Report into NZ budget leak blames failings of unit led by Gabriel Makhlouf

New Zealand treasury did not have ‘effective governance’ or ‘oversight processes in place’

Gabriel Makhlouf, governor of the Central Bank of Ireland:  He was not named in the 35-page report, and his actions in response to the incident were not considered by the authors as they had been subject to a separate investigation. Photograph: Nick Bradshaw for The Irish Times

Gabriel Makhlouf, governor of the Central Bank of Ireland: He was not named in the 35-page report, and his actions in response to the incident were not considered by the authors as they had been subject to a separate investigation. Photograph: Nick Bradshaw for The Irish Times

 

An investigation into the leak of parts of the 2019 New Zealand budget from the treasury under Gabriel Makhlouf, now governor of the Central Bank of Ireland, has highlighted failings by the department’s senior leadership team of the time.

The report was commissioned last June by New Zealand’s State Services Commission in the wake of a political furore that followed the premature publication of budget details. It examined the context of the leak and how it happened.

“The treasury’s core business is delivering the budget and I’m disappointed the senior leadership were not hands-on enough in that task,” state services commissioner Peter Hughes said in releasing the findings.

The inquiry revealed that a series of technical decisions related to website design and the “migration” of the budget document to the department’s live site created the circumstances for the loss of sensitive information.

However, the security risks of those decisions were not obvious to senior managers because the department “did not have effective governance or senior oversight processes or systems in place to oversee the budget process from end-to-end”.

Consequently, risky processes that were established in 2018 and known to lower-level employees were not given “appropriate consideration” by senior leaders, it was found.

Separate investigation

Mr Makhlouf was not named in the 35-page report, and his actions in response to the incident were not considered by the authors as they had been subject to a separate investigation.

That earlier investigation of Mr Makhlouf’s conduct found that he “acted unreasonably” in assessing and describing the situation at the time. It also found that he failed to draw on the expertise available to him. It upheld, however, his political neutrality and found that he acted in good faith in all respects.

He was chief executive at the department from 2011 to June last year, leaving just a month after details of the budget were lost through treasury’s own website search tool.

Those details were published ahead of the government release date by New Zealand’s opposition National Party. Mr Makhlouf’s mischaracterisation of the loss, both to the public and to government ministers, as a “hack” set off a political furore.

Some New Zealand commentators have been strongly critical of Mr Makhlouf’s tenure at treasury. Wellington-based blogger and economics commentator Michael Reddell was on secondment to treasury in 2010, when Mr Makhlouf was hired as deputy chief executive.

‘Damning’

“For Makhlouf? I’d call it damning,” Mr Reddell said. “He was the chief executive, ultimately it’s on him.”

Eric Crampton, chief economist at the New Zealand Initiative think tank, called the the report “damning” of how the treasury department was run.

Last year, Minister for Finance Paschal Donohoe stood by Mr Makhlouf’s appointment to the Central Bank despite pressure to reconsider. Internal documents show Central Bank directors were worried about the “reputational damage” caused by the controversy.

In a letter dated July 15th, 2019, Mr Makhlouf told Mr Donohoe that he could have handled the issue “more clearly and with a different emphasis”, though he was “pleased” that his “honesty, integrity and political neutrality are not in question”.