Hockey: Not Your Average Joe

by Madonna King

  ‘Okay,’ Souris said, ‘if there are country railways that are not making money, would you want to close them?’

  ‘Yes,’ Joe answered.

  ‘If they are not making money and pensioners are the only people using them?’

  ‘Yes.’

  Souris nodded, and indicated the interview was over. None the wiser, Joe left his office. Souris knew the sale of GIO would not be smooth sailing, and he wanted someone by his side who would not mince words. He had largely inherited the staff of his predecessor, and needed a policy advocate, experienced in law and finance, who wouldn’t sugarcoat his advice. Joe Hockey, at 26, had just proved that by telling him, a National Party minister, that if the departmental advice was to close a railway station in a country area, that’s what he’d recommend – it wouldn’t change on the way to the minister’s office.

  ‘I just wanted to know he’d be honest with me,’ Souris says now, ‘and put his balls on the line.’ That would become a favourite expression in the office as the Greiner government, which had just been returned to power but was hanging on with the help of Independents, navigated the sale of GIO, the first of a wave planned for NSW.

  The task was made more difficult, at least in the government’s view, because of GIO’s prickly and rambunctious managing director, Bill Jocelyn. Jocelyn didn’t like politicians much, believing most were incompetent and financially illiterate, and he quickly slotted Souris into that category. Their relationship, throughout the negotiations, was both fractious and tense. Jocelyn, who had been an actuary with AMP for 20 years before joining GIO in 1978, supported the privatisation, and while there were differences in the hows and whys along the way and a $300 million difference of opinion in what the retention and sale value might be, the conflict largely sprang from a personality clash and Jocelyn’s inability to stomach most politicians. While Jocelyn and Greiner had first met over the privatisation plans three years earlier, in 1988, it was a one-page aide-mémoire they had both agreed upon in mid-1991 that was the basis for Souris’s brief. And Nick Greiner wanted it all to happen quickly.

  While Treasury deputy secretary Michael Lambert headed up the privatisation, Joe sat in as an aide to Souris, running logistics and communication and the nuts and bolts that went with big complex meetings where several parties were represented. Joe attended all the meetings, and made sure he had his say, too. His learning curve was steep, but he loved it. Travelling to London and New York, and more a lawyer than a finance expert, he immersed himself in the minutiae of the plan – the technical detail, the legal and actuarial detail, the process involved in floating shares and the pitfalls along the way. He and Souris were both navigating through uncharted territory, a great platform for a friendship that still endures today. Each week, meetings would be held inside NSW Parliament House in Macquarie Street with the GIO representatives headed by Bill Jocelyn, George Souris and Joe, Michael Lambert, Nigel Stokes and others from Bankers Trust who were advising the government on the sale.

  Context is important in big sales like this, and the GIO sale was no different. With the deregulation of the financial markets in the 1980s, a wholly state-run institution wasn’t really commercially viable. GIO was speculating in the reinsurance market and, to Michael Lambert and his team, it was unclear what their position was and how much exposure they had to disasters around the world. Both Treasury and the private sector were warning Greiner that his government could be exposed financially and politically. That set the scene for some tense negotiations even before the parties discussed the nitty-gritty. The starting point for Bill Jocelyn, essentially, was that Treasury, Bankers Trust and the government wouldn’t know a thing. ‘That tone came into the meetings for quite a long time. Joe tried to sort of mediate and he used his political skills to do that,’ Nigel Stokes says.

  Souris believed that Jocelyn wanted every member or policy holder of GIO to have first offer to buy shares in the mutual company before it was released publicly and that he didn’t understand the importance of having institutional friction as part of the bidding process. Jocelyn says he was not keen to have it controlled by large institutions from the outset. ‘I wanted it preferably held by the public,’ he says. He also thought Souris was a dill, to put it mildly. Each Thursday they would meet, and inevitably discussions would be mired in mutual distrust.

  Eventually, Souris asked Greiner to come along to one of the meetings to see how he was being hamstrung. ‘We got to a point where we said, okay, now is the time to bring Nick into one of these meetings and he can just sit there politely and listen to what goes on. We knew, of course, there would be a flashpoint within seven minutes or so,’ Souris says.

