The case for change to our political donations rules

By George Williams, professor of law at the University of NSW and member of the board of the not for profit Centre for Public Integrity.

Originally published in the Australian on 7 March 2022 and since republished on the website of the Centre for Public Integrity.

State politics has yet again been tainted by crooked donations. The Independent Commission Against Corruption [in New South Wales] made findings of corruption last week against people including former NSW Labor MP Ernest Wong over attempts to conceal a $100,000 donation by Chinese billionaire Huang Xiangmo.

In South Australia, Opposition Leader Peter Malinauskas has a solution. He promises to ban all political donations if he becomes premier this month. He says this is “the single biggest thing we can do to restore public trust in our democracy”.

What is missing from this debate is a focus on our federal system. No state reform can succeed without national action. Moreover, Australia’s next election will be fought with the political finance system in crisis. Voters will elect their federal representatives without being told the source of tens of millions of dollars received by parties and candidates. The community will not know what expectations have been created by these donations, and who their representatives are beholden to.

On the expenditure side, Clive Palmer has promised the United Australia Party will run the most expensive campaign in Australian history. His splash of advertising across the media bears this out. To date, Palmer has spent 100 times more than either of the major parties. This undermines any semblance of a level playing field.

The source of these problems is easy to pinpoint. National law on political donations and expenditure is not only lax, it has been designed deliberately with gaping holes. Legislation has been drafted so political parties can hide their receipt of vast sums of money.

This facilitates fundraising because donors can be rewarded with favourable decisions without public scrutiny. The biggest losers are ordinary Australians when their interests come second to those of wealthy donors and vested interests.

The sums of money involved are not small change. They are more than sufficient to buy influence and create incentives for politicians to reward donors. They encourage a sense of expectation in donors, including corporations that prioritise their shareholders in deciding where to give money. It is the anticipation of a return, rather than altruism, that drives corporate giving to politicians.

Of greatest concern is undisclosed donations. Over the past year, our political parties received $68m from unexplained origins, which is almost 40 per cent of all party income. The amount of dark money has been growing steadily. According to the sums done by the Centre for Public Integrity (of which I am a board member), our political parties earnt $4.5bn since 1999. This includes $1.38bn with no apparent source, with each of the major parties receiving hundreds of millions of dollars in unexplained wealth. Federal election law says only donations over $14,500 need be revealed. Gifts exceeding this threshold can be split into smaller amounts that do not require disclosure where they are funnelled through multiple party entities. It is possible to donate $14,500 to each of the nine national, state and territory branches of a major political party, totalling $130,500, without triggering disclosure.

The definition of what amounts to a donation also has loopholes. It does not cover major sources of income such as party fundraisers and corporate sponsorship of business forums.

Even where disclosure is required, it comes too late. Rather than transparency when a gift is made, donations from the previous financial year are reported the following February by the Australian Electoral Commission. For example, a gift made on July 1, 2022 will not be made public until February 2024. Donations to parties and candidates in the lead-up to a federal election are revealed long after Australians cast their ballot.

Federal election rules governing expenditure on campaigns are similarly problematic. Electoral regulation is often directed to creating a level playing field. Voters should have the opportunity to be exposed to the policies of many candidates without this being drowned out by saturation advertising by those with the deepest pockets. Expenditure caps also alleviate some of the pressure from fundraising and the likelihood that politicians will become beholden to donors. Despite this, federal law places no limit on the amount of electoral expenditure.

The system need not be this way. The states have their problems, but they have much stronger regimes in place. NSW, Queensland and Victoria require disclosure of donations over $1000, with gifts made public in as few as seven days during an election. States have also put in place limits on how much can be spent during elections. In NSW a party can spend a maximum $132,600 per seat on electoral expenditure; in Queensland $95,964.

Federal reforms of this kind are needed, and are backed by overwhelming public support. A recent poll found 93 per cent of Australians favour politicians revealing every donor who contributes more than $1000. The barrier to reform is not a lack of solutions or community support, but national leadership and political will. This is the missing element to fix a broken system that breeds corruption and causes enormous harm to the public interest.

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