Seven years ago, employees of the Menzies Cleaning Company went on strike for two days in protest against contracts that expected them to clean New South Wales state government classrooms in nine minutes each - a measure, perhaps, of Menzies' aggressive business style.

Menzies is also the chairman and managing director of two art auction houses: Deutscher-Menzies, established with Chris Deutscher in 1998, and Lawson-Menzies, established in 2001, when Menzies bought historic Sydney auction house Lawsons.

It is widely known that deutscher and hackett were extremely disheartened by the launch of Lawson-Menzies - an auction house that they would be competing against. It is also no secret that they had grown weary of Menzies' ways. When I phone Menzies to discuss the art market and the departure of Chris Deutscher and Damian Hackett, I get a searing taste of the man's temperament.

He is brusque, defensive and clearly still smarting from the departure of his star performers. I ask about the art market and the success of recent auctions, including the inaugural deutscher and hackett auction, which fetched $8.6 million, marking a robust entry into the field. "Why are you focusing on deutscher and hackett? You have already made up your mind what you want to write about. You should focus on the principal players in the Australian market."

He roars down the line that the "Menzies art brand", encompassing Deutscher-Menzies and Lawson-Menzies, is the "number one brand" in Australia, pulling in $40 million out of the $104 million that is made each year on art auctions in Australia.

"We were number one market share last year and this year we will be $50 million-plus. To hail something as the new messiah after one sale is extremely premature. We are the number one company, which I am having trouble convincing you."

It's hard to get a word in, and I steer the conversation towards something he may be happier discussing: his recent purchase of the former Christie's building in Darling Street, South Yarra, and his plans for the site. But this too riles him. "It's the head office of the Menzies art brand, the number one brand in Australia," he repeats.

As I wrap up the conversation, he softens a little. "I am sorry I have been a bit cross," he says. "With respect to the issue with deutscher and hackett, they are both outstanding operators and naturally it was of great disappointment to us that they resigned in such a precipitous fashion.

"It's naturally a cause of great emotional strain, so that's the reason that I have become a bit guarded ... but I have tried to answer things in a very forward manner. Everyone is trying to do their best in a very competitive world." I almost feel sorry for him.

In late May, after we speak, news emerges that Menzies has put in an offer of $18 million for the mother of all trophy homes - Stonington Mansion in Malvern, a former Governor's residence most recently used by Deakin University for its business school. It is revealed, too, that using New York's Frick Museum as his model, Menzies will regularly invite the public into his majestic abode to view his private art collection, which includes works by John Olsen, Arthur Boyd and Brett Whiteley. He'll be damned before letting deutscher and hackett steal the show.



The Deutscher-Menzies split is not the only one to have shaken the city's art scene. From the departure of Christie's from Australia to the relaunch of Leonard Joel's fine art arm, this year's shuffling about of key players has been a game of musical chairs.

Sotheby's lost its urbane managing director, Mark Fraser, who left, after 19 years, to join maverick Tasmanian art collector David Walsh. Sydney firm Bonhams and Goodman opened a Melbourne office in April and hired a young art specialist with quite a reputation - Geoffrey Smith, the estranged curator of the National Gallery of Victoria. Smith resigned from the gallery last year in a blaze of publicity after a protracted legal battle over an alleged conflict of interest arising from his former relationship with private gallery owner Robert Gould.

The terms of Smith's resignation were confidential, so the severity of Smith's alleged transgressions, or whether he transgressed at all, are not known. But, as Bonhams' inaugural Melbourne auction proved, recruiting Smith was a smart move - Smith's first auction catalogue was testament to his glory days of curating exhibitions of Australian art, packed as it was with prize Tuckers, Nolans, Blackmans, Streetons and Drysdales. After 15 years with the NGV, Smith knows where the treasures are buried.

"Yes, it's true, I do," he readily admits.

Smith's personal archive of Australian artists, compiled over more than two decades, and kept on his computer at the NGV, was hotly contested during litigation with the gallery. The archive is an invaluable tool in his new position.

