Ex-banker seeks to bring balance to Treasury: Mike Baird has the background to look after NSW's finances
· by: Paul Cleary
· From: The Australian
· March 26, 2011
IN stark contrast to most other treasurers both state and federal, present and past, NSW opposition Treasury spokesman Mike Baird is well qualified for this pivotal role.
Unlike his current and recent counterparts, Baird actually understands finance, having built a significant career in banking that involved deals worth a lot of money. So unlike Wayne Swan (public policy lecturer), Peter Costello (barrister), or Baird's Labor opposite number, Eric Roozendaal (party official and fundraiser), Baird had his head around the ins and outs of balance sheets, profit and loss statements and net present value long before entering politics.
He also has vastly more corporate experience than all of his colleagues in the opposition front bench, and much more than anyone in the NSW Labor government, and indeed the Gillard government. Should the Coalition sail into office today as expected, Baird will become treasurer responsible for a $55 billion budget, a burgeoning unfunded superannuation liability, and the ailing $360bn state economy.
At first glance, one might dismiss Baird, 42, as a product of nepotism and privilege. His father is Bruce Baird, the former transport minister and minister for the Olympics in the Greiner-Fahey governments, who went on to have a principled though unsuccessful stint as a backbencher in the Howard government.
On the day The Weekend Australian meets Baird, he is wearing one of those stockbroker shirts worn by Michael Douglas in the role of Gordon Gekko in the film, Wall Street. Not only does the shirt have blue stripes and a white collar, it also has white cuffs finished with silver cufflinks.
When Baird dons a tie for our photographer, it is in the navy blue adopted by the Liberal Party as its trademark. He looks very much a blue-blood Liberal. But there is much more to Baird than appearance. In terms of the experience and personal qualities he brings to this role, he is the real deal.
Baird's 18-year career as a banker, which took him to London and Hong Kong and into senior positions in his 30s, sets him apart from the political professionals -- the former apparatchiks, ministerial minders, party officials and spin doctors -- who now dominate the front benches of both major parties in Canberra, NSW and other states.
While having had an impressive career, Baird doesn't fit any mould or stereotype. He is a devoted father of three who married at 21, and a practising Christian who once studied to become an Anglican minister. He is also a fit, good-looking surfer from Manly who combines a quick and sharp oratory with a broad Australian accent.
And despite this formidable background and first-class political connections, he does not have the airs or patrician demeanor of some of his Liberal peers. Unlike his towering father, whose great height could be intimidating, Baird is moderately tall and cuts a modest, unassuming figure.
Baird says politics needs more people from a corporate background who come to make a contribution, and then leave. "I think it is healthy having a fresh external perspective, and I would be encouraging as many people as possible to do it," he says. "Certainly from my perspective, this is not a career. I don't see myself trying to climb the political ladder. I have gone in to make a contribution to my community, as part of a state government, and go as hard as you possibly can and then don't stay around too long."
Baird sees his rise in politics as a sign of things to come, as he reels off several names of candidates in today's state election who had impressive careers before politics. He says this is "one of the untold strengths of our side", and that he will work to bring more people with private sector experience into politics.
"I think there's a huge influx of external skills and experience that is about to descend on parliament. That is going to be a wonderful thing for NSW. People are sick and tired of the same old politics. "We also need to be more innovative in the way people are brought in. To me there are not enough bridges between the public sector and the private sector. "There used to be secondments both ways. I will be asking for ideas and approaches in how we can do that."
Baird says companies should think about sending their graduates on secondments to the public sector, and vice versa, as this will encourage learning and innovation. "You need to foster a culture of innovation, exposing your people and team to as many experiences as possible," he says.
Graham Bradley, chairman of HSBC Australia, worked with Baird before Baird left in 2007 to enter politics. He commends Baird's decision to enter politics and called for political parties to recruit more individuals with a corporate background. Bradley says it is rare to have someone with his skills holding down the job of treasurer. "He is extraordinarily bright and very astute commercially, with a very good feel for business and for international finance," Bradley said. "Those qualities are rare in people going into the job of treasurer, at either state or federal level. Indeed, Mike may be the first banker to become state treasurer in many, many years."
But the comments by Baird and Bradley would not be read favourably by the NSW Liberal leader. Barry O'Farrell's career background is exclusively political, having worked as a staffer to John Howard when he was opposition leader, then as a chief of staff to Bruce Baird, and finally as director of the NSW Liberal Party, before entering parliament. The clash of cultures emerged this week, when O'Farrell hit the panic button and vetoed a suggestion by Baird that it would be worthwhile looking at NSW's outmoded mineral royalties.
