Australia trails way behind other nations in regulating political donations

Money makes the world of politics go around and, as recent scandals afflicting both major political parties have shown, keeping it clean isn’t easy. Our series on Australia’s system of political finance examines its regulation, operation and possible reforms.

Australia was once a pioneer in developing mechanisms for electoral integrity. We gave the world the secret ballot, for instance, as well as non-partisan electoral administrators and non-partisan processes for electoral redistribution. But our political finance regulation now falls way behind international standards.

To take just one issue, Australia is not one of the 114 out of 180 countries that ban donations to political parties from foreign interests. Transparency can be impossible to achieve when donations come from other countries.

The federal government introduced public funding for political parties in 1983, to reduce reliance on private donations. But corporate donations have continued to grow – reaching A$202 million in 2013–14. The only federal restriction on private money in politics is the requirement to disclose donations of more than A$13,200. But this information doesn’t become public until well after the relevant electoral event.

Unlike similar democracies, Australia limits neither political donations nor campaign expenditure by political parties at the federal level. But states and territories have different rules.

Other jurisdictions

Canada has extensive regulation, banning corporate and union donations, imposing caps on individual donations and limits on candidate, party and third-party expenditure – that is, expenditure by groups other than candidates or political parties during an election campaign.

New Zealand also limits expenditure by parties and third parties. Its electoral commission is responsible for party broadcasting allocation (free time and money for paid advertising).

The United Kingdom has limits on expenditure by political parties and third parties. Paid advertising in electronic media isn’t allowed at all.

In 2008, the House of Lords upheld the prohibition. It argued the ban was necessary to maintain a level playing field and prevent “well-endowed interests" from using “the power of the purse to give enhanced prominence to their views”.

In Australia, the cost of television advertising and associated market research has driven political parties to chase ever-greater donations. Both political donations and the negative advertising these buy increase distrust in politicians and political parties.

Regulating for democracy

The aim of political finance regulation is twofold: to ensure the integrity of elections and to promote a level playing field for electoral competition. Both aims are equally important.

To safeguard integrity, we need transparency and other measures so that those with vested interests in government contracts or regulation cannot buy access and influence.

The second reason for regulating political donations is to promote political equality, a defining feature of democratic citizenship.

Parties without wealthy backers should not have their message drowned out by those that do. And corporate donors should not be able to buy political access far in excess of what other citizens enjoy.

A third reason for regulating donations is to ensure those elected to be political representatives don’t instead spend their time chasing donations.

But despite repeated calls for political donations reform, progress at the federal level has been stalled since then senator John Faulkner’s 2008 Electoral Reform Green Paper.

States, territories and reforms

There’s been more movement at the state and territory level. New South Wales now has the most comprehensive regulations. These include: donation caps; source restrictions (no donations from property developers, for instance, or gambling, tobacco or liquor industries); and expenditure limits for parties and third parties.

The NSW government even appointed an expert panel to investigate the possibility of a total ban on political donations, and their replacement by full public funding of parties, in 2015.

The Australian Capital Territory has expenditure limits. The ACT also requires continuous disclosure for donations more than A$1,000.

In South Australia, expenditure limits are a condition of public funding. The state also imposes a A$500 cap on “cash for access” events.

But this patchwork of regulation creates many loopholes. NSW Premier Mike Baird has tried to get a national system of political donation law onto the COAG agenda – so far without success.

In the past, many believed any reform of Australia’s political donations regime wouldn’t survive a challenge because the High Court has found that the Constitution implies freedom of political communication. All this changed with the 2015 McCloy decision.

In this case, brought by a property developer, the High Court decided that “guaranteeing the ability of a few to make large political donations in order to secure access to those in power” was antithetical to the underlying constitutional principle of political equality. Political freedom needed to be balanced by “equality of opportunity to participate in the exercise of political sovereignty”.

This was a very welcome recognition that political equality is central to representative democracy. And it should give heart to all electoral reformers.

Catch up on other articles in the series.