The art market is alive with rumours that Sotheby’s will follow Christie’s decision last year and shut down its operations in Australia.

Paul Sumner, a former managing director of Sotheby’s Australia, told Crikey this week that he had been involved in discussions about the future of the Australian company with its New York executives in the late 1990s but had argued that if the Australian offshoot was closed it would leave the field open to Christie’s and make them more profitable.

“The two rivals have been competing for more than 250 years and one has always followed the other – if one lifts its commission, so does the other,” Sumner said. “Then again, you have to remember that what happens in Australia is insignificant on the world art auction scene: the entire annual turnover of the Australian art market only equals the sale of one major painting in New York or London.”

Sotheby’s has been the market leader in Australia for almost all of the past 25 years and in the last two years its turnover has exceeded $30 million – or close to a third of total art auction sales. Yet with the art market setting new records, both in terms of individual paintings and overall turnover, the company’s pre-tax earnings only rose from a mere $1.3 million to $4.2 million according to its last set of accounts.

Inflaming the rumours of an imminent closure was last week’s resignation by Sotheby’s managing director Mark Fraser and the appointment of a businessman rather than an art auction-house expert to replace him. Former HSBC Australia managing director Philip Holberton, who has also been on the boards of Powercor, ETSA Utilities and Citipower, has assumed the chief executive’s role. Some observers claimed Holberton’s task was to organise the business so it could be shut down.

The 45-year-old Fraser has been with Sotheby’s for the past 19 years, the last four as managing director. He had been highly successful in shifting the focus at Sotheby’s to top-quality pictures and boosting its profits at the same time. But now he has taken up a new position as director in a team planning the $50million+ Museum of Old and New Art being constructed on David Walsh’s Moorilla Estate Winery outside Hobart.

Walsh, a little-known but immensely rich investor and collector, was with Fraser last night at the official opening of the National Gallery of Victoria’s spectacular Australian Impressionism exhibition where 250 major works by the great names of the Heidelberg School – McCubbin, Roberts, Streeton and Conder – are on display.

Asked about the future of Sotheby’s Australia, Fraser flatly dismissed any suggestion that it might be facing closure. He said he had heard nothing from New York and that the Australian company was doing extremely well and was hiring more staff. Holberton had taken charge because there was no-one with sufficient experience in the art world to assume control, he said.

Fraser also rejected a report in Crikey last Friday that said he had been hired by Walsh on a $500,000-a-year salary package. “If that was true, why would I be living in an old weatherboard house and driving a car that wouldn’t start when I tried coming here this evening?” he complained.