Over the past week or so, Sam Dastyari has tried to contact Gladys Liu.

The former New South Wales Labor senator feels some sympathy for the beleaguered Victorian Liberal MP, having lost his political career through involvement with Chinese money and a man he now describes as “an agent of influence”.

Unsurprisingly, Liu – facing questions about her links to the Chinese Communist Party and her fundraising efforts – has not returned his calls.

Watching the debate over Gladys Liu’s ties to organisations linked to the CCP, Dastyari has a sense of déjà vu. But he’s changed his view of fundraising.

“Do not underestimate just how much pressure political parties and political apparatchiks are under when it comes to fundraising,” he told The Saturday Paper this week.

“This is an arms race and the arms race has built into it, now, what is kind of a mutually assured destruction to the system. And that is what we are seeing played out. You cannot go into an election campaign being massively outspent by your political opponents and expect to win.”

Dastyari is now a campaigner for electoral funding reform.

He has joined calls for a publicly funded electoral system in which political parties no longer raise private funds.

He says although it may require a constitutional amendment to ban private donations, the current system creates the risk of corruption.

The former senator points to allegations being levelled against Labor and Liberal figures in his home state of NSW, where he was formerly Labor state secretary. “Shady dealings, Aldi bags and cash in the NSW branch – people shake their heads and say, ‘Why do these things happen?’” he says.

“They happen because the system has inbuilt an arms race.”

Instead of just looking at the symptoms, he says, policymakers should examine the cause. “Sometimes the best option is to flip the card table and start again.”

Dastyari says people don’t understand what donated money buys. Rarely is it a direct policy change or specific decisions.

“That’s far too simplistic an interpretation of a very complex system,” he says. “What you actually end up doing is getting access … [The] opportunity to put your case – and frame an argument in the way in which you want that argument to be framed with decision-makers – is of huge value.”

Opportunity seekers pay a lot. While small crowdfunded contributions are also sought, they are not the focus.

“Don't kid yourself that money doesn’t buy access … You have to ask, ‘Is it the best outcome for a system that those with money can buy a seat at the table?’ ”

“That’s not the model of political donations in this country,” Dastyari says. “The model is a small group of people giving very large amounts of money, either individually or through their organisations. The most innocent interpretation – that they’re simply doing it to support ideological views they already have – in itself distorts the system.”

Sam Dastyari says that pressure to raise money naturally affects MPs’ attitudes, just by virtue of spending so much time around rich people. “The thing they all have in common is that they have money. Your value system is simply going to get skewed.”

Donations are never for nothing.

“Don’t kid yourself that money doesn’t buy access,” he says. “If I walk in, prepared to make a large donation of, say, $50,000 or $100,000 or $150,000 to a political organisation, that will get me dinner – either through an auction or even a direct party program. That will give me access to the senior leadership. And even in its most innocent interpretation, you have to ask, ‘Is it the best outcome for a system that those with money can buy a seat at the table?’”

Dastyari says Chinese business figures donating in the Australian political system are just like others, in the sense they want access to further their business interests.

But there is an extra dimension – they are seeking to also create a personal network of Australian political connections that helps them earn power and status back in China.

“What was different about these Chinese donors was the scale was quite large,” he says. “It was very noticeable. We’re talking about what, in Australian politics, is large sums of money. We’re talking millions of dollars being donated across the political spectrum.”

Dastyari says some donors also have “a more nefarious agenda”, pushing not only business interests but geopolitical issues as well.

In discussing that, he is concerned about inflaming anti-Chinese sentiment, a significant byproduct of this whole public debate.

On Thursday, Chinese–Australian writer and commentator Jieh-Yung Lo raised those concerns in an online opinion piece for the ABC. “We feel that as a community we are becoming collateral damage,” he wrote.

Prime Minister Scott Morrison has accused Labor of making a racist smear against all 1.2 million Chinese Australians by raising questions about Gladys Liu’s connections and allegiance, amid unconfirmed reports security agencies warned against preselecting her.

This week, the English-language newspaper the Global Times, whose content is authorised by the Chinese government, defended Liu and backed Morrison’s argument.

“The target of this ferocious attack was not Gladys Liu herself, but China,” correspondent Chen Hong wrote. “By insinuating Liu was a Chinese agent who had infiltrated Australia’s federal political arena, Cold War combatants have sounded the alarm once again on China as an evil menace to Australia’s political sovereignty and national independence. The actions have provoked a new wave of paranoid hysteria among China-threat conspiracy theories.”

