Labor and the Coalition have cooperated on electoral reforms targeting the use of private money – which will hit the funding models of challengers such as Clive Palmer and the teals. By Mike Seccombe.

The bipartisan deal designed to thwart independents

A group of women dressed in blazers stand together at a press conference.
Member for Curtin Kate Chaney, with fellow independent MPs.
Credit: AAP Image / Lukas Coch

Almost one in three voters cast their ballot for someone other than a Labor or Coalition candidate at the 2022 federal election – not that you could tell from the numbers in parliament.

Only one in nine members in the House of Representatives – 17 out of 151 – belongs to neither of the major party blocs. The Senate somewhat more closely reflects the will of the people, but its 19 non-major party members make up just a quarter of the total.

That’s still enough to seriously put the wind up the big parties. They might not agree on much, but they are united in one goal: the preservation of their duopoly. Even as they fought the big fight over the referendum, they were quietly working towards a bipartisan position on a suite of reforms to the electoral system, designed to protect their dominance.

The expectation – based on the time line set by the Albanese government’s special minister of state, Senator Don Farrell – is the proposals will be introduced in the few sitting weeks remaining this year. That way, there will be time to implement them before the next election.

We don’t yet know exactly what will be in the package, but we have a pretty good idea, based on a few public statements, a lot of insider chatter and a report by the Joint Standing Committee on Electoral Matters.

The JSCEM report made 15 recommendations, including a couple that will go some way to improving the transparency of political party funding. It advised reducing the threshold at which donations to political parties and candidates must be declared – from the current $15,200 to $1000 – introducing real-time disclosure of donations, and that the government give “consideration to amending the definition of ‘gift’ ”.

The committee also recommended caps on both the amount donors could give and the amount that could be spent on campaigning, and greater powers for the electoral commission to enforce truth in political advertising.

The notable one, though, was recommendation 9, proposing “a new system of increased public funding for parties and candidates, recognising the impact … a reformed system will have on private funding in elections”.

Simply put, get taxpayers to pick up more of the cost of politicking.

The duopoly has tried to do this before. In 2013, the major parties quietly struck an agreement to increase public funding, but the deal fell apart once it became public knowledge, was roundly attacked in the media, and the Coalition party room revolted.

The Albanese government has a powerful motivation to try again, and a new argument for capping the amount of private money in the political system and replacing it with public funds. In two words: Clive Palmer.

Over the past two election cycles the eccentric right-wing mining magnate has spent about $200 million on campaigning. Despite the fact none of his candidates were elected in 2019, and just one in 2022, Palmer has flagged his preparedness to do it again. And with a net worth of $23.66 billion, according to this year’s The Australian Financial Review Rich List, he certainly has the means.

“The problem with Palmer,” says Richard Denniss, executive director of the progressive think tank The Australia Institute, “is that our electoral laws were not written with trolling in mind.

“The assumption is that everyone playing the game is trying to win. But Clive isn’t … He’s trying to stop someone else from winning.”

Palmer has admitted as much. After Labor narrowly lost the election in 2019, he said he had achieved his real goal.

In one of his few interviews on his proposed reforms, given in June when the JSCEM report came down, Don Farrell cited Palmer as a major rationale for change.

“The Australian electoral system shouldn’t be just open to people with lots of money,” he told Michelle Grattan in an interview for The Conversation.

“The expenditure by wealthy people to essentially buy election results is now completely out of control and we’ve got to do something about it.”

Labor has good reason to want to shut Palmer down, but why would the conservative parties have any interest in nobbling someone who’s prepared to spend millions attacking their opponent?

The answer is, of course, the teals. The big political story of the 2022 election was the loss of six Liberal heartland House seats to women – as well as a Senate seat to a man, David Pocock.

All ran hard on issues on which the conservatives were weak: climate change, the treatment of women and integrity in government. All have maintained a high profile and, assuming they don’t mess up in some big way, are likely hard to depose. All were high-calibre candidates, with strong grassroots support.

But they also had money. Climate 200, set up by a wealthy benefactor, Simon Holmes à Court, aggregated about $13 million of donations from 11,200 people.

The conservatives might not worry much about Clive Palmer’s activities, but they certainly do about the independents. As does Labor.

In 1975, almost 96 per cent of Australians voted for the major parties. Ten years ago, that proportion had fallen below 80, and the slide was accelerating. At last year’s election, it was only about 68 per cent, and among voters aged under 40, it was 63 per cent.

And those numbers, more than any real desire to clean up politics, are the motivating factor here, according to Denniss. “This is oligopolists colluding,” he says.

