Money in Australian electoral politics: Reforming the morass
31.05.2023
Canada, France, Ireland, Italy, Japan, South Korea, Spain all do it. Even the USA tries to do it. But the Commonwealth of Australia does not. What is it?
Kudos if you said they cap the amount anyone may contribute to a political party or candidate. Double the kudos if you know that the entire eastern seaboard in Australia now has such caps, not just for state parties but for state electoral purposes.
It is 40 years since the Hawke government begat the regime that still essentially governs the funding of campaigns for Commonwealth elections That regime remains at rest on twin pillars. Public funding, for parties or candidates that attract above 4% of the vote, in return for some disclosure requirements – whose lack of timeliness is redolent of the paper-and-pen era in which they were hatched.
The Commonwealth disclosure requirements now form a ‘transparency register’ that has broadened in the past decade. However such changes have mostly just widened the net, expanding the types of entities that must disclose donations used for electioneering. They now catch contributions to lobby groups if they electioneer at national elections. But the law doesn’t drill deeply into the financial affairs of parties. Compare the United Kingdom, where audited financial accounts of parties have to be published annually – and unlike Australia, parties there do not receive public funding for electoral purposes.
Whether in an absolute sense, or relative to our usual democratic comparators, the electoral funding and disclosure rules in the Commonwealth Electoral Act remain lax. This state of affairs may align with liberal philosophy in the abstract. But it is not merely passé in terms of developments in the field in the last 40 years; it is corrosive of faith in integrity and political equality in Australian elections.
With a Labor government ostensibly driven by social democratic norms, and an expansive cross-bench of Greens and independents committed in principle to more fairness in electoral participation, what are the prospects for renewal? To discuss this, we need to consider the main dishes on the regulatory menu: disclosure, donation caps, expenditure limits. Then, finally, to ask if reform is imminent after all these years.
Disclosure is Broke: Fix It.
Disclosure at the national level is broke: it needs to be more timely, and tighter. Parties only have to declare ‘gifts’, earmarked to fund national electioneering, after the end of each financial year. Those declarations or returns are then not required to be published by the Australian Electoral Commission (AEC) until February of the next year. So resources gifted to parties in the lead up to the May 2022 Federal election were not knowable until between 8 and 20 months after they were received.
In addition, parties need only disclose individual gifts above an indexed threshold, which now sits at $15,200 per annum. (Donors are meant to keep tabs on whether a series of gifts they make exceed that threshold and, if so, disclose that annually.) In any case, given our federal structure and history, parties consist of up to nine registered entities: their national secretariat plus their mainland state and territory divisions. The disclosure threshold applies only to each of those entities, not to the party taken as a whole. So the effective disclosure threshold, for gifts to aid national electioneering, can be well over $100 000 at the party-wide level.
Now you might think, ‘Well at least this annual “disclosure dump” gives the media some deliberative focus.’ It is true that having ‘real-time’ disclosure – say on a weekly basis – and at too low a level could just snow investigators. The answer to that is to improve the presentation of the data, including tools to easily aggregate and map the data that is disclosed, across time periods, related parties and entities and geography.
It is important, also, to bear in mind the inherent limits of any disclosure system. Disclosure is essentially a kind of freedom of information tool. It allows the media and rival political players to ask questions. But by itself it is no guarantee of integrity, let alone a means to political equality. On its own, disclosure can even heighten cynicism or normalise unlovable donation practices. Companies may think they need to keep up with the largesse of competitors seeking to ingratiate influence; party treasurers can hit up donors to a rival party and say ‘what about us?’
Regardless of such normative and consequentialist considerations, the national disclosure system is clearly broken. Given its untimeliness and high effective threshold, that much has been known for years. But more recently, the major parties have driven a truck through the system, and the AEC has not stood in their way.
The means by which this has been achieved is through the major parties operating business-oriented fund-raising arms, under names like the Liberal Party’s ‘Australian Business Network’ and the ‘Federal Labor Business Forum’. These fund-raising arms charge huge subscription fees: not to be a member of the party proper, but of a kind of exclusive networking club. To magnify the exclusivity, fees have been tiered across ‘platinum’, ‘gold’ and ‘silver’. The fee for the highest tier has reportedly inflated from $110,000 to $150,000 in recent years.
When these fundraising arms organise notionally come-one, come-all dinners (like Labor’s $5000-a-head ‘Budget Dinner’ hosted by PwC or a $5000-a-head ‘boardroom lunch’ with Treasurer Chalmers) the ticket cost is set below the disclosure threshold. That is an old practice. The scandal today is that the large, tiered subscription fees to the party networks/forums are not being disclosed.
