recession in the early 1990s and could not afford to drop the ball once more. Already a modus operandi had been developed, but this would have to be executed at lightning speed and in unprecedented conditions, helping the government navigate the greatest economic conflagration the world had seen since the Depression of the 1930s. Bold strategies and policies were initially taken up by the Prime Minister and Treasurer, but soon politics came into the mix and the department found itself facing a new challenge in deciding whether or not to become involved in the debate, justifying its position and therefore exposing itself to criticisms of “politicisation”.

This case considers how the federal Treasury, determined to be prepared for future financial instability, confronted the threat with bold and comprehensive stimulus packages. Drawing on a series of interviews with key players, as well as Treasury documents, Part A offers unique insights into the strategies that saved the Australian economy from being swallowed by the international financial maelstrom.

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The second part of the case, subtitled “A departmental stress test” looks at the impact on the organisation, its culture and its values, during the prolonged period of high-intensity activity around the Global Financial Crisis.