In July 2005, Bob Carr announced he was standing down as Premier of New South Wales. Succession would fall to the minister in his Cabinet supported by the dominant Right-wing faction of the Labor Party. Events moved swiftly. The party's General Secretary, Mark Arbib, made clear his preference for the then Minister for Health, Morris Iemma, over the supposed favourite, Carl Scully. A phalanx of MPs from the ALP Right proceeded to align their support with the wishes of the General Secretary. The amount of public discussion was minimal, what was done was done in private. It was done quickly. Carl Scully announced his withdrawal from the race. Iemma proceeded to be unopposed within the Right and unopposed within the State Parliamentary Labor Party.

Within days, Deputy Premier Andrew Refshauge and Planning Minister Craig Knowles resigned from the ministry and the Parliament. In a matter of months, the ALP had lost the ticking heart of the Carr government – Carr himself after 24 years in Parliament; Michael Egan, an energetic Treasurer with interests across all policy, who had first entered Parliament in 1978; Refshauge, nominally on the Left, a veteran of 24 years; Craig Knowles, a man of integrity, in his 20th year as an MP, out of contention because of indiscretions sub-trivial.

Any advantage to the Liberal Opposition was forfeit almost instantly. The Liberal leader, John Brogden, was the subject of newspaper reports of his alleged behaviour in bars with women who were not his wife.