Myles McGregor-Lowndes argues that there’s good reason to be optimistic about giving in Australia.

Myles McGregor-Lowndes argues that there’s good reason to be optimistic about giving in Australia.

Usually, I am tagged as a pessimist, but I am optimistic about continued growth of giving in Australia for the near future. I am reminded of the famous experiment where a pessimistic child is put in a room full of toys and observed to cry, out of anxiety about breaking something. An optimistic child is put in a room full of horse manure with a spade and madly tries to find the pony.

Fundraisers are usually optimistic and trying to find ponies. There is an exception: when they speak to the press midway through their annual appeal about being on the losing end of donor fatigue and thus fearful of not reaching last year’s appeal total, let alone this year’s target.

No evidence of donor fatigue

Perceptions of donor fatigue are at odds with the evidence. In the decade between 1997-98 and 2007-08, the total tax-deductible donations claimed by individual Australians more than tripled, from $611 million in 1998 to $2.35 billion in 2008. It’s interesting to note that the amount claimed in 2008 ($2.35 billion) far exceeded that claimed in 2005 following the Boxing Day Tsunami ($1.5 billion) – little sign of donor fatigue there.

The average amount given and claimed by Australian taxpayers has also increased sharply over the ten years between 1998 and 2008. It has increased by 182% – from an average annual tax-deductible donation claim of $185.13 to $523.10 in 2008. Even when adjusted for inflation as measured by the CPI, the increase between 1998 and 2008 is remarkable.

Increase in number of donors

Not only did the size of donations increase between 1998 and 2008, but so did the number of donors. In 1998, approximately 32% of Australian taxpayers claimed tax-deductible donations on their tax returns. In 2008 this figure had increased to exceed 35% of Australian taxpayers. The highest participation rates were in 2005 following the Boxing Day Tsunami appeals when almost 38% of Australian taxpayers claimed donations on their tax returns.

There are more organisations seeking funds in the community, but the increase in number of deductible gift recipient (DGR) organisations is not great: since 2000 the ATO has endorsed fewer than 5,000 new DGRs.

While more research is required, I suspect that there are multiple factors supporting sustained giving increases.

Australians are wealthier

Australians are wealthier by any measure and the increase has been greatest for those in the top wealth bracket. We are also generally confident about the future, which tends to increase the number and size of large gifts. There are also increasing numbers of self-made wealthy people or first generation wealth, which again should result in increased giving.

Fundraisers smarter at raising awareness

Fundraisers are becoming smarter at raising the awareness of need and their cause. In order to make a donation, individuals need to be made aware that someone needs their support. To induce giving, subjective perceptions of need are more important than the objective measure or actual need. The more opportunities people are given to donate, the more likely they are to give, and these opportunities appear to have increased.

Demonstrating effectiveness

Though there is still much room for improvement, nonprofits are better at showing the efficacy of donations. The donor’s perception that their contribution makes a difference to the cause they support is important for the overall donor lifetime value. Perceptions of efficacy are also related to confidence in the charity and favourable perceptions of overheads and fundraising costs.

Incentives lower cost of giving

The costs of giving have been lowered slightly in the past decade by various tax incentives. The Prescribed Private Funds (PPFs) – now known as Private Ancillary Funds (PAFs) – arrangement resulted in a total of $2.14 billion in donations between 2000 and 2008. This is a more convenient giving vehicle for many. It also allows private bankers, brokers and financial advisors to craft a product to sell to clients.

While individual donors care about the public benefits associated with the work of the organisations that they support, they are generally not motivated by pure altruism and also care about the private benefits or incentives associated with philanthropic giving.

PAFs have become a ‘must have’ in certain social circles. I believe that people who donate to charitable causes are held in higher regard by their peers. Slowly, more people are willing to share their philanthropic giving and receive recognition.

Giving feels good

Giving can contribute to an individual’s positive self-image and can also provide an immediate and positive emotional response. I perceive that more Australians are experiencing such feelings and this too leads to increased giving.

I am noticing that more individuals see philanthropy as a means to reach a desired state of affairs that is closer to one’s view of the ‘ideal’ world. Individuals, particularly the young, are supporting causes they believe can change the world in the direction they value.

A golden age?

Fundraisers should make the most of the generally positive climate of Australian giving, build solid relationships with donors and keep banking the trust and confidence in their organisations. I still think there are plenty of ponies out there and … a fair bit of manure as well!