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Treasury came armed with a warning. Instead, politicians dragged them into the mud

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Jane Hume and Katy Gallagher were involved in an unusually heated week of Senate estimates (AAP: Lukas Koch)

Public servants say nothing by accident.

When grilled by senators at estimates hearings, they speak with such painstaking precision it can be maddening to those familiar with the regular conventions of the English language.

"Senator, I think the minister has said what the minister has said," intoned Home Affairs secretary Stephanie Foster this week after a lengthy pause, in a perfect illustration of the dialect of "anti-speech" typical of the forum.

So it was disarming when Treasury secretary Steven Kennedy opened his estimates appearance with these non-minced words.

"It is important that, should trade tensions escalate around the world, Australia's response is responsible, rigorous and effective, even if tariffs are applied to our exports.

"It will seem counterintuitive to many, but responding to tariffs or trade restrictions with similar measures will only make matters worse."

Retaliatory tariffs, he said, would be an act of self-sabotage.

Treasury came armed with a warning. Instead, politicians dragged them into the mud

Steven Kennedy warned against retaliating to tariffs from the Trump administration. (AAP: Lukas Coch)

"Tariffs directly increase the prices businesses and consumers pay for import goods … Ultimately, tariffs can push up a broader set of prices across the economy and reduce economic growth.

"If Australia were to impose tariffs, we would bear nearly all the cost."

It is hardly surprising that Australia's top economic adviser would adhere to this longstanding and well-established understanding of how tariffs work.

But the blunt restatement, coming at a time when the world is gripped by concern not just about the Trump administration's own tariffs, but about spirals of retaliation and a broader chilling of global trade, is striking.

Liberal senator Jane Hume, who could be on the front line of Australia's tariff response should the upcoming election go her way, seemed for a moment to grasp the significance of the intervention.

"Thank you, uh, secretary, for your opening statement. We'll address some of the matters that are in that over the day, but first I'd like to address an important issue that's obviously outstanding on the eve of an election."

The issue? A costing of tax-free lunches.

We'll return to the crumbling of the world trading system, but first there's mud to sling.

A 'grubby' day at estimates

Hume launched into an inquisition of why Treasury agreed to cost the Coalition's policy of tax breaks for small businesses who buy meals for their staff or clients.

Kennedy's answer, the same one he gave several weeks ago, amounted to this: Treasury technically shouldn't do that kind of thing, but it also has to do what the government asks.

So the obvious loophole, stepped through routinely by treasurers, is to simply submit a costing request that looks suspiciously like an opposition policy, but is not identified as such, and the department's hands are tied.

Chalmers cherry-picked Treasury's costing of Coalition lunch policy

Photo shows Jim Chalmers holds his arms out while speaking at a press conference at parliament house

Treasury came armed with a warning. Instead, politicians dragged them into the mud

The Treasury costings were at the centre of a political storm, with Angus Taylor suggesting the public service was used inappropriately.

Not satisfied, Hume began reciting a list of senior Treasury officials who had at one time or another been seconded to work in the offices of Labor ministers, including Kennedy himself. She asked if the department had become politicised.

A visibly rattled Kennedy, who was appointed by Scott Morrison, pointed out that he had faithfully served both sides of politics, and that senior staff in his department had been seconded to Labor and Liberal offices during their careers, as is common.

"I completely rejected that the department or its officials have been politicised," he said, then added with characteristic understatement: "We are sometimes put in a challenging position."

They were about to be put in another.

Next it was the turn of Shane Johnson, deputy secretary of Treasury's macroeconomic division, to grimace as he was used as pawn in another political attack, this time from the other side.

Labor senator Deborah O'Neill made the theatrical revelation that she had emails showing ex-Treasury official Godwin Grech was working on the very same bank bailout in advance of which Peter Dutton bought bank shares.

O'Neill added very little to Labor's attack on Dutton, which he has dismissed as "dirt". That Grech was talking to the Liberal Party is a matter of historical record, and she offered no evidence whatsoever that any information had reached Dutton via Grech, nor made any such allegation even under the legal cover of parliamentary privilege.

Treasury came armed with a warning. Instead, politicians dragged them into the mud

Deb O'Neill spent much of Treasury's estimates appearance asking about Peter Dutton's share purchases 15 years ago. (AAP: Lukas Coch)

More to the point, none of the Treasury officials she was notionally "questioning" had anything much to offer about events that had taken place in their department 15 years ago.

Asked repeatedly to opine on whether he would act in a similar way to Grech, Johnson gave a long pause before saying: "So, I … So, no I wouldn't, but I'm not sure what was going through Godwin's mind at the moment and … um … yep."

Throughout, the political heckling was ugly even by the unruly standards of estimates.

Hume called Katy Gallagher "grubby", the third time she had used that word to describe a frontbencher in the space of a day (Murray Watt was dubbed "king grub"). Gallagher offered that Hume was a "disgrace".

At one point, Liberal senator James McGrath said the words "point of order" 28 times in a row without pausing for breath. Several times, the microphones and cameras were switched off so the senators could sort out their differences.

Tariff threat looms large

But as the barbs were flung for hours, follow-up questions about the tariffs were scarce.

The few questions we did hear produced interesting results. Treasury had modelled the effect tariffs might have on Australia.

Trump's treasury secretary made three things clear to Australia

Photo shows Jim Chalmers speaks with Scott Bessent

Treasury came armed with a warning. Instead, politicians dragged them into the mud

If the US President thinks his tactics in squeezing allies has worked in Europe, he'll adopt a similar strategy in the Indo Pacific.

Just like the RBA, they concluded the effect — whether tariffs were imposed on us directly, or only on major trading partners like China — would only be modest, perhaps contracting the economy and pushing up inflation, but not by a great deal.

Much worse, however, would be the effect if we retaliated, which would do little but cruel Australian exporters.

This was precisely the outcome we avoided when China imposed trade bans on Australian products, Kennedy and colleagues pointed out.

Producers did suffer from those tariffs, but in some cases they found alternative markets, and moreover we did not spread the pain to others by reacting in kind.

As Kennedy put it, Australia weathered the storm without having "compromised its principles" and should be ready to do so again.

"Part of setting up Australia for success in an increasingly uncertain global economy is making sure we do not cut ourselves off from the world."

But for political parties fixated firmly on an election, the world will have to wait.

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