Like his boss, former premier Morris Iemma, who has also quit politics, former treasurer Michael Costa crashed and burned over their doomed attempt to privatise New South Wales’ electricity industry. Earlier this month, in the most tumultuous week in state politics since the 1930s, Mr Iemma told Mr Costa he was being dropped from the ministry 12 hours before Mr Iemma himself was decapitated by Labor’s dominant Right faction.

The restructured New South Wales cabinet was sworn in by Lieutenant-Governor Jim Spigelman, in a ceremony at Government House in Sydney. With six new ministers and significant changes to the portfolios of several others, the cabinet is a radical change to the line-up of former premier Morris Iemma.

This week saw big problems emerge for the Labor Party in New South Wales and Western Australia, while federally the Nationals shrank even further with the loss of Lyne. In the Senate, Steve Fielding voted down the luxury car tax increase, while in the United States, Sarah Palin has garnered an immediate and positive reaction.

The New South Wales Premier has revealed his new cabinet, declaring that the “soap opera is over”. As tipped, John Della Bosca has returned, along with right faction powerbroker Joe Tripodi. Frank Sartor and Michael Costa have been dumped, while Reba Meagher withdrew from contention last night before being pushed out.

Hard as Premier Morris Iemma will struggle to blame him for mugging state finances, New South Wales Opposition Leader Barry O’Farrell knows the public will blame Iemma, not him, for any dip in the state’s bottom line and consequent deterioration in services. After 13 years of Labor, they would be crazy to blame anyone else.

Mr Costa’s sacking ends the career of one of the most controversial and unusual figures in Australian politics - a former head of the New South Wales trade union movement who became an avowed economic rationalist and admirer of former US president Ronald Reagan.

Nathan Rees, who entered New South Wales Parliament only 18 months ago, is to replace Morris Iemma as NSW premier. Mr Iemma fell on his sword this morning after losing his Right faction’s support, the first time in the 117-year history of the Labor Party a premier has been forced out.

Successive Labor governments have ignored the union movement’s power inside the party. The example of Simon Crean is no great encouragement to further action. But it is a problem that is not going to go away. Party members in New South Wales are emboldened by the victory they have achieved over the Iemma Government.

The framework for a partial sell-off had already been laid out in the Owen Report, which the Government commissioned when it began work on the sale last year. A similar sell-off had recently gone ahead in Queensland without a hitch. By Wednesday night, the partial sell-off had become the Government’s least worst option.

It cost an estimated $500,000 to recall the New South Wales Parliament to vote on the Iemma Government’s privatisation proposal, but after less than an hour of discussion in the upper house, the debate was suspended. However, the Premier and his Treasurer, Michael Costa, were not prepared to accept defeat.