In this final week of campaigning for the 2016 Federal election, spending by political parties will ramp up as parties try to convince undecided voters. A great deal of money spent will come out of your pocket — I’m talking the $2.62 that candidates get per first preference vote, but also the organisations that spend the money you give them to make political donations. This post analyses donation data to identify the donors and to identify the reasons donations are made.

Under the Commonwealth Electoral Act 1918, persons who make donations to registered political parties totalling above a certain threshold are required to lodge annual returns detailing the donations. The Australian Electoral Commission publishes information about the donations made by individuals online. We’ll look at the most current information available, which is the returns for FY2015 (a non-election year) when about $23.5 million was donated:

Answering the question of who makes large political donations is very similar to the questions investment banks and management consulting firms ask during interviews — if you try pin the tail on the donkey, people will not be impressed even if you’re right. It’s preferable to narrow down the possibilities by exclusion (ie, not those who can’t afford to donate), and also by asking why a person would make a donation. Donations may be made by do-gooders. I accept this — there are philanthropists who happily donate to political parties instead of art galleries. It also seems that some who donate large amounts do so to influence policies. Let’s see whether this holds true.

By separating donors into industry groups, a picture emerges that certain industries are over-represented (eg, only about 14 of the ASX50 — including related parties — donated above the threshold). Looking at the list of donors, there is a large body of individuals, presumably well-off. These are our do-gooders. 43 do-gooders, 0.0002 per cent of the population, or 1 in every 500,000 people, making about 7.76% of all the political donations.

The balance of donors are corporate entities. How likely it that these organisations donate because they have spare cash on their balance sheets and care about good government? I say not very. The corporate entities seem to belong to certain interest groups (property, financial services, medical/pharma and mining/energy) that are aligned with businesses liable to be affected by government regulation. For example, pharmaceutical companies depend on continued funding of the government subsidisation of medicines through the pharmaceutical benefits scheme, while property developers depend on continued favourable tax treatment to maintain demand for new developments. It’s possible then that donations are made for the purpose of ensuring continued favourable regulation.

That organisations seek to influence policies and regulation by making donations to political parties is not an original thought. The AEC register exists principally so these donations are publicised — so that interest groups can be identified. Special interests successfully lobby for various sub-optimal policies, it is said, because:

1. citizens do not care to get riled up about technical policies the costs of which are dispersed over all citizens (rational ignorance, cf issues such as the inhumane treatment of refugees, which is something that is viscerally important);

2. the benefits of the policies are shared by a small special-interest group with strong incentives;

3. special-interest often target lobbying efforts at policies which are difficult for the general public to evaluate; and

4. even if some individuals notice, the diffusion of interests across individuals makes collective action difficult.

If we look at donations by those in the financial services category, by way of example, we can see that there’s clear support for the Liberal/National Party coalition over the ALP. The ALP is much less friendly to financial services than the Liberal party. Financial services are heavily regulated, and the majority of voters, even those passionate enough to post Facebook status updates and sign change.org petitions will find the issues difficult to understand. That seems to explain the $220,000 that Macquarie Bank donated to the Liberal/National Party coalition in FY2015.

It’s interesting to see that even the Big 4 banks, whose customers would likely fall evenly on either side of the political spectrum, donated heavily in favour of the Liberal/National Party coalition. Again, that they did so suggests that they were advancing their self-interest when donating rather than some other good-hearted goal.

Finally, because this is ostensibly a blog about the legal market, let’s look at law firms and barristers. Firms and barristers care very little about the election if the amount of donations they make is an indicator of interest. (To be precise, it might be the case that a lot of lawyers donate money, but below the reportable threshold.)

As you can see, the ALP donors are comprised by the standard set of plaintiff firms, Maurice Blackburn and Slater & Gordon and others, with a cameo by Corrs. Slater & Gordon, whose top three clients are the CFMEU and the AMWU, and John Setka (the CFMEU boss), donated over $35,000. What motivated that donation? I’ll leave that to you to decide.