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An audit report covering Scott Morrison’s role in the New Zealand tourism office raises serious concerns over transparency and due process. By Karen Middleton.

Morrison ‘hijacked’ NZ tourism review

Prime Minister Scott Morrison.
Credit: AAP Image / Ben Rushton

Seven years before he was sacked as managing director of Tourism Australia – amid serious concerns about his management practices – Scott Morrison was the subject of criticism in a New Zealand audit report examining his activities as head of NZ’s Office of Tourism and Sport.

The 1999 report by NZ’s controller and auditor-general examined the December 1998 resignations of two heads of the NZ Tourism Board, as well as payouts to them that were later found to be unlawful. The report criticised Morrison’s role in the lead-up to these events.

Scott Morrison left NZ’s Office of Tourism and Sport in 2000, a year after the audit report was published and a year before the end of his contract. The reasons for his early departure have never been fully explained.

The NZ auditor’s criticisms of Morrison – who is named in the report – are similar to some of those the Australian National Audit Office (ANAO) would make nine years later in its own report examining the management of Tourism Australia.

In general terms, they included non-consultation, making unilateral decisions, not observing due process and restricting board access to information.

Until details of the ANAO investigation were published in The Saturday Paper last weekend, the reasons for Morrison’s 2006 sacking from Tourism Australia had never been confirmed. The audit report had sat unexamined for a decade.

Morrison has declined to respond to questions The Saturday Paper submitted to his office on November 8 relating to his stewardship of Tourism Australia and the ANAO findings, despite repeated requests.

The Saturday Paper also submitted questions this week to Education Minister Dan Tehan, who worked as chief of staff to Fran Bailey, the tourism minister who fired Morrison.

The questions asked what Tehan knew of Bailey’s concerns about Morrison’s stewardship of Tourism Australia and the reasons for Morrison’s dismissal. They also covered whether Tehan had discussed this with Morrison and why Tehan had chosen to vote for Morrison in September’s Liberal leadership ballot against challenger Peter Dutton, when Tehan has been a regular at Dutton’s Monkey Pod lunches for conservative Liberals, so named for the room in which they meet.

Tehan declined to respond.

Following The Saturday Paper’s report on the Australian audit, which revealed the Howard government’s concerns about irregularities in Tourism Australia’s handling of $184 million in contracts, questions were raised in parliament about Morrison’s time at the authority.

Government senate leader Mathias Cormann initially took Labor’s questions on notice and then tabled a one-page response, which said: “I can confirm that the performance requirements for the prime minister’s contract were fully satisfied.”

Opposition senate leader Penny Wong demanded: “So why was he sacked – unanimously sacked?”

Asked in parliament on Wednesday about the NZ audit findings, Cormann said: “The Labor Party are clearly getting more and more desperate. They can see that Prime Minister Morrison is somebody who gets results.”

The NZ Office of Tourism and Sport was established in July 1998 and Morrison was appointed as its inaugural director.

As head of the office, he reported directly to the then NZ tourism minister Murray McCully. Morrison’s office was supposed to collaborate with the Tourism Board, a separate and independent government entity.

The NZ auditor-general’s report said Morrison commissioned a review of the NZ Tourism Board’s operations without informing its board members fully or allowing them input.

He then used the report, which asserted the board was operating “in a tactical rather than a strategic way” – a description the board disputed – to demand its chairperson be sacked.

“We were surprised by the vehemence and timing of this advice,” the NZ auditor-general said.

The report criticised Morrison’s review process and described how he had presented alternative grounds for sacking the chairperson – over what the board described as a technicality – when legal advice cast doubt on his original judgement.

The report found that a month into the job, Morrison told the minister he had “serious misgivings about the board”, with which McCully was already clashing.

The picture that emerges is of a power struggle between Morrison’s office and the board, and between the board and the minister, in which Morrison sided with the minister.

As director of the NZ Office of Tourism and Sport, Morrison oversaw the adoption of the successful “100% Pure New Zealand” campaign with advertising agency M&C Saatchi – the same company that would later be contracted for Tourism Australia’s “Where the bloody hell are you?” campaign.

Morrison was advising McCully as he negotiated a new “purchase agreement” with the Tourism Board that would set its budget and operational rules.

Relations between McCully and the board, already strained over the restructure that had created Morrison’s office, worsened during these negotiations. The minister suggested unless the deadlock was broken, the chairperson and possibly other members might have to go.

The audit report also describes the strained relationship between Morrison’s office and the board, with Morrison acknowledging he “did not consult the board” in the course of developing his office’s role and mission statements.

The auditor says board members complained that their functions “appeared to overlap in several respects”.

The final purchase agreement provided for undertaking an “independent review” of the Tourism Board.

Morrison commissioned PricewaterhouseCoopers to undertake a limited review – but he did not make these limits clear to the board.