Before the article appeared, Opposition Leader Anthony Albanese accused Morrison of hypocrisy. During the donation scandal, the prime minister had repeatedly referred to Dastyari as “Shanghai Sam”. Last week, he appeared to deny that he ever said it.

“The only person linking concerns about Ms Liu to the entire Chinese–Australian population is Mr Morrison,” Albanese said. “He should stop.”

This week, Labor failed repeatedly to force Liu to make a formal statement in parliament addressing the allegations of undeclared donations and China connections. She has declined to explain in detail how she had managed to reportedly raise about $1 million for her own campaign in the seat of Chisholm – exponentially higher than most other MPs.

Government senate leader Mathias Cormann told the senate that Labor’s candidate in Chisholm, Jennifer Yang, was also a member of “a number of the same organisations” and branded the Labor attack a “disgraceful, unsubstantiated smear and dog-whistle”.

“The truth is, Gladys Liu is a proud Australian and a committed Liberal,” Cormann said. “… She has the government’s full support.”

In response, Labor’s senate leader, Penny Wong, accused the government of hiding behind the Chinese–Australian community. “Making this about race is a really grubby political tactic,” she said.

“So many Chinese Australians can see right through what the prime minister is doing … It is shameful. As someone who has experienced racism firsthand, I object most strenuously to the way you are using it in order to divert attention from legitimate questions that even your own Liberal Party have asked.”

Nevertheless, those leading Labor’s scrutiny of Liu are conscious of the impact of such public debate, knowing it doesn’t have to be designed to incite prejudice to have that effect.

The opposition broadened its attack midweek to include Anglo-Australian MP Jason Wood from the seat of La Trobe. Wood rejected allegations he had used his electorate office for fundraising in breach of ministerial standards.

The allegations related in part to an upcoming event at which Liu and Assistant Treasurer Michael Sukkar have been advertised as special guests.

Government officials are watching the whole debate closely with an eye to the already-tense diplomatic relationship with China.

Inside government and beyond, the point is being made that belonging to a Chinese-linked organisation or celebrating China’s development does not automatically make people a security risk.

When assessing who is or isn’t a potential security threat, Australia’s security agencies use three categories: influence, interference and espionage.

Influence is benign – the practice of seeking to shape a positive view of a nation, an organisation or an individual.

It’s what governments engage in through both their diplomatic missions and private organisations – cultural, sporting, business and other common-interest groups – to exercise what is known as soft power.

Interference occurs when exerting that influence becomes clandestine, involving covert activities and funding sources.

Espionage involves moving that to the level of accessing state secrets, providing them to a foreign power and scaling up the covert activity to disrupt or shape what happens in another country.

Interference is now formally defined in Australian law within the National Security Legislation Amendment (Espionage and Foreign Interference) Act and, along with espionage, is a crime.

But in the realm of political donations and influence, the law allows quite a lot.

Dastyari now says he was naive in his dealings with Chinese donors, especially developer Huang Xiangmo. “I was used by an agent of influence,” he says. “But that’s on me, not on them, for letting myself get used.”

Asked when he realised that, he says: “Like a frog in boiling water, not until well after I was cooked.

“I had a long period of depression after I left parliament … Many long nights, long reflection, gave me the opportunity to be able to think back and piece together what exactly happened, because no one from any security agency has ever spoken to me ever, about anything. I’ve never met with anyone from any security agency ever. That’s a fact.”

He says he takes responsibility for his actions and isn’t looking for sympathy, just trying to share a painful lesson that destroyed his career, and his marriage.

“I’m not saying this as some academic in an ivory tower who’s never raised money. I’m saying this as … probably one of the largest fundraisers the Labor Party has ever had, right? And looking back on the system with a failed career and the benefit of hindsight.”

When asked whether others endorsed what he was doing while only he paid a price, he declines to comment.

Dastyari acknowledges some will view his anti-fundraising conversion with cynicism and says reaching that realisation earlier might have saved his own career.

“I’m saying these are the warning signs for others.”

One of those others is doubtless Gladys Liu. Having resisted calls to address parliament on her own activities, on Wednesday morning she appeared in the federation chamber – the parallel extra chamber of the house of representatives, used to manage overflow business – and made a short speech.

But there was no mention of the political storm. Instead, in a constituency statement about her electorate, Liu congratulated local junior sports teams on their premiership victories.

She also thanked the NewHope Baptist Church in Blackburn North for allowing her to volunteer, serving meals at its free dinner on Saturday night.

The prolific fundraiser offered perhaps just the slightest reflection on her current predicament.

“There is a saying,” she noted, “that charity begins at home.”