Ban on donations confusing: Tony Abbott.

Ban on donations confusing: Tony Abbott. Photo: Andrew Meares

Prime Minister Tony Abbott has blamed confusion over the former NSW Labor government's ban on political donations from property developers for some of the Liberal Party's woes at the Independent Commission Against Corruption, including the resignation of two state MPs last week.

In a radio interview on Monday, Mr Abbott also revealed himself as being at odds with Premier Mike Baird on the issue of election funding reform, declaring it is "right" that parties have to seek money from the public.

The view is in direct opposition to Mr Baird's push for full taxpayer-funded elections in NSW following evidence at the ICAC about illegal fund-raising by the NSW Liberal Party.

Pushing election funding reform: Mike Baird.

Pushing election funding reform: Mike Baird. Photo: Getty Images

Last week, former Liberal MPs Andrew Cornwell and Tim Owen resigned from the NSW Parliament after it was revealed they accepted tens of thousands of dollars from property developer Jeff McCloy to fund their campaigns before the 2011 state election.

Property developers have been prohibited from donations to NSW election campaigns since 2009.

Asked during the interview whether the standing of politicians had been diminished by the evidence heard at the ICAC and the resignation of the MPs, Mr Abbott said he believed it had.

But he said "the problem" was that the former NSW government had banned donations from property developers and introduced caps on the total amount able to be donated to political parties and individual candidates.

"Who exactly is a developer?" Mr Abbott asked. "That can sometimes be a difficult question."

He said "political parties need to raise money. I think it's right that political parties have to go to the public and seek support that way rather than just being able to rely solely on the taxpayer."

However, he added: "Plainly, some people have cut corners. It's quite possible some people have broken the law and, if that's the case, whatever party they're in, they should face the consequences."

Mr Baird has commissioned a panel led by businesswoman Kerry Schott to examine options for reform of the NSW election funding system.

Dr Schott has been asked to report by December but Mr Baird has signalled the introduction of some measures in time for the elections next March.

The NSW Greens are proposing a model they say would significantly increase public funding of elections but still allow some donations to avoid it being struck out by the High Court.

Under the proposal, political parties would be entitled to reimbursement of 85 per cent of what they spend on a campaign – up from about 33 per cent at present.

Donations to parties would be capped at $1500 – down from the current $5000. For candidates, the cap would be $500 – down from $2000.

The list of banned donors would be expanded to include mining and extractive industries, companies now holding government contracts or intending to bid for them in the next four years, and registered clubs and "other not-for-profit gambling entities".

Greens MP Jamie Parker will introduce a private members' bill when Parliament resumes next month. He said waiting until December "simply means we will go to the next state election under a system that is thoroughly corrupted".