Can the teals resist this $90m party invitation?

The new law on political donations has all the hallmarks of a backroom deal that helps the dealmakers and shuts out the rest. Labor and the Liberals sealed their pact in the Senate on Wednesday night regardless of calls for more time to debate the changes and more compromise on the outcome. The law went through quickly, shortly before an election, when many Australians have other things on their minds – not least their household budgets.

The result is a flawed regime that has outraged the independent campaigners who have gained so much ground in recent elections – not just the teals but the smaller parties and the non-aligned crossbenchers who have outwitted the majors and tapped into a deep frustration with the political duopoly.

Illustration: Simon LetchCredit:

But the new law is a huge improvement on a broken system. It is meant to throw some sunshine on the big money that shapes our politics. It may be a missed opportunity, but it is not a failure. It will deliver faster disclosure, a cap on donations and a cap on campaign spending. It will make it harder for billionaires such as Clive Palmer to swamp campaigns with cash.

Trade Minister Don Farrell, one of Labor’s canniest backroom operators, struck the agreement with the Liberals, including Queensland senator James McGrath, after months of preparation. While the government offered the independents some small amendments, it would not budge on the core changes. It wanted the veneer of crossbench support – and was repudiated. The crossbench voted overwhelmingly against the final bill.

The law will not apply to the coming election but is certain to shape future ones. That’s because money is the brickwork beneath the party, which builds the platform for the leader: the financial structure decides the political structure. Australian politics will be different after this law, and that means the teals and smaller parties will have to adapt.

The new limit on campaign spending is $90 million in a year for a political party – whether it be Labor, the Liberals, the Greens or others. It is lower than the sum Palmer spent on the last election – roughly $117 million – but it’s still generous. It is a necessary safeguard. In theory, a cap is a limit on free expression because those who want to offer money and support should be free to do so. In practice, the donations can warp politics. Look at the White House: big money has not made American democracy stronger.

The limits on donations are more complicated – and easier to get around. Donors can pay up to $50,000 each year to the party they support, ending the era of open-slather payments. But it looks like this can be done for every state and territory division as well as a national office, which means a party could in theory collect nine times that amount in a year. In other words, $450,000 from a single donor.

Even better for the fundraisers, the annual limit resets when an election campaign begins. The donors could chip in $450,000 a year over the three years of an election cycle and then do the same when the campaign is called. It is not clear how this will work because the law went through so quickly this week.

The new disclosure regime, however, is reasonably clear and a definite improvement. Under current rules, a donor who makes a payment today only has to send the paperwork to the Australian Electoral Commission by November, and the public would only see this the following February. The system is a disgrace. The new approach is to disclose soon after payment.

Outside an election campaign, a donor has 21 days to notify the AEC, which will then disclose the donation. During an election campaign, the time frame narrows to seven days, and then to 24 hours in the final week of the campaign. This will require a lot of work at the AEC, which is one reason it cannot be done in time for this year’s election.

The threshold for disclosures is a workable compromise: $5000. This is lower than last year’s threshold – $16,300 – but higher than Labor first promised. Those who donate less than $5000 do not have to disclose, and they might be able to make similar deposits in nine states and territories. There will still be plenty of “dark money” in the system.

What should worry voters, however, is another part of the regime: more public funding for campaigns. The AEC currently pays candidates $3.39 for every vote, but this will rise to about $5. While everyone gets a share of this, the biggest parties get the biggest share.

Remember, that money goes on robocalls, corflutes, social media campaigns, mainstream advertising and all the other things that bombard voters. How much of it do we really need? And how much of it should we pay for through our taxes? The Centre for Public Integrity, a not-for-profit group led by former judges, says the public funding boost is unjustified.

The glaring problem for the independents, however, is the cap on spending in each electorate. The law says candidates and parties can only spend $800,000 on a specific seat – much lower than the outlays of $2 million or more in some of the teal contests at the last election. This is a great outcome for the Liberals because it stops the arms race they lost so badly.

Independent candidates, meanwhile, will not have a national campaign behind them. A political party will be able to run national advertising that influences voters in each electorate without it being classed as “targeted” expenditure on the seat. That party could spend $800,000 on the local effort as well.

This was one reason Zali Steggall took on Farrell in the corridor of the Parliament House press gallery on Thursday morning. There is fury on the crossbench at the way the major parties have passed a law to help themselves. “It is so cynical and it will backfire, because it will galvanise and energise the independent movement,” says a crossbench adviser.

Farrell had a reasonable rejoinder on Thursday to the argument for a higher cap to help the teals: “If you can’t get your message out to the Australian people with a spend of $800,000, then there’s something wrong with your campaigning.” The imbalance between the parties and the independents is not enough to justify a $2 million avalanche in the key seats.

The parties have some advantages for good reason: they built large, national organisations over decades with members across the community. Unfortunately, it is also true to say the biggest parties are in poor shape. They have lost members over decades and this has turned their factional bosses into big fish in small ponds. Parties without broad membership are easily exploited by branch-stackers and big donors.

So the weakness of the major parties is the political illness behind these donation reforms. Labor and the Liberals should not need more public cash to keep them campaigning – they should have members willing to fund that fight themselves. But they have done a deal that keeps them hooked up to a Commonwealth drip. This is not sustainable over the long term: federal money cannot match committed volunteers.

What comes next? Independent campaigns will adapt to the new financial structure. Groups such as Climate 200 have always denied they work like political parties, but they will be tested under the new regime because they will have a financial incentive to build bigger national organisations to raise cash.

Independents often share core beliefs. The teals ran on shared issues at the last election, including action on climate change, equality for women and integrity in government. There is no reason those campaigns cannot be run by a national organisation. You might even call it a political party.

The donation law offers financial fuel to the major parties to turn their flamethrowers on their rivals. The teals and other independents will have to respond to a regime that gives political parties an advantage. They will probably want to fight fire with fire.

David Crowe is chief political correspondent.

Cut through the noise of federal politics with news, views and expert analysis. Subscribers can sign up to our weekly Inside Politics newsletter.