Briefing paper
June 2023
Introduction
For too long, big money has been allowed to buy big influence in Australian politics. The upcoming report by the Joint Standing Committee on Electoral Matters into the 2022 election represents a unique opportunity to rid Australian politics of big money’s insidious influence. While the transparency measures the Government has already publicly committed to are welcome and significant, they will not remedy the problems of undue influence and inequality that have been entrenched by the current system and are evident in donations concentration and electoral expenditure data.
Analysis by the Centre for Public Integrity has revealed a substantial increase in the power of large donors over the last 15 years: while the top 5 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. Similarly, while in 2005-06 the top 5 per cent of donors contributed only 41 per cent of total donations, this has since doubled to 82 per cent. These figures threaten our constitutional guarantee of political quality, and present a potential corruption risk for Australia’s governing parties.
The potential for wealth to interfere with electoral outcomes is also evident in ballooning electoral expenditure. Between 1998-99 and 2021-22, total payments by parties, and electoral expenditure by candidates and independents, grew by 84.7 per cent to $439 million. Similarly, the average cost per independent win has soared from $106,055 in 2001 to just over $1.1 million in 2022 – an increase of 947.5 per cent.
Only appropriately-designed donations caps and expenditure caps – both of which are already operational in various Australian jurisdictions – are capable of arresting the donations arms race, reducing the capacity for wealth to distort electoral outcomes, and ensuring that our elections are a contest of ideas rather than dollars. These caps are a critical part of our Reform Principles (see below), which set out an integrated suite of changes to get big money out of Australian politics.
Donation concentration
Australian Electoral Commission (‘AEC’) disclosures for the 2021-22 financial year reveal that the concentration of political donations to Australian political parties continues to rise. Both the average size of donations, and the proportion of total donations funded by a select few, are now at record highs.
Unlike New South Wales, Victoria, and Queensland, there is no cap on Commonwealth political donations. It is widely acknowledged that large political donations, especially by corporations, pose a significant corruption risk to Australia’s governing parties; they also threaten to undermine our constitutional guarantee of political equality.[1]
The most concentrated year on record
Figure 1 reveals a rapid increase in the power of large donors over the last 15 years. While the top 5 individual donors made up 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. Similar trends are observed for the concentration of the top 10 and 20 donors.
Figure 1: Top 5, 10 and 20 Donors as Proportion of Total Political Donations per year: 2005/06 – 2021/22
A similar pattern is observed when comparing percentages of donors and proportions of total donations. As seen in Figure 2, in 2005-06 the top 5 per cent of donors made up only 41 per cent of total donations. This has since doubled to 82 per cent.
Figure 2: Top 5, 10 and 20 per cent of Donors as Proportion of Total Political Donations per year: 2005/06 – 2021/22
Donor concentration is high across both major parties. From 1998-9 to 2021-22 the top 5 individual donors to the ALP contributed $205.4 million, or 34.5% of their total donations. The top 5 donors to the Coalition contributed $118.8 million, or 22.6% of their total donations.
ALP donor concentration 1998-9 to 2021-22
| Top 5 | Top 10 | Top 15 | Top 20 | |
| Donations | $205,437,478 | $293,714,397 | $336,335,056 | $359,571,080 |
| Percentage of total (%) | 34.8 | 49.8 | 57.0 | 60.9 |
| Top 5% | Top 10% | Top 15% | Top 20% | |
| Donations | $464,517,327 | $503,575,136 | $522,547,881 | $534,709,826 |
| Percentage of total (%) | 78.8 | 85.4 | 88.6 | 90.7 |
Coalition donor concentration 1998-99 to 2021-22
| Top 5 | Top 10 | Top 15 | Top 20 | |
| Donations | $118,775,626 | $159,514,482 | $182,892,507 | $199,824,972 |
| Percentage of total (%) | 22.6 | 30.3 | 34.8 | 38.0 |
| Top 5% | Top 10% | Top 15% | Top 20% | |
| Donations | $346,219,131 | $397,611,913 | $425,117,407 | $443,524,981 |
| Percentage of total (%) | 65.8 | 75.6 | 80.8 | 84.3 |
Median donation climbing
The median donation, adjusted for inflation, continues to climb: while in 2005-06 it amounted to under $28,000, Figure 3 shows that this figure had increased to $38,500 by 2021-22.
