Political donations to Labor resume following Rudd's exit

Prime Minister Julia Gillard after delivering her speech at The Lowy Institute for International Policy. Picture: Cameron Richardson

THE shift from Kevin Rudd to Julia Gillard has been as important as the mining tax deal.

THE federal Labor Party has enjoyed renewed interest from sections of the business community wanting to give it political donations since Kevin Rudd was replaced as prime minister by Julia Gillard.

This is worrying news for Coalition leader Tony Abbott, whose conservative side of politics has been struggling to raise funds for some time.

It has only been two weeks since Rudd was rolled as Labor leader, but already Labor's national secretariat has started fielding calls from one-time donors looking to renew their relationship with the party. Helping that process along were a series of good polls for Labor the weekend after Gillard became leader, followed by the newly constructed mining tax arrangements announced last Friday.

New political leaders often get a honeymoon shortly after taking over, but few expected Gillard's to be so immediate, given the way Rudd was removed from office. It was an unedifying, if electorally necessary spectacle. It all says a lot about the extent to which Rudd was the problem when it came to poor polling for the government in recent months.

People who knew Rudd well always said that when the public started to get acquainted with him, their attitude towards him would change.

During the mining tax debate, Labor found that its donations from business dried up very quickly. The mining industry itself has never been a major contributor to the Labor Party, indeed to either major party (with the exception of donations from identities such as Clive Palmer, who gives generously to the conservatives). But interestingly, even though the mining tax in part paid for a lowering of the company tax rate from 30 to 28 per cent, to be enjoyed by other sections of the business community not saddled with the super-profits tax, the way the government treated the miners left others in business unimpressed with the Labor government and therefore unwilling to attend fundraising dinners, participate in the usual rounds of raffles and auctions, or donate directly in a way that appears on the annual donations register.

In short, it left business feeling that Labor was no friend.

That animosity towards Labor was quite personal - aimed at Rudd - with Labor sources suggesting the personality shift from Rudd to Gillard has been every bit as important as the deal over the mining tax, the more conciliatory rhetoric and the party's improved position in the polls.

Before the latest turnaround in Labor's funding fortunes, the national secretariat was becoming overly reliant on dollars from the union movement. It is well known that Labor receives millions of dollars in political funding from the unions, especially in election years. But that dependence has been greater this election year than it has been for a long time.

Why this was bad for Labor is quite simple: first, the government wouldn't want to owe the unions more than is necessary in the aftermath of the next election, because you can bet the unions would look to cash in credits owed to it. Second, the perception of the government needing more money than usual from the union movement, on the back of opposition claims that senior factional and union leaders gave Gillard the leadership in a sweetheart deal, isn't the sort of publicity Labor needs closer to the elections.

The problem for the opposition with the shifting ground in the mining tax debate is that it hasn't made a great deal of financial gain out of mining donations up until this point in time. Yes, in Western Australia the party's funding quota has been met, and it is now sending money to other states. But, for the most part, the mining industry chose to raise funds for its campaign against the original design of the super-profits tax through the Minerals Council of Australia, not via the Liberal Party. With the advertising detente now in place, that means the reserve funds raised are MCA funds for future endeavours on behalf of the industry (or money that will simply be paid back to the sources), not Liberal Party funds to be used in the run-up to the next election.

Businesses rarely donate to either major party for ideological reasons - which is a long-held gripe of Liberals, because they are the party more likely to enact policies designed to encourage free enterprise and therefore business. Most businesses use two yardsticks when making a decision on which party to donate to: the party's chances of winning and being in power, and the need to avoid the perception of partisanship. If there is no clear choice on the former point, the later becomes immaterial: businesses will usually give more generously to the side likely to win in order to ensure access and influence when policy decisions are made.

If, however, the contest appears likely to be close, as federal elections usually are, businesses will either donate roughly equally or not at all, to avoid any appearance of playing favourites and potentially putting an incoming government offside.

Because for so much of the current term of government the Coalition has been out of the political contest, according to the polls, its business fundraising has been slow. In contrast, Labor has done quite well, up until the beginning of this year anyway. Now, with the improved fortunes of the government following the change of leader, its business fundraising is picking up again.

Combined with government advertising in areas such as telecommunications, climate change and health, and the nearly endless resource advantages of incumbency, as well as millions of union dollars flowing Labor's way, the next election will be a David and Goliath contest when it comes to which side of politics has the money and the means to deliver its message effectively.

Throw in Gillard's effective, plain-speaking style and Abbott has lost the final edge he always had over the nearly incomprehensible former prime minister.

No wonder Liberals are starting to panic.