From the outside, it appeared to be the independent review to which the board had agreed, with the same two to three weeks’ duration.

But Morrison stipulated the PwC review must be undertaken “quietly and discreetly”. Within the terms of reference – which he later modified from those originally put to the board – was a letter saying the review was to be conducted with the board’s “co-operation”.

However, Morrison told PwC that while it could interview a select group of the board’s staff, it must not consult the board members themselves nor its chief executive, Paul Winter; the minister; the minister’s office; nor members of another advisory body, the Tourism and Sport Ministerial Advisory Board, which was established to support Morrison’s office.

Morrison would later tell the NZ auditor-general that the PwC review was “not in fact the independent review referred to in the purchase agreement” but his office’s “contribution to that review”.

“Mr Morrison’s explanation came as a surprise not only to Mr Winter and board members but also to the minister himself,” the auditor found. They had assumed this was the independent review.

The auditor-general queried the authority of Morrison’s office to commission its own private review.

PwC had also been told not to show the draft report to either Winter or the board.

“Mr Morrison, on the other hand, did have access to the report in the course of its preparation, and made both written and oral comments on it,” the auditor-general found. “It is apparent that these comments influenced the shape of the report.”

When the report went to the minister, Morrison’s covering letter said it had identified “extremely serious” shortcomings and urged the minister to take “direct and immediate action” to rectify them.

He recommended the minister, Murray McCully, give the chairperson seven days to provide satisfactory reasons as to why the chairperson should stay, or “he should be dismissed”.

Later, the PwC consultant told the auditor-general that “in his view, the report did not justify the recommendation”.

PwC did not object to the conditions Morrison placed on its work at the time, but later told the auditors it was “uncomfortable with … the requirement to produce a report in these circumstances, without giving either the members or the Board’s staff an opportunity to comment on it”.

When the staff who had been interviewed for the PwC review saw the report, they protested unanimously that it “misrepresented” them, especially on governance.

“Board members felt justifiably aggrieved that their performance had been criticised without foundation or an opportunity to comment,” the audit report said.

“They came, understandably, to the view that the process agreed with the Minister in the purchase agreement had been hijacked.”

Legal advice the NZ Office of Tourism and Sport received subsequently from the Crown Law Office – which appears to have warned against proposing dismissal – “caused it to recommend a more cautious approach”.

But separate to the PwC review, Morrison had advised McCully of another matter which in his view “gave grounds for the [board] members’ removal from office”, relating to an alleged rule breach in the handling of its lease renewal on premises in Hong Kong.

The board disputed this, describing it as a “technical” breach, but some members decided McCully appeared so determined to sack at least one and possibly all of them that the only way to resolve the impasse was for the chairperson to resign.

They persuaded him to do this – without accepting any culpability and with an assurance details would stay confidential – and his deputy agreed to go, too.

Both negotiated substantial payouts.

The auditor-general accepted that all involved in the events had sought to act in the best interests of the tourism industry but its April 1999 report nevertheless found the payments were unlawful because they were made without appropriate authority. McCully resigned the same month.

Scott Morrison left his NZ tourism job the following year.

Responding to questions from The Saturday Paper, the Prime Minister’s Office provided the following statement:

“These matters were canvassed and addressed in relevant reviews and New Zealand media at the time.

“Mr Morrison decided to return home to Australia in 2000 to take up a position in the private sector following the change of Government in 1999. He did so after assisting in the transition process for the new Government following discussions with the incoming Tourism Minister. 

“He did not receive any separating payment as he departed by choice. 

“During his time in New Zealand, Mr Morrison was instrumental in the establishment of Tourism New Zealand that succeeded the New Zealand Tourism Board.

“Tourism New Zealand proceeded to create the 100% Pure New Zealand campaign that set a new benchmark in international tourism promotion, as well as coordinating NZ’s Millennium Celebration Events and the establishment of the World Anti Doping Agency, securing an inaugural Directorship for NZ.”

Asked again whether he would respond to last week’s questions about the ANAO report’s findings, Morrison’s spokesperson said government senate leader Mathias Cormann had dealt with the matter.

He said the “Where the bloody hell are you?” campaign had contributed $2.1 billion to the tourism industry.

Citing statistics showing a boost in tourism under Morrison, Cormann also suggested Labor’s shadow tourism minister, Martin Ferguson, had not complained at the time and in fact had supported Morrison.

When the ANAO report was published in August 2008, Labor was in government and Ferguson was tourism minister. Why he did not examine its findings further remains unclear.

Morrison won Liberal preselection for the New South Wales seat of Cook a year later. He’s been rising ever since.

This article was first published in the print edition of The Saturday Paper on Nov 17, 2018 as "Morrison ‘hijacked’ NZ tourism review ". Subscribe here.

Karen Middleton
is The Saturday Paper’s chief political correspondent.