Could it be that Canberra's cold winter is playing tricks with senior practitioners of the arts of public administration? It's hard to tell but something is. For example:

• The Public Service Commissioner, John Lloyd, has been using entirely irrelevant data to justify pay increases in the public service.
• The Treasury secretary, John Fraser, has been making speeches of bemusing oracular vagueness.
• The Department of the Prime Minister and Cabinet secretary, and nominal head of the public service, Michael Thawley, has treated the tens of thousands of his loyal, devoted followers to a sphinx-like silence in the nine months since his appointment.

It's usual for new leaders to pepper their subjects with bon mots about wiser directions, fresh priorities and even, God help us, avenues of "reform". Thawley has taken the novel approach of keeping his own counsel. It's hard to tell how this is going to work, although it seems to be "so far, so good". Time may tell, although as a prominent Pommie poet has written: "Time only knows the price we have to pay." Maybe the spring thaw will loosen his tongue.

You've got to feel sorry for the commissioner, Lloyd. As a thoroughly seasoned member of the industrial relations club, he would know only too well that the public service remuneration policy he has to administer is an absolute crock. Linking remuneration increases to productivity improvement – that is, increases in output per hour worked – is not only unwise, it's impossible, because productivity in almost all public service agencies can't be measured.

That's why the entire operation is shrouded in the utmost secrecy. Neither the Public Service Commission nor departments nor the minister, Eric Abetz, will provide any details of productivity gains being made through the policy – because none can be demonstrated. If anything, the policy is more likely to have reduced productivity.

And so the shroud of secrecy has been pulled tighter. In estimates committees, some departments indicated the commission had augmented government policy advice. Unfortunately, the commission won't say how it's done so. That is, not only are taxpayers denied access to the consequences of the working of the policy, parts of the policy are being kept under wraps. For practical purposes, the whole operation can be regarded as an "on-water" matter. This is the kind of stuff the most imaginative scriptwriters of television farce couldn't make up.

So it's unsurprising that poor Lloyd is left clutching at straws.

In this year's budget estimates committee hearings, Liberal senator Cory Bernardi asked Lloyd about the obscure "employee living cost index". By complete coincidence, Lloyd just happened to have comprehensive details of the index at hand, allowing him and Bernardi to rejoice that some public service pay offers exceeded the index for the year ending December 2014. Sadly, this index is irrelevant to remuneration increases now being negotiated.

As the government guidelines properly provide, new enterprise agreements operate prospectively, not retrospectively. That is, the relevant price increase is that likely during the period of agency agreements over the next three years or so. Bernardi and Lloyd are looking backwards when they should be looking forwards. Abetz has been doing the same thing but he has an excuse: he doesn't know any better.

The fact is the government's budget assumes the consumer price index will increase by 7.5 per cent in the three years from June 2015. That is, public servants and the military getting a 4.5 per cent pay increase (without taking into account any offsetting reductions in conditions) in that period could take a 3 per cent real pay cut.

That in itself is also irrelevant, especially if people outside the public service doing comparable work get the same treatment. That's improbable, however, as the government's budget assumes that the wage index for the next three years will increase by about 8 per cent.

In sum, public servants (and the military) are being asked to take a significant real wage cut and, in addition, the public service and the military have their competitive positions in the labour market reduced.

That gets us to Fraser and the Treasury. Its staff have accepted a 4.5 per cent increase over the next three years largely on the basis of them working an extra 30 minutes a week and losing a half-day shutdown at Christmas. The department says: "As a result, it is expected there would be an increase in productivity." That expectation has absolutely no foundation in economic lore. If lifting productivity in the economy was as simple as re-instituting the 40-hour week, the Treasury would already have recommended that to the government. You can bet a penny to a pound that it's not done so because it must know that extending working hours has got nothing inherently to do with improving productivity.

With this kind of thinking in his back pocket, it's perhaps unsurprising that Fraser's recent speech to a conference of economists brings to questions of tax, government spending and industrial relations a dose of the intellectual bends.

On tax and spending, Fraser said:

• "There are few, if any, examples in recent times of developed countries spending their way to long-term prosperity." (A variant on Prime Minister Tony Abbott's line that no country has taxed itself to prosperity.)
• "... we are better placed as a lower-taxing country than a higher one".
• "... taxes impose a degree of dead weight on the economy".
• "If you are facing a high marginal tax rate, then the marginal utility equation may well tip in favour of spending a fifth day on the beach."
• "... lower company tax makes Australia more attractive to all companies".

It's hard to know what to make of such slippery, imprecise observations, but let's have a crack.