The suspicion is the full package of measures, with the combination of donation caps and public funding, will disadvantage challengers to the majors. Maybe even wipe them out, as has happened in Victoria.

Three years ago, the Labor state government introduced electoral law changes described by then premier Daniel Andrews as the “strictest and most transparent political donation laws in Australia”. The Victorian parliament now has no independent members, although there are MPs from minor, special-interest parties.

The changes limited donations by individuals to $4320 over each four-year electoral cycle and greatly increased public funding, from $1.20 per primary vote at the 2018 election, to $6.49 and $3.24 per primary vote for lower and upper house candidates, respectively, at last year’s election.

The new regime disadvantages challengers in several ways. For one, says The Australia Institute’s democracy and accountability program director, Bill Browne, the legislation provides for carve-outs that are available only to established parties.

“Membership fees, levies, payments from ‘nominated entities’ and contributions from candidates are not capped. With the exception of contributions from candidates, these carve-outs are limited to registered political parties.”

The big one relates to money provided by nominated related entities, such as the Liberal Party’s Cormack Foundation, which last year provided a reported $7 million.

“For Labor, the nominated entity is Labor Holdings and Services, and for the Nationals it’s Pilliwinks. The parties are getting more money from those carve-outs than they do from donations from members of the public,” says Browne.

Indeed, his analysis of the available data showed the Victorian Labor Party received more money from its staffers and 70 MPs via levies than it did from the remaining six million Victorians via donations.

The changes, he concluded, have done little to make the funding of the big parties less opaque. Instead, they have ensured the majors no longer need rely on contributions from the public to mount successful campaigns.

It’s a different story for challengers, however. Because the public funding is calculated on the basis of the vote share in the previous election, an independent having a first tilt at election gets nothing up-front to help them.

Moreover, the per-vote funding is not seat-specific, so it can be pooled. Given elections usually are decided by the results in a relative handful of electorates, the major parties can spend little on safe or unwinnable seats and pump the saved money into marginals.

In its submission to an independent review of Victoria’s electoral and political donations system in July, Climate 200 calculated that if the majors spent 80 per cent of their campaign funds on 20 per cent of electorates, the Coalition could use about $600,000 of public funding for each priority seat, and Labor about $750,000.

“Assuming a major party candidate has a war chest of $500,000, and an average donation size of $569, an independent challenger would need to find 879 donors, just to match the funding the state provides to a major party campaign,” it said.

“The only funding independent challengers have access to is donations, capped at a maximum of $4320 per donor.”

Another unfairness: independent candidates’ public funding is classified as taxable income, whereas it is not taxable for parties.

It’s the same in the federal sphere, says Kate Chaney, one of the teals elected last year and the architect of a far more stringent electoral reform bill than the Victorian legislation or, we can safely bet, the forthcoming federal package. Her bill would, for example, require unions and publicly listed companies to gain members’ and shareholders’ approval before making political donations.

Having won her seat, Chaney did get reimbursed for her expenditure “after it was useful”, and then discovered that under the current laws it was taxable as personal income.

Still, it will be a lot easier for her to fight the next election, because she and the other independents now have the advantage of incumbency.

According to The Australia Institute’s analysis: “Every election cycle, each Member of Parliament is entitled to at least $2.9 million, and each Senator to at least $2.6 million worth of salary, office and travel allowances, and staff.

“These resources can be used towards re-election campaigns, creating barriers to entry for challengers that help explain why 90% of incumbents get re-elected,” it said.

Chaney’s fear – and she suspects, the intent of the proposed funding changes – is that the changes coming from Farrell and his Coalition counterpart, Jane Hume, will make it even harder for new independents.

“The effect of increasing public funding is that political parties don’t have to fundraise because they’ve got their war chests. But any challengers do have to fundraise,” says Chaney.

But what can be done about someone rich enough that they don’t need either public funding or donations, like Clive Palmer?

Richard Denniss has suggestions. “One way, for example, would be to impose a maximum percentage amount that a party can get from any one person. But Labor, and the Liberals in particular, are very keen to throw the baby out with the bathwater.”

Simon Holmes à Court shares his cynicism.

“When the rule-makers are the beneficiaries, they’re not looking to enhance democracy,” he says. “One thing that unites the majors is sustaining their cosy duopoly in the face of declining support and their fear of minority government.”

He suggests the big parties have two options to arrest the slide in their popularity: “One, be better; or two, fix the rules in their favour.”

Historical precedent suggests the second option may be too tempting.

This article was first published in the print edition of The Saturday Paper on October 14, 2023 as "State of donation".

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