An influential parliamentary committee has handed down its first major report into electoral reform. But, as Zacharias Szumer reports, there’s still a long way to go.
For almost a year, the Albanese Labor government has been signalling its intentions to reform donations laws. This past week, Labor moved one step closer to realising those promises with the release of a committee report the party has long said would form the basis of any legislation.
Among other things, The Joint Standing Committee on Electoral Matters (JSCEM) has recommended donation and spending caps and real-time disclosures. Annual donations information is currently published every February for the previous financial year. There are currently no limits on donations or campaign spending at the federal level.
There is also currently no obligation to disclose political donations below $15,200. The committee has recommended lowering the threshold to $1000. This may make it harder to hide a $100,000 donation by splitting into 10 undisclosed $10,000 donations – a reportedly common trick.
Campaign arms race
While spruiking the reforms to the media, Special Minister of State Don Farrell has often bought up mining mogul Clive Palmer, whose financial generosity towards his United Australia Party is well-known. Ahead of the 2022 election, one of Palmer’s companies donated $117 million to the UAP, far outstripping the $84 million he spent on the 2019 race.
To win several blue-ribbon seats from the Liberals in 2022, Teal candidates deployed a $10 million war chest, much of it from large donors. Between them, founders of tech company Atlassian, Scott Farquhar and Mike Cannon-Brookes, gave around $2.6 million.
As any regular reader of MWM knows, the major parties are also no strangers to big donors.
June analysis released by the Centre for Public Integrity (CPI) shows that, in 2021-22 the top five individual donors to the ALP contributed $205.4 million, or 34.5 percent of their total donations. Meanwhile, the top five donors to the Coalition contributed $118.8 million, or 22.6 per cent of their total donations.
CPI analysis also showed that, while the top five individual donors contributed less than 20 per cent of total political donations in 2005-06, this figure climbed to an all-time high of 70 per cent in 2021-22. And between 1998-99 and 2021-22, total payments by parties, and electoral expenditure by candidates and independents, grew by 84.7 per cent.
In short, in the last two decades politics has increasingly become a financial arms race. The long-term trend of major parties haemorrhaging fee-paying members continues apace. Meanwhile, the proportion of party funding coming from mega donors continues to grow.
The devil awaits in the details
Speaking to an MP’s media advisor to get an opinion on the proposed reforms, I was told this week: “I know it’s a cliché, but the devil will be in the details.” Clichéd or not, he certainly wasn’t alone in expressing such sentiments. Press releases about the JSCEM report from The Australia Institute and the #Our Democracy movement and Greens Senate Leader Larissa Waters all deployed that exact phrase.
One of the devilish details is how spending caps are structured. The JSCEM report recommends that spending caps be set per electorate, or state in the case of the senate. This means that all candidates for a lower-house electorate, or a senate seat would have a ceiling on how much they could spend on campaigning.
There are good arguments for and against this idea.
As the Australia Institute’s Bill Browne has pointed out, per-electorate caps “hold back new independent and minor party candidates building name recognition – while doing little to stop established political parties flooding the market with region-wide party-focused ads.”
However, without caps on spending in each seat, large parties can spend smaller amounts in safe seats while financially outgunning independents in marginal contests, and then average their costs across every electorate they contest.
Another diabolical detail: The waterbed problem
Another issue still to be hashed out is whether groups such as GetUp, the ACTU or Advance Australia will have their spending limited too. The Coalition has expressed strong opposition to spending caps being imposed on political parties but not on groups that engage in political campaigns. Predictably, unions are their main concern.
Electoral law expert Professor Graeme Orr says that if reforms limit the spending of parties, it should also regulate that of groups that engage in political lobbying.
“Parties need to be able to spend more than lobby groups. If not, they’re going to be swamped and you’ll get the American problem, where there’s a lot of dark money floating around among astroturf groups and Super PACs [Political Action Committees],” he said. “Such lobby groups are not accountable via the ballot or the media the way parties and MPs are.”
Super PACs are large, well-funded lobby groups that arose in the US due to a combination of limited direct contributions to parties and unlimited donations to lobby groups. In the last decade, super PACs have largely functioned as a way for the super-rich to pump billions into influencing political outcomes.
This is what some people call the “waterbed problem” – you can push down the political power of money in one place and it just swells up in another. Groups like the Australian Conservation Foundation or the Wilderness Society weren’t set up to support particular parties but exactly where the line should be drawn between such NGOs and NGO-style groups that could be set up to evade caps is the source of ongoing dispute.
Saffron Zomer, executive director of the Australian Democracy Network, fronted a JSCEM hearing on Friday with other NGO-sector representatives to urge that donation caps should not apply to third parties. She said the solution was “drawing a more accurate difference” between NGOs and “entities that are set up to promote or oppose a candidate or political party,” adding that donations to the latter should be capped like those to political parties and candidates.
She said it would be discriminatory if new laws restricted entities that primarily receive income from donations while making exceptions for investment or membership-funded groups such as the Minerals Council of Australia.
The charity sector bitterly fought a 2021 change voted on by both major parties that made such groups register as “significant third parties” and disclose who their donors were if they spent more than $250,000 on political campaigns that could be classified as “electoral expenditure”. At Friday’s hearing, Ms Zomer also urged that those changes be wound back.
Labor has signalled that it’s open to the concerns of such groups, but we’ll see what that means as negotiations play out. So, in more clichéd terms: the proof will be in the pudding
So where to from here?
Labor will probably stay fairly quiet until the final report comes out later this year. It certainly won’t move to legislate until 2024. How many of the recommendations will survive into legislation is anyone’s guess at this point; nearly all political actors have a dog in this fight and any change will benefit some and disadvantage others.
Labor has consistently said that they want bipartisan support on any significant electoral reform, but that may be hard to achieve without significant concessions.
The Coalition wants the disclosure threshold to be set at $8000, instead of $1000, citing the importance of protecting the privacy of donors. According to their dissenting report, during the 2022 federal elections, there were “numerous incidents of small businesses endorsing political candidates and/or political parties and facing threats and boycotts by left-wing activist groups.”
MWM reached out to the deputy chair of JCSEM, Liberal senator James McGrath, for clarification about what “numerous incidents” refers to but received no reply by the time of publication.
The Coalition has also signalled strong opposition to donation caps if they allow any exceptions for union affiliation fees. The JSCEM recommendations call for an “appropriate exclusion” for “party membership fees, subscriptions, levies and affiliation fees” – so this may be a sticking point, and not just with the Coalition.
Human Rights Law Centre senior lawyer Alice Drury told JSCEM on Friday that “[t]o put it fairly bluntly, if we don’t actually cap membership fees to political parties, there’s not really much point in us all being here. That will just incentivise would-be donors to restructure their donations as membership fees.”
And, it’s not easy being Green
Of course, Labor doesn’t technically have to get the Liberals on board, but if they want to pass legislation through the Senate via the Greens’ balance of power, they’ll open up a fight on other fronts.
The Greens have spent the last decade vainly fighting both major parties for a total ban on donations from industries such as the fossil fuel sector, gambling, banking, defence, and pharmaceuticals. This isn’t without precedent; NSW bans donations from property developers and tobacco, liquor and gambling businesses and QLD locks out property developers.
Given Labor’s total rejection of the Greens over this for the last decade, it seems hard to imagine them being too receptive now. This week, Senator Waters told me that the party would “continue to use our balance of power in the Senate”. Her party’s comments in the JSCEM report also include a pledge to reject “partial reforms”.