The founders of the Liberal Party thought business money had too much influence over its predecessors and sought independence. Gough Whitlam went off the rails seeking Iraqi money in 1977. Minor parties, like the Greens, usually have very little, but debate its pernicious influence when some comes their way. Union donations to Labor have always been controversial.

Recently big money has enabled a range of political campaigns, beginning with the Your Rights@ Work campaign by the union movement against the Howard Coalition government in 2007 and running through various campaigns by wealthy interests, like miners and clubs, against the Rudd-Gillard Labor government.

Money is controversial in politics, a necessary evil perhaps. There are frequent attempts to limit its influence, sometimes by eliminating the need for it by restricting campaign expenditure. The grounds for eliminating its influence are that money is usually seen as a corrupting rather than positive influence. It can certainly distort political judgment. Money is also seen as giving some citizens unfair advantages over others and so making a mockery of one vote one value, a core principle of representative democracy.

Money in politics can't reasonably be eliminated altogether. Without it there would be no big parties, groups or campaigns. Reformers generally have two goals, often not spelled out clearly. One is to make political competition fairer by levelling the playing field as far as political donations are concerned by putting limits on what can be donated. The second, sometimes in the absence of the first, is to make political donations and political expenditures by so-called third-party groups as transparent as possible through public reporting.

Australian experience in trying to do this, like other regulatory efforts, is mixed at best. Donors will go to all sorts of lengths, like setting up shell companies to make donations and laundering money through complex money trails, to avoid public reporting mechanisms. Secondly, reporting often takes place well after the event, usually an election, that the money seeks to influence. Transparency is much less useful as a consequence.

Both individuals and groups possess wealth. Few individuals of great wealth serve in Australian parliaments, though there are some exceptions, like the Victorian Premier, Ted Baillieu, Malcolm Turnbull and, by marriage, Kevin Rudd. But many extremely wealthy individuals exercise power in politics either directly or indirectly through the media. Examples include millionaires like Clive Palmer (LNP) and Graeme Wood (Greens), not to mention the media barons like the Murdochs and Packers, and would- be media barons like Gina Rinehart.

Wealthy groups play a major role in politics through supporting one or other of the major political parties. Trade unions invariably support Labor, indeed they created it. Corporations disproportionately support the Coalition. This collective use of money is commonplace. One advantage of such spending in the case of unions is that individual workers pool their money to have an influence they wouldn't otherwise have. But in both cases the individuals involved, whether unionists, clients or consumers, have little or no say about where their money is going. That is an ethical problem.

This is the context for the current, controversial NSW state government legislation. This radical legislation, building on 2010 Labor legislation that capped donations from any source, will be challenged in the High Court on the grounds that it is unconstitutional according to constitutional lawyers like Graeme Orr of the University of Queensland and George Williams of the University of NSW. That court has already played a role, when it ruled against the Hawke government's attempt to strictly limit electronic campaign advertising, citing constitutional protection for freedom of political communication.

The issue is complex as demonstrated by the fact that the Liberal-National government won the support of the Greens to pass the bill in the NSW upper house. Both are in competition with Labor and not surprisingly it is Labor that emerges least well from these proposals. Premier Barry O'Farrell says this will end the ''decisions for donations'' culture in NSW. Opposition Leader John Robertson says it will allow wealthy individuals to run riot in politics to the detriment of ordinary citizens.

Orr nicely summarises this Election Funding, Expenditure and Disclosures legislation. First it allows only individuals, not organisations, to make political donations. Unions, corporations, churches and community groups are banned. All of them, including Christian lobbies and social service councils will be excluded, but unions will suffer most because of their 120-year-old link with the Labor Party.

Secondly, direct campaign expenditure by such organisations will be counted as expenditure by a political party if they are affiliated with that party. The union-Labor link is the only example of such an affiliation in Australia. Williams reckons the first two elements taken together will destroy Labor as it is currently structured.

Thirdly, not-for-profit community organisations are prevented from pooling their resources to run election campaigns advocating one party over others. Only so-called issue-oriented campaigns are allowed.

Yet wealthy individuals and individual groups or unions can run partisan campaigns.

If the NSW legislation is upheld, and even more so if the ideas spread, it will dramatically change Australian politics. Imagine the 2012 ACT elections being conducted under these rules.

However, one can see plenty of unorthodox money trails emerging to circumvent this law. Individuals may suddenly become wealthy.

In the meantime some aspects will be challenged in the courts.

John Warhurst is an emeritus professor of political science at the Australian National University. John.Warhurst@anu.edu.au