Gladys’ leadership rumours rise as rival Perrottet embroiled in scandal

Aug 27, 2021

Is it coincidence that Gladys Berejiklian’s rival Dominic Perrottet is suddenly embroiled in the “Wolf of Wall Street scandal”? Michael West investigates NSW leadership tensions and the New Generations Fund.

Who would knock Gladys off? Seven Network, virtually the communications department of the Liberal Party, is touting a StuartAyres/David Elliott ticket is in the wings but says Treasurer Dominic Perrottet remains the frontrunner in any challenge for the leadership in NSW.

It’s the classic struggle of the Left versus the Right.

Gladys has so spectacularly muffed the pandemic, and ICAC is bearing down on her still, so it is little wonder there is talk of a spill.

Yet the Premier of NSW has been enormously popular. An incredible communicator, Berejiklian has the uncanny ability to contradict herself with absolute conviction, to obfuscate, day in day out, with such dogmatic authenticity that even she appears to believe she is telling the truth.

Eventually however, somebody will have to take responsibility for the Covid mess and it won’t be the backroom boys who counsel her. It won’t be Michael Photios or Don Harwin, her factional power-brokers.

In politics, everybody is dead meat. It’s just a matter of time. Few go out as winners, and Gladys is unlikely to be among the few.

It is clear she did not “follow the health advice”. To quote Gladys herself says when she is being unclear, “I can’t be any clearer than that”.

So it is that the games have begun – the Premier is under siege from both the Left and the Right – and a strange thing is happening. The AFR, a property of Nine Entertainment, therefore close to the Liberals, is really piling on Perrottet. And the pile-on has begun seeping into other media.

Is it a hatchet job?

Perrottet set up what is best described as a state hedge fund back in 2018. This New Generations Fund (NGF) was established to pay down the State’s very large debt. Instead, it has morphed into a hedge fund punting everything from junk bonds to the overheated sharemarket and a sky-high bond market.

Governments punting public money is a recipe for disaster but NSW has just gone next-gen by privatising public assets, and not only punting that, but also gearing up to do it right at the zenith of the markets, when asset prices are through the roof.

They’ve ignored a couple of basics on risk. One, don’t bet with other people’s money. Debt does super-charge your returns on the way up, but equally your losses on the way down. And, two, markets go up … and down.

The theory behind the NGF is that interest rates are so low that NSW – specifically the fund managers NSW Treasury Corp – can get a better return elsewhere. There is something to this. Yet there is also something to the fact that markets don’t rise for ever, and a safer option would be to pay down NSW debt rather than go to the races.

Mind you, they are not entirely alone.

North of the border, the Queenslanders (QIC) slotted huge licks of public capital into a coal terminal, buying a large chunk of Brookfield’s Dalrymple Bay Coal Terminal when coal is in terminal decline. It has cost them already as the float of the coal asset predictably flopped from day one.

But NSW has gone next-gen with New Gen. They are not just betting on the share market, it’s the overcooked bond market as well, hedge funds, junk bonds, private equity. Right at the top, with asset prices sky high, here are the guardians of public money, having a hairy-chested punt.

As the AFR’s Chris Joye put it (good explainer here):

“And by concurrently denying NSW’s budget access to the Debt Retirement Fund’s existing $15 billion of cash savings, which were funded by prior budget surpluses and asset sales (this will soon go to $27 billion when the second half of WestConnex is sold next month)”.

So, instead of paying down debt and deploying the money from privatisations to build new infrastructure they’ve gone to the casino.

What is peculiar though is that the AFR is already calling it a “scandal”. Yet right now, because markets are so high, Perrottet and his asset managers from NSW T-Corp have been braining it, making money hand over fist.

The journalists covering the story know their stuff. They are right that Perrottet is operating in a “regulatory no-man’s land”, but it is the sheer intensity of the pile-on which is interesting, and the fact that it is spilling into other media, and that there are no losses … yet.

Traditionally, in AFR-land, scandals only occur once there are losses. Traditionally, the financial press piles on and “bayonets the dead” when it’s too late, when the scandal has been done, the losses had. Not this time. “As Gladys’ woes have deepened, so has coverage Dominic Perrottet’s “Wolf of Wall Street scandal”. So it would appear that the power brokers of the NSW Left is doing a hatchet job on the Wolf of Rawson Street, Epping.

This is the stuff of leadership struggles

Perrottet is very capable, indeed by far the obvious choice of preferred leader for the NSW Right (even though his conservatism has softened this year to make a case for leadership). Elsewhere, there are no shortage of aspirants on the Left. Marise Payne’s partner Stuart Ayres and Police Minister David Elliott are lurking. Matt Kean, also a power-broker of the Left, has ambitions, and Attorney-General Mark Speakman is also mooted as a possible contender.

Perrottet is no stranger to scandal, the Icare debacle being one. And he has also fallen afoul of the Federal Liberals- perhaps with Gladys Berejiklian too – for trying to push the cost of state lockdown onto the Commonwealth, recently drawing the ire of Treasurer Josh Frydenberg.

As evinced by Gladys’s handling of the Covid crisis, NSW is run by business for business. Disgraced Labor power-broker Eddie Obeid once described the passage between the offices of the factional power brokers to the office of the NSW Finance Minister as a “goat track”.

As one senior Liberal remarked, if you are a business and you want the laws changed in your favour in NSW, you scurry up to Michael Photios’ office and get him on a retainer. Berejiklian’s ascent to the top office came at the expense of the push for democratic reform in the party by her predecessor Mike Baird. Business has the state government by the short and curlies.

More broadly for the citizens of the state – the people who ought to hold the power, the voters – their elected representatives cling to the neo-liberal notion that business knows best. Hence the slather of privatisations over the years. Few have even yet paused to ask what the blazes the state is doing delivering up monopoly profits, time and again, to big business via asset sales, while the state has moved so aggressively back into the private space speculating on financial markets and even deploying public money to punt oyster farms and boutique beef investments.

This is the paradox. What investment manager in their right mind would sell a monopoly which spits out cash – like power stations, ports, the lucrative Lands Titles Office, indeed a massive chunk of the electricity grid – only to invest in stuff where they have no competitive advantage, no monopoly, but merely an army of fee-hungry brokers to feed?

It is all quite bizarre, but unfortunately, among our politicians, almost universally accepted.

This article has been republished from Michael West Media.

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