As the people of NSW wake this morning, they will face an achingly familiar reality: their state government has again become a national joke.

It’s not even a good joke. Surely Barry Humphries, given two minutes, could come up with a better punchline than the one delivered by Barry O’Farrell yesterday: a NSW Liberal Premier brought undone by a bottle of Grange Hermitage. How very colonial of us.

Still, we haven’t reached Illinois levels, and that at least is something for which we should be thankful. Last year, Chicago friends of mine held a party to celebrate the number of their governors currently incarcerated falling from three to two.

By the end of the day NSW will have its fifth Premier in six years (all of them still free) – it is likely to be either Treasurer Mike Baird or Transport Minister Gladys Berejiklian.

Baird, son of former Liberal Minister Bruce Baird, strong Christian, social conservative, is the bookie’s favourite. Berejiklian, long-term Liberal warrior and a rare success in the tough transport portfolio, is O’Farrell’s pick. His decision to talk directly to Berejiklian, sitting on the ABC election night panel, congratulating her for her performance during the campaign, rather than answer any questions from Kerry O’Brien, boosted her profile from day one of this government.

1959: Not such a great vintage for Barry O’Farrell. Photo: AAP

The job ahead

Whoever it is has a huge task ahead of them. They will have to cope with the departure of O’Farrell, a decent and capable politician. And they will have to deal with the spreading political implications of this shock event.

First, the Premier himself. Since coming to office O’Farrell has conducted himself in a measured fashion. While running some danger of being seen as a “do-nothing Premier”, he decided the other risks – of rushed decisions, inept administration, and leaving voters behind – were far worse. As a result, he kept trust with those who voted for him, and would have won the next election with ease. Competent leaders are not as easy to find as they should be, and he is a great loss to the Liberal Party.

This deprives the NSW Liberals of their strongest, sharpest stick with which to beat Labor at the next election.

One of O’Farrell’s virtues was that he placed a great and apparently sincere emphasis on integrity, an emphasis which left him with little choice yesterday. The suggestion that the Premier had misled ICAC, however unwittingly, is a grave accusation and one that could not be withstood.

And yet if we take the Premier at his word, and accept that he forgot he had received this bottle of wine, then it is the type of mistake which gives politicians nightmares: not the stuff of criminality but of humdrum carelessness. It has the terrible feel of human tragedy about it. In itself it will do little to damage O’Farrell’s reputation, and he is likely to emerge from this with honour intact.

The letter that cost Barry O’Farrell his job.

Unleashing factional chaos

Those on the Labor side rejoicing in the Premier’s demise would do well to remember the substantive implication of his downfall: we have lost one of the strongest Liberal moderates in the country. He was not afraid of voicing his moderate views, nor of standing up to the federal government. He was the most audible voice of dissent when the Abbott Government was threatening to destroy the Gonski school reforms, and can take much of the credit for Abbott’s backdown.

More recently, he sent a clear warning to Attorney-General George Brandis that he could not depend on NSW’s support for his ill-judged attempts to change the Racial Discrimination Act. O’Farrell was a bulwark against the more extreme actions of his federal counterparts, and against the hard right-wingers within state ranks. For the Liberals, the risk is that his demise takes the lid off factional chaos, for so long contained by his authority.

No angels in NSW politics

But the ramifications of losing O’Farrell in particular are only the beginning. The stench that had fallen over NSW Labor has now spread to envelop NSW politics in general. No longer can either state or federal Liberal parties cast themselves as inhabitants of an angelic political universe far distant from the fallen world in which their Labor colleagues dwell.

This deprives the NSW Liberals of their strongest, sharpest stick with which to beat Labor at the next election. On some level O’Farrell’s resignation was designed to preserve this advantage for his party, but it is likely lost forever now. It is a great blow also to Abbott, who has made much of the chaos, incompetence and corruption within Labor. Hence his anger at a press conference yesterday at a journalist who dared suggest the state Liberals were corrupt: the PM is in denial, believing still in the kinder political universe of just twenty-four hours past when the Liberals were the obviously grown-up alternatives to the child-demons supposedly running Labor. Now that ICAC has claimed the scalps of one of Abbott’s own frontbenchers (albeit perhaps temporarily) and a Liberal Premier, that illusion is harder to maintain.

The Liberals will be hoping that O’Farrell’s decisive action has staunched the wound. Perhaps it has. But it is likely we will not know for some time yet. More Liberal MPs may yet find themselves in difficulty – or, for that matter, more Labor MPs. ICAC inquiries have a habit of fulfilling the time-honoured formula of television crime dramas from Perry Mason to The Killing: very few are truly guilty, but everybody’s got something to hide.

Sean Kelly was an adviser to Kevin Rudd from 2009 then to Julia Gillard from 2010. He is on twitter @mrseankelly