At law, a political donation is something given for ‘inadequate consideration’. The parties happily encourage subscribers to claim they are receiving good consideration. Quelle surprise. As Woodside Energy’s CEO explained some years back, this leaves it up to people like him to decide whether to make ‘voluntary’ disclosure. Despite being armed with significant forensic powers, the AEC has taken such assertions at face value. It told the ABC recently it leaves it up to the subjective – and conflicted – view, of those paying for access to the parties, to decide. Donations up to ten-times the disclosure threshold can therefore be hidden in plain sight.
All this ignores the objective nature of value in most real world dealings, including for conditional gifts. Parties are hardly in the events industry. The AEC could demand to know what events each forum/network holds, and commission conference organisation experts to assign an upper market value to the event-as-an-event (including an allowance for the attendance time of ministers or MPs.) The AEC can also inspect the accounts of these fund-raising arms, to see what surplus they generate, per average subscriber, for the party coffers.
In short, the major parties are nakedly soliciting revenue, with a nod-and-wink as to anonymity, in return for selling premium access…and the regulator is standing by. Selling access corrupts basic public law values: politics as a public trust, and the franchise as an emblem of the equal worth of all people. Why on earth would an ordinary person voluntarily join one of the major parties today, when the parties see them as largely superfluous to party as an electoral-machine? As if rubbing salt in the wound, last year the major parties even convinced the courts that any membership rights, contained in their own rules, are legally unenforceable.
Donation Limits
Presently, the only ‘real’ limit on donations into national politics is a ban on ‘foreign’ donors. This is a recent development, driven by concerns about Chinese money. I put ‘real’ in quotes, since nothing is more fluid than international finances. Hence the law is not really enforceable offshore, but assumes careful screening of receipts by Australian political actors. Whilst the parties have been willing to twist and stretch disclosure law, the opprobrium for breaching a ‘foreign’ donor ban is probably sufficient for the parties to self-police the source of gifts.
That leaves non-foreign, ridgy-didge Aussie donors: a residual category that ranges from citizens (wherever located) and permanent residents, through to businesses incorporated or simply with a principal place of activity here. Unlike the sample of countries listed at the start of this piece, they face no donation limits. Is this a problem?
It may be, for political integrity and equality. If disclosure requirements were more meaningful, and given the potential of the new National Anti-Corruption Commission, we might be right to leave political integrity to those regimes. What then of political equality?
A political donation is in part an act of political association. This means they cannot, constitutionally, be banned outright. But they can be limited – both in their size, and even in who can make them. Generally, we should welcome donations from a broad range of sources to help keep parties connected to a broad social base. Indeed, donations to parties and candidates of up to $1500 per annum are tax deductible for individuals. On the other hand, big donations, even those made on the basis of mateship or ideology, undermine political equality.
Given this pervasive effect on political equality, why are donation caps not more prevalent in Australia? One clue lies in two countries absent from the list of those with caps: the United Kingdom and New Zealand. Like Australia, they have a long-standing Labor Party (albeit they spell it properly, as ‘Labour’). ‘Surely the party of the ordinary worker would support caps?’ you say.
Well yes, in principle. But when caps are introduced, the law confronts the affiliation fees of those trade unions that historically formed those parties, and which prop them up in the lean times of opposition. (Modern Labo(u)r Parties do okay from corporate donations when they are in power or on the verge of power; less so when facing the wilderness, thanks to their pragmatism and that of business donors).
A second hurdle for donation caps is whether new political forces may need an injection from a sugar daddy in order to challenge the might of the existing major parties. This is less relevant for an eponymous party like the former Palmer United Party (now the United Australia Party)but much more important for a more genuine movement, like the ‘Teal independents’ who were turbo-charged last year by Climate200 support. The key figure behind the movement, a progressive entrepreneur who inherited part of the vast mining and corporate raiding fortune of Australia’s first billionaire, has even written a book celebrating it. It may be no coincidence that Teal candidates did much better in the 2022 national election – without caps on donations or expenditure limits – than in the 2023 NSW State election, where both are capped.
Campaign Spending Limits
A third option on the menu is expenditure limits, which limit the amount parties, candidates and lobby groups candidates can spend on certain electioneering costs. These limits are now common for state elections in most of Australia, as this table shows. (Victoria and Western Australia are the odd ones out, Tasmania only has them for its upper house elections and in South Australia they are nominally ‘opt-in’, as a condition for accessing public funding.)