  ‘What actually happened,’ Jocelyn says, ‘is that he said to me on one occasion at a meeting, “You think I’m incompetent and irrelevant”, and I responded with “George, you’re not irrelevant.” He got pretty upset about it.’

  Greiner is diplomatic: ‘He [Jocelyn] was impatient of outside authority and a bit impatient of politicians. It’s Bill’s style to be irreverent and dismissive.’

  Jocelyn’s venom wasn’t just aimed at Souris. On one occasion he threatened to throw a financial advisor out a window; on another, he wrote to Michael Lambert, addressing him as ‘Dear Fuckwit’. On all accounts, one meeting ended so tersely that George Souris later carried in his briefcase an executive- council minute allowing him to dismiss Jocelyn on the spot. It only required one more signature – his own. What is not known by most of the parties, including Jocelyn, is that the idea came from Joe.

  Joe was affable and intelligent enough to get on with both Souris and Jocelyn, who would later act as referees for his pre-selection bid for the seat of North Sydney. That was no small feat. Joe’s brief from Souris was to ‘ensure all the pieces of the jigsaw remained in place and worked to the same goal’. Joe loved networking with lawyers and accountants and actuaries, he loved being at the epicentre of the decision-making and he loved the privileged protégé position afforded him by Souris. Jocelyn says Joe remains the only person he ever provided a written reference for, during his pre-selection bid. He had found him both intelligent and helpful. Souris says much the same, and that Joe had the unusual talent of playing whatever role a situation dictated. He could be the close advisor or the distant one. He could see a problem close up, and in context.

  Apart from Souris and Jocelyn, the other person who got to know Joe’s talents was Nigel Stokes from Bankers Trust. Stokes says Joe’s part in negotiations should not be underestimated. ‘I can remember saying to Joe I’m not sure whether a public issue of shares is appropriate for the sale of GIO; it might be better as a trade sale. And Joe told me in no uncertain terms that the government was committed to a public listing.’ This was because Nick Greiner wanted to have management on side and if it was sold to a competitor, he knew management would be opposed and would fight it all the way. So if he sold it as a public float, it would stay as a separate company and management would support that.

  ‘Joe was very involved in developing the political dimension to that strategy,’ Lambert says. He was the one, sitting in negotiations, with the political antennae turned on. Certainly Joe bore a lot of responsibility for someone still aged under 30. When GIO debuted on the Australian Stock Exchange a year later in mid-1992, soon after John Fahey had become premier, Joe’s reputation as a young, ambitious and talented policy advisor was made. The $1.2 billion sale was a big success, massively oversubscribed, and while it had its detractors Joe had navigated his own path and come out a clear winner.

  Next stop was the sale of the State Bank, another target on Nick Greiner’s privatisation agenda. But the political context was changing fast, with his NSW Liberal empire crumbling. The Independent Commission Against Corruption (ICAC) was staring down Greiner. In the middle of that brouhaha, he walked into a meeting where Souris and Joe were chatting with State Bank boss John O’Neill. ‘We are going to sell the State Bank,’ Greiner said. ‘I don’t care if it’s a trade sale or not. We ha
ve to get out of this business.’

  A unanimity of opinion existed that an IPO, or a public listing, wouldn’t work this time. Part of the reason was that the state banks had all done poorly after deregulation. While the NSW bank fared better than those in South Australia and Victoria, the deregulated market changed how things operated. All the state banks were being pushed into riskier areas, and that was an issue for a state-owned institution guaranteed by taxpayers.

  Not long after that decision was made, Greiner resigned and John Fahey became premier. George Souris took over the finance portfolio. He wanted to take Joe with him and make him his chief-of-staff. Souris didn’t think anyone would object; Joe had impressed him and others in the government, those in the public service who knew him spoke well of him, and his bosses at Corrs loved him, too. Even Bill Jocelyn liked him. But John Fahey, it seemed, didn’t share their view.

  One afternoon Fahey called Souris up to his office. Joe was asked to wait outside. One of Fahey’s chief advisors was also there. Joe Hockey wasn’t right for the job of chief-of-staff, Souris was told. Souris responded immediately, ‘Well, you’ll have to sack us both then.’