Smith brings other things to Bonhams: he is best friends with Sidney Nolan's adopted daughter, Jinx Nolan; and his new partner Gary Singer, Melbourne's deputy lord mayor, is Jinx's lawyer and the lawyer of the Tucker Estate.

Relationships forged during his time at the NGV have also helped. For Bonhams' August auction, Smith has already secured an important self-portrait by Australian surrealist James Gleeson, from Sydney collector and long-time friend Ray Wilson. The work, Portrait of the Artist in an Evolving Landscape, from 1993, featured in the NGV's 2004 retrospective on the artist, co-curated by Smith and Lou Klepac.

"I have known Geoffrey for many years now through his role at the NGV," says Wilson. "I have a close personal relationship with most of the auction houses, but what swayed me to Geoff was his knowledge and commitment to Gleeson."

The behind-the-scenes upheaval has not slowed the city's art boom. The past few months have seen extravagant records set: buyers are showing a gluttonous appetite for art. "It's a bull market," says fine art consultant Jon Dwyer, who began his career sweeping the floors at Joel's in 1977. "It's never been as interesting or exciting, not even during the late '90s art boom."

The action takes place in a few blocks of the city's moneyed hubs: South Yarra, Prahran, Armadale and Malvern. deutscher and hackett have set up in Commercial Road, an interesting choice given their former employer, Deutscher-Menzies, is at the other end of the thoroughfare, where it becomes Malvern Road. Bonhams and Goodman is also on Malvern Road, while Sotheby's is in High Street, Armadale, just across the road from Joel's Fine Art.

"The competition is extraordinary at the moment," says Joel's chief executive, John Albrecht. The contest for product is particularly fierce: auction houses tussle to find the most desired works that will spark bidding rallies and set headline-making records.

If you have enough money behind you, as Rod Menzies does, you can whip the competition by buying works from clients, as he did for his June auction, paying a reported $2 million plus for the privilege of securing the 1985 Brett Whiteley painting The Olgas for Ernest Giles, from Melbourne businesswoman Sally Browne.

"It's fair to say that over the last 10 years, whether you like it or not, Rod Menzies has single-handedly changed the face of the Australian market because no one else did this before he came along," says Jon Dwyer.

But other auction houses are still powering along. At Bonhams and Goodman's first Melbourne auction in April, Albert Tucker's Flirtation sold for $840,000, more than seven times its lower estimate, and a new auction record for the artist. New records were also set for Clifton Pugh, John Coburn, and, perhaps most remarkably, for the 35-year-old Del Kathryn Barton, whose work Confetti Rain sold for $49,200, more than six times its lower estimate.

"Results like that are kind of obscene," says Barton's own dealer, Karen Woodbury, who, coincidentally, is married to Chris Deutscher. "It's too high, it's silly," Woodbury says. "We want her work to have longevity, and that's about a stable strategy of building her career step by step."

Silly or not, buyers continued their spending spree at Sotheby's Sydney auction in May, setting a new record for John Brack, for The Old Time, which fetched $3.36 million. The 1969 painting, from Brack's ballroom dancing series, is considered by some art experts an inferior work to Brack's The Bar, which sold for $3.17 million last April. Then again, perhaps The Bar was a bargain. However, name alone won't guarantee a high price. If the aesthetic isn't right, not even the name Albert Tucker will be enough to shift a work beyond its lower estimate. At Bonhams' April sale, another Tucker work, Explorer 1, was passed in, after a final hammer price less than its lower estimate of $300,000. "It's too brown," said one man in the audience.

For all the hype of recent auction results, Australia's market is tiny when compared to those of Europe and the United States. An abstract painting by American artist Mark Rothko fetched a record price at Sotheby's New York in May - $80 million. The sum was almost the equivalent of the entire takings at Australian art auctions last year. Still, the market has increased three-fold in the past 10 years, up from a total of $37.8 million in 1996 to last year's record of $104.8 million. Of that, Sotheby's pulled in $31.8 million, Deutscher-Menzies $26.5 million, Lawson-Menzies $13.4 million, and Bonhams $4.8 million. Before it closed in the middle of last year, Christie's made $11 million.