Limits on expenditure drive the UK and NZ systems, as well as being a feature across Europe and the Americas. (They cannot be mandated in the US, and opt-in spending limits there have fallen by the wayside.)
In principle, expenditure limits do several jobs. They squarely address the ‘arms race’ problem, which Mr Palmer has reignited in Australia. In constraining demand for money, they free up parties and their leaders to focus on genuine public business and they may limit demand for dodgy donations. Thirdly they may help deliberation by making campaigns less cacophonous, something that is a turn-off for many electors.
Expenditure limits should also be easier to police than donation limits. While donations are inherently behind-the-scenes, to be effective, campaigning needs to be public. That remains the case even with the advent of highly-targeted online campaigns, although that development requires transparency from social media companies.
When it comes to expenditure limits, the devil-lies-in-the-legislative-detail. With no fixed-terms for the Australian Parliament, the capped period is not easy to define. (At Westminster, it is up to a year). Just what is covered by ‘electoral expenditure’ also needs careful design and definition. And the co-ordination of campaigns, such as between trade unions or corporate groups, need to be controlled, to keep caps from being rorted.
Above all, what limits to put on lobby group electioneering is a vexed question. Not least with some members of the High Court suggesting, in 2019, that the idea of a ‘level playing field’ limits any differential treatment of parties and candidates, as opposed to lobby groups, in electoral regulation. If so, this is an odd heresy. Representative elections are necessarily focused on parties and candidates. Parties have ongoing reputations to protect; and party leaders and MPs, are publicly accountable in a myriad of ways that lobby groups are not.
Reforming the Morass
Fifteen years have passed since the states began modernising the law of money in electoral politics. Yet substantive change has been absent at the national level. If inertia had its way, this dual track of state innovation and national enervation would be unlikely to change.
As we have seen, the national transparency net has widened to rope-in lobby groups that electioneer, yet simultaneously has frayed. There is optimism however that disclosure under the Commonwealth Electoral Act will be tightened, to include a lower disclosure threshold and more regular disclosure obligations. None of this is rocket science. There are models aplenty for something approaching continuous disclosure in the internet era, from New York City to Queensland. On what must be disclosed, we must pray that the Greens and cross-benchers lean on Labor to deal with the ‘business forum’ loophole it helped manufacture.
Tasmania is on the verge of becoming the latest (and last) sub-national jurisdiction to update its law in the area. Its bill is instructive, though, about what not to do. Across 265 pages it weaves an intricate web of registration and accounting requirements. Yet it does little more than bring in a regular disclosure regime, sweetened with the cream generous public funding for elections and party administration. The Liberal government wants to set the disclosure threshold at $5000 per annum: pretty high for a small state.
After self-inseminating his party (mostly via Mineralogy Pty Ltd) with over $200 million over the past two national election periods, one legacy of Mr Palmer’s recent forays into electoral politics may be some form of donation cap. Which to have any effect, must include suturing any business forum/network loophole.
Any cap, I suspect, is likely to be set at a high level. The major party treasurers – along with otherwise ‘progressive’ electioneering groups like Get Up! and Climate200 – will baulk at setting donation caps anywhere near as low as some states have. (Victoria is the most parsimonious – just $4320 currently over the 4-year term.)
This leaves the main new item on the menu as expenditure limits. Again, the shadow of Mr Palmer looms large here; but not just his. Finding himself outspent by a Teal rival in a previously blue-riband Sydney seat in 2022, a Liberal MHR complained the spending was ‘immoral’. Is it too cheap to note that his party could have swallowed its economically libertarian instincts, at any time in its three terms in government, and legislated limits? Better late than never! Temperance bandwagons were mostly full of recovering addicts; and, as St Augustine ironically put it, ‘Lord, make me chaste and celibate, just not yet.’
The Commonwealth Parliament’s Joint Standing Committee on Electoral Matters (JSCEM), a multi-party committee with 14 members, has held public hearings, including on electoral finance reform, over a seven month period now. (MPs, even more than public lawyers, seem fascinated by electoral law). Its report is due soon enough. The mix of compromise, competing principles and self-interest, manifest in its recommendations, will make compelling reading.
Graeme Orr is a professor of law at the University of Queensland and author of a book on elections as rituals and a text on The Law of Politics (2019, 2nd ed).
Suggested citation: Graeme Orr, ‘Money in Australian electoral politics: Reforming the morass’ on AUSPUBLAW (31 May 2023) <https://www.auspublaw.org/blog/2023/5/money-in- australian-electoral-politics-reforming-the-morass/>