by Corrie Perkin

ROD Menzies, the owner of art auction houses Deutscher-Menzies and Lawson-Menzies, makes no secret of his ambition to be the market leader.

But this week, when he announced his decision to sell a 1954 Picasso painting through his own D-M Sydney auction next month, even industry colleagues were perplexed.

Why sell the painting in Australia and not, say, New York or London? And why auction a work valued at between $5million and $7million at a time of international art market uncertainty and local nervousness about the economy?

Mr Menzies paid $US4.6 million for the vibrant painting, titled Sylvette, at a New York auction two years ago.

The businessman, who made his fortune through cleaning contracting, said the mood of the art market prompted his decision to list the Picasso.

"There's so much in the media about bang, crash, doom and gloom that I thought this afforded an opportunity to throw in a little bit of humour and light," he told The Weekend Australian.

Art market identities say the Picasso is another example of Mr Menzies' bold sales tactics. These include attractive vendor guarantees in case a work fails to sell, entering into financial agreements with buyers, and putting his own artworks into his companies' auctions.

Although they accept that, in an unregulated industry there is nothing illegal about these tactics, they say it may skew art values and market activity.

Tim Goodman, chief executive of Bonhams and Goodman auctioneers, said: "These tactics don't reflect a fair market. The whole idea of an auction is that it should reflect the real market with a well-provenanced catalogue including privately owned pictures that are genuinely for sale so an audience can bid with free competition."

Art adviser John Dwyer said: "The auction room is the public arena of Australian art. People look to the auction rooms for a lead, and when you're not getting correct information from the public arena, then it can get very tricky."

Last month's sales results across the major companies suggest a fragile market. Ten days ago Joel Fine Art was forced to close its glamorous Melbourne showroom, the first victim of the art auction wars. "I am propping up the market," Mr Menzies acknowledged, "but I think (the Picasso) will exceed market expectation. And the reason I'm propping up the market is because I intend to lead the market, and I intend to achieve that strategic objective with pictures like this, in addition to our normal fare."

On the matter of his own involvement in getting sales over the line, he said: "I've been doing guarantees for 10 years. And I will sometimes have partners who follow the investment strategies I formulate which, in the event of the guarantee price not being reached, is bought by a syndicate of new owners which may or may not include myself, but includes a significant change to the ownership."

If Sylvette sells next month - and Mr Menzies is certain it will - it will set a record for the highest price paid at an Australian art auction. The previous record was last June's sale of Brett Whiteley's The Olgas for Ernest Giles, which fetched $3.48 million, including the buyer's premium.

It will be a marketing coup for Menzies Art Brands. It may also help the company achieve its ambitious combined June sales budget of between $12 million and $15 million for D-M and L-M.

Last year Menzies Art Brands sold $64.4 million of art at auction, crushing its nearest competitor, international art firm Sotheby's, which sold $51.49 million.

The Picasso will help. Mr Menzies hopes his new strategy of sourcing paintings internationally to sell in Australia will also assist his bottom line. Yesterday, he flew to New York to consign, and possibly purchase, more works.

Mr Menzies, who has been in the art business for 10 years, agreed it was an unusual strategy to sell US and European art in Australia.

The lack of quality Australian paintings had forced his hand, he said.

When asked whether a 1954 Picasso could ensure business success, art dealer Denis Savill said: "Does one swallow ever make a summer? Never. Menzies is known as a great marketing man, a great businessman, a whizkid with his money.

"But to be No1 auctioneer he needs time to prove he has the legs. And he's still not getting the fresh paintings which are your bread and butter."

Mr Menzies' latest sales strategy once again raises the question: should the Australian art auction business be regulated?

Mr Goodman would like to see a self-regulating industry body oversee auction house practice.