  Souris says, ‘I just wouldn’t part with him. It got to that kind of point. It didn’t take long – five or six minutes – and I departed the meeting unhappy.’ As Souris walked out of Fahey’s office, Joe followed, stumped by the opposition to his appointment, which he considered a natural progression after working on the GIO sale.

  Souris held out against any other appointment, and eventually the premier’s office relented and Joe was appointed chief-of-staff. It was a significantly broader role, and Joe found himself travelling with Souris on the obligatory trail to visit Moody’s and Standard & Poor’s, the big credit rating agencies in the United States. Souris took the opportunity to try and broaden Joe’s interests in the arts at the same time. It was a gap in his experience and Souris, who loved the theatre, was flabbergasted that the performing arts held no lure for his young advisor. On one trip they found themselves with a rare night off, and Souris gave Joe the choice between two performances, but said it was mandatory to at least attend one of them. Jelly’s Last Jam was chosen, Jelly Roll Morton being the famous jazz singer who helped introduce jazz to the US in the early 20th century. The star was Gregory Hines, and it proved to be Joe’s first theatrical experience. ‘I took him into this and said sit down and bloody enjoy it. And it was fabulous. It was his first artistic moment.’

  Much later, Souris would visit Joe’s Blues Point Tower apartment and see, standing in the corner, a saxophone. Jelly Roll Morton had convinced Joe to take up a musical instrument.

  Souris’s judgment of Joe is coloured by an obvious affection. He sees him as the typical child of migrants who sank everything they could into their children’s education. He took him under his wing, advising him to buy property and to never sell anything. Joe soaked it up. Souris attributes Joe’s Armenian background to much of his success, mirroring Joe’s father Richard’s view that anyone can make it to the top in a country like Australia – even the son of an Armenian-Palestinian migrant.

  Joe had finished up at Corrs soon after the GIO privatisation to focus on his work with the NSW government. He knew he wanted politics over policy, and this was the first stepping stone to a seat in parliament. The sale of the State Bank was a big one, too, giving him the opportunity to deepen his knowledge and his networks. He would work with Peter Collins, who had been brought in from the cold by John Fahey and was now treasurer and minister for the arts.

  NSW Treasury deputy secretary Michael Lambert had provided the government with a bleak assessment of the State Bank. It was carrying a lot of bad loans and it was likely the books would only get worse while it stayed in public ownership. That had been the basis for Greiner’s decision to sell the bank. But this time, the government decided not to float it because it was unclear how bad those loans might be, and John Fahey was determined not to sell it to one of the major banks. This provided a challenge to Lambert and Treasury because it then had to look towards either a regional bank or a non-bank.

  ‘John O’Neill [the then head of the State Bank] will never agree but it was a looming disaster,’ Joe says. ‘It was potentially catastrophic.’ With the obvious potential buyers – one of the big four banks – ruled out, Treasury appealed for bids. That happened, and then some withdrew, and the government found itself left with just one bidder, Colonial Mutual Life. Of course, this risked daily bad press, and an even worse sale price, so the government embarked on a process where they pretended more than one bidder existed.

  Several people who were involved in the process credit Joe with being able to disguise the fact that there was only one bidder, and with providing suggestions on how to get the best possible price. Joe understood the media more than most, and he saw part of his role as picking up what might appeal to The Daily Telegraph or The Sydney Morning Herald and embarrass the government. Certainly, some of the bad publicity that enveloped the sale would have been worse without Joe’s hand, but with only one bidder, the advice given by Bankers Trust to the government was unequivocal. It must set the price – and that’s what happened. The government negotiated a price, which essentially amounted to the net tangible assets of the bank.

  The pressure on the government during this period was immense; it might even have been easier to abandon the sale. Nigel Stokes, from Bankers Trust, says, ‘In retrospect I think the State Bank sale was important to get through. State government-owned banks expose the state government.’ His point is this: wind forward to 2007 and the banking crisis Australia faced. What would have happened to a state bank? Stokes gives big credit to Joe for the NSW government’s decision to hold the line and not waver in its commitment to the sale. The net result was that Colonial Mutual Life ended up being the buyer, providing a continuing branch network. The sale took time, and was run by two ministers – initially in Souris’s office and then through Peter Collins’s office. In both cases, Joe was by their side.

