Australian foreign aid is at an all-time low and should be dramatically increased

By Dr Tania Miletic
Research Fellow, Melbourne School of Government

In this election campaign, there are some very distinct trajectories for foreign aid: from continuing the policy of cutting and diminishing aid, to rebuilding aid as an asset in Australian diplomacy, trade and security.

Right now, Australian foreign aid is at an all-time low when measured as a proportion of Gross National Income (similar to GDP) - the international measure of showing a country’s generosity. Australia’s successive reductions place it within the group of the least generous Organisation for Economic Cooperation and Development (OECD) Development Assistance Committee donors.

Since 2013, Australian aid has been cut by a third to 0.22 per cent of GNI in 2017-18. The Coalition plans for further reductions to 0.20 per cent in 2020-21, well below the average for the OECD countries of the and UN target of 0.7% of GNI.

Aid generally accounts for only about 1% of the total spending of the Federal Budget.

In contrast, global trends show increasing aid generosity. Australia’s declining aid expenditure puts it at odds with the aid budget trajectories that many other OECD countries are following. British Conservative governments have increased official development assistance (ODA) to reach the OECD's 0.7% of GNI target in 2013. It has since passed a bill enshrining the 0.7% commitment into law.

A miserly attitude to foreign aid is also at odds with the spirit of Australian generosity. Last year Australia ranked second in the World Giving Index, ahead of New Zealand and only behind Indonesia, as reflected by the willingness of Australians to help a stranger, donate to charity and volunteer.

The rationale for substantially increasing funding to aid in response to the demand in a globally unstable and opportunity-laden environment is strong. In this election there are distinct policy choices for increasing Australia’s prospects of ‘stepping up’ or to continue in its current diminished state.

The Coalition’s policy

The rationale for previous cuts by the Coalition were due to budget deficit, leading one to expect an increased commitment by the Coalition now that it’s projecting a Budget surplus. But the Coalition’s forward estimates suggest aid volume will remain low.

The Coalition’s forecasts see Pacific regional co-operation stepped up with some big commitments to the region but not with new spending. The step-up in the Pacific comes at the cost of a step-down in other countries especially from East and Southeast Asia – some of which are well performing (by DFAT’s own standards) parts of the aid program.

Allocation to Africa remains negligible. Cambodia, Bangladesh, India, Nepal, and Pakistan have all been cut, in some cases dramatically. Taking from its Asia region to fund Pacific programs makes for an incoherent foreign policy.

Labor’s policy

There would be extra aid volume if the Labor Party wins power relative to the Coalition, committing to increase ODA as a percentage of GNI every year that they’re in office beginning with the first budget.

Shadow Minister for Foreign Affairs Penny Wong has said “Labor will rebuild Australia’s international development program – reversing the declining trajectory of the budget, rebuilding capacity and restoring consensus. Labor’s international development program will speak to who we are, the confidence we have in ourselves, the values we believe in and to the region and world we want to live in.”

Unlike the Coalition, Labor’s increased focus on the Pacific has not come at the expense of key partners in South and South East Asia.

Greens policy

The Greens, since 2016, have said that overseas development aid would be progressively increased to reach its 0.7 per cent of GNI, with provision for additional funding for major humanitarian crisis or conflict interventions. This will take it to a level that is the international benchmark but has never been achieved in Australia’s history.

Funding for diplomacy and aid needs to be substantially increased

Today’s global challenges require political solutions. This stands in contradiction to increasing trends of militarisation and securitisation and the decimation of Australian diplomacy and aid allocations. The proportion of the Australian budget allocated for diplomacy has been repeatedly and disproportionately reduced in most years for the last quarter century. Defence to aid ratio is now close to 9:1.

Australian foreign aid is one way our government plays a part in poverty reduction and addressing the drivers of global challenges such as disease, humanitarian crises, conflict, terrorism and climate change.

Amidst geopolitical competition in our region, bolstering funding not reducing overseas development assistance would serve Australia’s interests, as argued by DFAT Secretary Frances Adamson: Development cooperation helps us ensure that our Indo-Pacific region evolves peacefully, trades freely, and co-operates to build security.

Australia’s overseas development co-operation program has long been an under-resourced and under-utilised pathway for Australia to pursue its own national interests and support countries in the region to become more prosperous and politically stable.

Coalition - Primary Policy Documents

Budget 2019 | Aus aid

Labor - Primary Policy Documents

Humanitarian relief | Tax multinationals

The Greens - Primary Policy Documents

Overseas aid

Banner image: PNG counselling service for women, provided by AusAid. Image credit: Flickr/DFAT


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