An earlier ‘conversation’ with Professor J.W. Nevile was published in Essays in Economics, in Honour of Professor J.W. Nevile: Presented to Him on His Retirement. We now bring the story up to date covering the period roughly between Nevile’s appointment as Emeritus Professor at the University of New South Wales in 1993 to the present.

This is an edited version of a lecture by economist and former Australian Treasury Secretary (2001–2011) Dr Ken Henry, delivered at a Colloquium in honour of Professor J.W. Nevile, held at the University of New South Wales on 10 October 2012. Taking a practitioner’s perspective, the article surveys the management of the Australian economy from the 1970s to the present, with a focus on the reasons Australia escaped the global financial crisis of 2008 and the lessons for macroeconomic policymakers to be drawn from that experience. The author concludes that macroeconomic policy practitioners have to think deeply about microeconomic connections and the potency of different instruments in addressing shocks with different sources. They also have to deal with considerable uncertainty. The global financial crisis demonstrated forcefully that there is no separation between macroeconomics, financial system stability, prudential regulation, micro-level incentive structures and market efficiency.

Following failure of the stimulatory policies post the 2008 financial crisis and the resulting instability of the Euro, national fiscal consolidation with real sanctions for non-compliance has become a key focus of most governments as they address escalating budget deficits and rapidly rising public debt. The problem is that agreement by central governments to adopt national fiscal rules, whether self-imposed or imposed by some supranational institution, leaves unaddressed how such rules and sanctions should be adopted by (or imposed on) sub-central and local governments. To date, the primary focus has been on whether the encouragement given over recent decades to fiscal decentralisation has worsened public debt levels and made national fiscal consolidation by central governments more difficult. This article argues that what is missing from this discussion is attention to the intergovernmental institutional arrangements and how they and their reform are potentially crucial to both national fiscal consolidation and ensuring retention of the benefits of fiscal decentralisation.

This essay examines a significant event in Australia’s economic and labour relations history in which an industrial relations court acted against government policy but in line with the advice of professional economists to impose a general wage reduction. This determination, unique during the period of central wage fixation, was made as the country fell into deep depression in 1930–1931. Arguments that a reduction in purchasing power would exacerbate the depression did not prevail over expert economic advice that wage reduction would lessen the structural consequences of reduced rural export income. The Court determined that the loss of real national income had to be accommodated without a wider package of measures such as exchange rate depreciation or expansionary monetary and fiscal policies. The impressive endeavours of the Court to understand and respond to a difficult economic reality represented a significant elevation of the status of wages policy in macroeconomic management – one that was to last for 60 years.

This article draws on evidence generated in recent deprivation studies conducted by the author and colleagues at the Social Policy Research Centre. After outlining some of the main limitations of poverty line studies, the paper explains how the deprivation approach addresses these weaknesses and illustrates the insights that deprivation studies can provide into the nature of poverty in contemporary Australia. It then compares the results produced by a deprivation approach with those produced using a poverty line – both in terms of what they imply about the extent of the problem and who they suggest is most affected by it. The comparisons demonstrate that the reservations that many hold about poverty research can be overcome and that when this is done, the results become more compelling and thus have the potential to have a greater impact on anti-poverty policy.

Very few would dispute the proposition that evidence about the effects of different policy options should inform policy decisions. However, there is less agreement on the nature of the evidence needed. In addition, there may be problems in evaluating that evidence. This is particularly the case when experts offer conflicting advice. This article presents the position held by Professor Nevile that in giving policy advice to the government, it is almost always desirable to draw on a range of different policy instruments. While theoretical input is usually important, it is even more important that theory does not lose contact with the real world. Factual descriptions of the real world and the use of a theoretical toolkit containing more than one theory are essential in achieving this goal. These principles are illustrated by a discussion of a particular category of policy advice – the evaluation of government programmes.

In this article, we consider the mainsprings of John Nevile’s many contributions to economics. John has repeatedly argued that because ‘economic actions, institutions and policies affect people’, they have an ethical dimension (Hawtrey and Nevile, 1986: 1), and he has stressed the importance of understanding the value judgements on which economics rests. His policy suggestions are aimed at improving social justice and the well-being of the most vulnerable. Apart from his deep knowledge of economic theory, his Christian faith provides an important foundation for his analysis, particularly of policy.

Defence procurement is a notoriously difficult and often controversial field of public management. In Australia, problems with schedule and budget overruns have been addressed through business process reforms aimed at tightening control and improving professionalism. However, studies of complex contracting in other contexts show the importance of relational factors of trust, collaboration and risk-sharing. These factors are not encouraged by the predominantly transactionally based contractual environment of Defence. Based on a detailed examination of three case studies, we suggest that there is a disjunct between the types of controls that are applied by Defence and the requirements of delivering complex, long-term projects involving multiple stakeholders. The need for both improved flexibility as well as heightened accountability is evident. We argue that balancing these values involves processes that encourage, rather than discourage, communication, risk-sharing and trust.