Since the Chinese invented the modern state more than 2000 years ago, its successful imitators have been distinguished by robust systems of taxation and judicious government spending in the public interest. History provides no validation for Fraser's claim that countries don't spend their way to prosperity: that's precisely what many of them have done. Moreover, in the last 70 years in Australia, fiscal policy has, by modifying economic downturns, limited the immiseration of high unemployment and helped to avoid wild and damaging swings in aggregate economic activity. Thus, seven years ago, Australia avoided a recession during the global financial crisis.

Then there's the counterfactual: those countries where tax and public spending are low and mired in waste and corruption, such as in sub-Saharan Africa. In most cases, governments in these countries (some of whom have tax to GDP ratios under 10 per cent) are unable to provide even basic public services and often lack the capacity to control either their territories or people within them who wish to engage in mass violence. In these places, aspirations for "long-term prosperity" die as soon as they're felt.

Fraser seems to think tax is a one-way street. It's not. Lower is not always better than higher; tax is not invariably a dead weight; and more tax doesn't always mean less economic growth. It's a question of degree and what's best in any country's circumstances. Tax can be reduced to the point of diminishing returns and reduced prosperity. Of course, tax and government spending can be overdone, as some countries have shown, but Fraser's fretting would be more convincing if Australian tax rates were high – they're not. His department's pocket guide to the Australia tax system shows the country's tax to GDP ratio near the lowest of all OECD countries, below Turkey and Japan and way below Britain and Canada.

It might be too strong to say Fraser was demonising tax but, as Australian governments fearfully stagger towards adjusting some taxes to meet revenue demands, his contribution was unhelpful. Australia has a significant revenue problem that owes a lot to concessions allowed on superannuation, capital gains and negative gearing, matters Fraser didn't mention.

As for his suggestion that high marginal rates encourage people to go to the beach every Friday, could he tell us how many of his senior staff now on the top income tax rate have asked him if they could spend one day a week at Batemans Bay? That should not be an "on-water" matter. Fraser's notion that motivation about work can be reduced to what he calls a "marginal utility equation" speaks inelegantly for itself.

Finally, on tax, Fraser does what many do: judge individual aspects of the tax system with comparable provisions in other countries and hint that we should be on the road to the lowest common denominator at all points. Businesses don't, or should not, think like that. They should, and rational ones do, look at the overall opportunities and risks here compared with other countries and act accordingly.

If Fraser were to consider, for example, the index of countries' "economic freedom", constructed over a comprehensive range of criteria by the conservative American Heritage Foundation in association with The Wall Street Journal, he would see that Australia comes in fourth out of 186 countries, ahead of Canada, Japan, New Zealand, Norway, Britain and the United States and behind only the relatively small economies of Hong Kong, Singapore and New Zealand. A similar assessment is provided by the World Bank. Our tax rates should be considered in such contexts.

On industrial relations, Fraser said:

• "... workplace relations is crucial to ... driving productivity growth".
• It's "an open question whether our workplace relations system remains well suited to the workplaces of Australia's future".
• "Australia appears to give more weight than other English-speaking countries to elaborate workplace relations processes."

It's certainly important that management at the firm level organise workplace relations to make the most of their opportunities and so promote productivity in the economy. However, the effects of the industrial legal system are more uncertain than Fraser imagines.

In his excellent economic history of Australia, Ian McLean says "it seems unclear whether there exists any robust relationship between the labour market regime and growth".

University of Melbourne economics professor Jeff Borland – a person with particular claims in labour market economics – says: "The big efficiency gains in [industrial relations] ... have already been made", that "there are much more important ways to improve living standards" and that "reform of Australia's industrial relations system should not be a policymaking priority for governments".

But if Fraser wants major change to the industrial relations system, he should explain what he'd do and what the consequences would be. In doing so, he should think about why, in the five years that WorkChoices operated, labour productivity slumped from 2.3 per cent a year to 1.6 per cent and has since picked up to 2.4 per cent.

He might also like to take into account the fact that, in the Heritage Foundation ranking of inter-country labour market freedom, contrary to his claims about Australia lagging behind English-speaking countries, we rank ahead of Britain, Canada, South Africa, Ireland and a host of Caribbean countries, but behind the US and New Zealand.

While there are some things that can be done, major changes to the industrial relations system are likely to be a dry gulch. Those who hanker for a big shake-up are talking about power, not productivity, by tipping the balance significantly back in favour of employers. That's likely to be bad policy and unhelpful to productivity if the WorkChoices experience is anything to go by.

More generally, if Fraser wants to continue to give vent to personal opinions on major matters of high political contention (and there are good reasons in the Australian Public Service code of conduct as to why he should not), he needs to be more rigorous, open-minded and precise. Alternatively, he could outsource speechwriting to his predecessor, Ken Henry. There was a bloke who could make great speeches.

Paddy Gourley is a former senior public servant. pdg@home.netspeed.com.au