  Collins was the MP for Willoughby, where Richard Hockey’s real estate business was based. Their families knew each other, and Joe’s parents had become good solid Liberal Party branch members. Collins was also part of the St John’s College alumni, and he welcomed Joe as his right-hand man for the sale of the State Bank. Collins, who had barely scraped into Fahey’s first ministry, was back in the fold as treasurer. But from the start, he knew the sale wasn’t going to be easy. The Liberals were still hanging on by a thread, and the Opposition was making life as difficult as it could. The government framed the sale to exclude the big four banks, so the State Bank wasn’t gobbled up, but that led inevitably to criticism. Joe’s job was to work with all sides to provide a seamless process. He worked with the legal and accounting services to set the framework, monitoring the bidders, and reporting daily to Collins on the issues arising and how they should be resolved.

  Fahey’s majority relied on the Independents he had to court and the government left nothing to chance. Joe spent days and nights looking at the likely prices, the conditions attached to them, any looming industrial action and how the sale was faring politically. Time passed. He loved it, but it consumed him at work and at home. Fortunately, Melissa was working day and night, too, and the pair would often share a can of tuna, late in the night, for dinner. Collins was relying a lot on Joe, because he had political carriage of the sale. ‘If it had failed, I would have worn it,’ Collins says.

  It was in the final stages of the State Bank sale that Joe and Collins had a chat about the likelihood of Ted Mack, the sitting Independent MP for North Sydney, retiring. Collins’s Willoughby electorate took in half the federal seat.

  ‘Joe knew that I certainly harboured federal ambitions. I said, Joe we’re in the middle of selling the bank. As much as I’d love to run for the seat I can’t. If I do and anything happens to the sale of the State Bank, I’ll be blamed forever, so I’ve really got to see the process through. So I can’t run for it. He said, “Well if y
ou’re not going to run for it I’d like to.” I said, you have my full support, and thank you very much for the conversation and [for] asking me.’ Joe was being politic, ticking a box; there was no doubt in his mind that he would have run anyway.

  Collins, who also had the arts portfolio, didn’t only take over the privatisation plans from George Souris. He also tried, like Souris, to develop Joe’s passion for the arts, and he did that on Joe’s second trip to visit Moody’s and Standard & Poor’s. On this trip, Collins and Joe squeezed in a trip to the Museum of Modern Art in New York. Coming back, they had scheduled a day in LA, visiting Universal Studios and meeting Gale Anne Hurd, the producer of The Terminator and Aliens. They lunched on Rodeo Drive and were invited along to the Mrs Doubtfire premiere that night. Joe’s room, in the iconic Chateau Marmont, looked out over Sunset Boulevard. Outside the hotel, at that time, stood a 21-metre-high neon sign of the Marlboro Man, and every 15 seconds Joe’s entire room would flash red. That evening, he and his minister caught a limousine down to the movie premiere, walking just ahead of Pierce Brosnan. Did Joe pick up any passion for the arts there?

  ‘I didn’t see it,’ Collins says now.

  Back home, the main focus – for both Collins and Joe – was the sale of the State Bank. Entire books could be written on that particular sale, and the difficulties encountered along the way. But an indication of how fraught it became comes from John O’Neill, who ran the bank from 1987 until it was privatised. He was 14 years Joe’s senior. And it is O’Neill’s wife who sometimes reminds him of the shouting matches that Joe and he had during that time. One example he gives was in 1994, as the sale was pending. The State Bank had won an award that was run by a personal-investment magazine. O’Neill, rightly proud, agreed to an interview with the magazine.

  ‘I was pretty honest and direct about my answers and made a statement that it was remarkable that we’d actually come out the other side of the recession and had transformed the bank … because there were times in that two- to three-year dark period of the recession where I didn’t think we were going to make it, and that became the headline,’ O’Neill says.