Figure 3: Median Real Donation 2005/06 – 2021/22
Electoral expenditure
While the AEC records electoral expenditure of candidates, it records only total payments of political parties and their branches (with electoral expenditure constituting a proportion of total payments). Between 1998-99 and 2021-22, total payments by parties, and electoral expenditure by candidates and independents, grew by 84.7 per cent.
Figure 4: Political party, candidate and independent payments 1998/99 – 2021/22
Figure 4 shows that while payments at the 2022 election were slightly lower than at the 2019 election, they are nonetheless significantly higher than at any other time in Australian history. That it is undesirable for our democracy to be fuelled by dollars, and the consequent need to introduce both donations and expenditure caps, is self-evident
Experience both domestically and internationally suggests that caps on electoral expenditure increase the size of the pool of candidates, the diversity of candidates, and the competitiveness of elections.[2] In New South Wales, Queensland and the Australian Capital Territory (which introduced expenditure caps in 2010, 2011 and 2012 respectively), not only has expenditure reduced, thereby reducing the demand for funds, spending between the major political forces has been equalised. [3] There is no evidence to suggest that these caps are entrenching incumbency and making it more difficult for new entrants to compete – in fact, the difficulty new entrants face is nowhere more evident than in the soaring average cost per independent win under the current system of uncapped expenditure. As Figure 5 shows, the average cost per successful independent campaign has increased by 947.5 per cent since 2001, from $106,000 to $1.1 million.
Figure 5: Average cost per independent win 2001 federal election – 2022 federal election
Conclusion
As our analysis of donor concentration and electoral expenditure data establishes, the power of large donors has increased substantially over the last 15 years. The opportunity to finally get big money out of politics must not be squandered, and the Centre for Public Integrity urges the Parliament to adopt our integrated set of Reform Principles in order to remedy the problems of undue influence and inequality that permeate the current system, and begin to finally establish a level playing field.
Getting big money out of politics
Reform Principles
Transparent and fair donations
- Real time disclosure of donations over $1000, and disclosure of electoral expenditure every 3 months. Annual analysis providing aggregated amounts and trends.
- Definition of donation broadened to include income from party fundraisers, corporate sponsorship of business forums, membership and affiliation fees over $2000 per year, and any gift that is received into the campaign account.
- Donations caps set at $5000 per year per donor
Equitable spending caps
- Spending caps designed to cut current electoral expenditure by at least 30 per cent.
- Spending caps to apply 2 years after the previous election to political parties, independents, associated entities and significant third parties, with the independents cap being proportionally higher to account for party advantage.
- Spending cap proportional to the number of electorates, with a negotiation system between candidates and the party to distribute the single cap (like used in SA).
Democratic public funding
- Decrease the public funding threshold, and increase the rate for candidates receiving 10 per cent of the primary vote or less.
- Start-up fund available for policy development and administration for new candidates and parties, similar to the NSW New Parties and Administration funds, accessible via application to the AEC.
Limiting incumbency benefits
- Limit the incumbency benefits of sitting MPs, including by restricting the use of parliamentary printing and communications entitlements during election years.
- Stop the use of government advertising promoting government members or policies 2 years after the previous election, either by extending and independently enforcing the current caretaker conventions, or by implementing a statutory ban (with exemptions for emergencies).
Effective compliance and enforcement
- A properly resourced enforcement arm within the AEC, and strengthened anti-circumvention offences and penalties.
- Public funding withheld for serious or systemic breaches.
- Review of political finance legislation after the first election held post-implementation.
- An accessible and automated compliance portal provided and maintained by the AEC.
REFERENCES
[1] McCloy v New South Wales (2015) 257 CLR 178, 207 [45] (French CJ, Kiefel, Bell and Keane JJ).
[2] Alexander Fouirnaies, ‘How Do Campaign Spending Limits Affect Elections? Evidence from the United Kingdom 1885-2019’ (2020) 115(2) American Political Science Review 395; Eric Avis, Claudio Ferraz, Frederico Finan and Carlos Varjão, ‘Money and Politics: The Effects of Campaign Spending Limits on Political Entry and Competition’ (2022) American Economic Journal: Applied Economics (forthcoming); Nikolaj Broberg, Vincent Pons and Clemence Tricaud, ‘The Impact of Campaign Finance Rules on Candidate Selection and Electoral Outcomes: Evidence from France’ (NBER Working Paper 29805, February 2022) < https://www.nber.org/papers/w29805>.
[3] The Centre for Public Integrity, submission to the Joint Standing Committee on Electoral Matters, Inquiry into the 2022 federal election (7 October 2022) 10-11.