Responding to a question from The Weekend Australian, Baird agreed there might be merit in looking at moving to a profits-based regime, which would be less onerous on start-up miners and possibly raise more revenue when mineral prices are high. When Premier Kristina Keneally claimed Baird was proposing a new tax, O'Farrell immediately quashed the idea, showing another triumph of politics over principle, which could well be a recurring theme in an O'Farrell-led government.
Baird appears not to have aspirations to be premier. He says he will probably serve two more terms and then, he jokes, think about going back to the private sector to fund his superannuation. "If I am elected again, that would be eight years. I can't see myself beyond three terms. If you can't make a contribution in two to three terms, you never will." But while Baird will bring financial skills to this job, he admits his critics say he lacks politics experience. In some ways, Baird's background resembles that of John Hewson, the former economist and banker who entered politics two decades ago and infamously lost the unlosable 1993 election.
Hewson also liked to wear those Gordon Gekko shirts, though he was more of a pointy-headed economist and he was an austere figure who lacked the common touch. But Hewson also entered politics to become a treasurer, and ended up as leader by accident. Baird sees being pointy-headed about finances as an important part of the job of treasurer.
"I am used to getting down to the minutiae, understanding an industry, a balance sheet, a cashflow. In a basic business sense, I am used to profit and loss and being held accountable to every line on the profit and loss statement, and actually being accountable for the strategies to deal with them. "I think that is a very helpful skill set for managing a budget," he said in an interview last week.
As a banker who has worked globally, Baird says it is second nature for him to look to best practice around the world and to seek out expert opinion. These skills will be important for a state at risk of losing its AAA credit rating, and for a state that has a burgeoning unfunded superannuation liability that can't be kept under control even with the aid of asset sales.
After joining the National Australia Bank as part of its graduate program, Baird worked in investment banking for Deutsche Bank as a senior manager before spending a year in Canada studying for the Anglican ministry. He returned to Australia and at the age of 29 tried unsuccessfully to win preselection for his seat of Manly. Had Baird won, he could have been a leadership contender in time for the last election, instead of the unelectable Peter Debnam.
In his banking career, Baird worked again for NAB in London, where he worked on several significant transactions, including Rio Tinto's $3bn acquisition of North Mining Limited. As head of originations for Britain and Europe, Baird and his team worked on a deal that involved raising capital in the Australian corporate bond market. He was then recruited by HSBC to return to Australia, where he headed corporate and institutional banking -- one of the bank's four key divisions -- for Australia and New Zealand. In addition to having an economics degree, Baird has completed executive courses at Harvard and London business schools.
Financial expertise enabled him to cut through the fog around NSW's finances when he came into politics after 12 years of Labor rule. One of his key wins has been to expose the state's superannuation liability. Highlighting what he called Enron-style accounting standards, he forced the NSW Treasury to recalculate the liability, leading to a threefold increase to $34.4bn in June last year. The rise came even after the NSW government channelled $510 million into the liability from the sale of NSW Lotteries.
A spokesman for Mr Roozendaal said late last year that an independent review had confirmed the government was on track to fully fund its liabilities by 2020. The Treasurer's office declined to return calls this week, as did the Premier's office. Bradley, who is also chairman of the Business Council of Australia, warns that the narrow experience of most politicians is becoming a serious problem for both major parties. Bradley says that when Baird left the bank in 2007 he had been one of a small group selected for promotion to senior positions, while he held down a demanding role that involved dealing with the biggest banks and companies in Australia. Baird had to work around the clock, often seven days a week.
It probably doesn't need to be said, but the salary sacrifice involved in moving from his role at HSBC to being a parliamentarian over the past four years would easily run into seven figures. Guiding Baird through his career are three role models whose portraits hang on his office wall in parliament. Attached to each is a small silver plaque for each of Baird's guiding principles -- integrity, passion, and results. For integrity, Baird has hung the portrait of William Wilberforce, the deeply religious British politician who campaigned to end slavery in the early 1800s.
For passion, he has a picture of Martin Luther King making one of his fiery speeches. And for results, he has Roden Cutler, the longest-serving governor of NSW who won a VC for courage fighting in Syria in 1941. As treasurer of a state in a parlous financial position, Baird will need inspiration from all three