30
April 2019
PDF version [316KB]
Angela
Clare
Foreign Affairs, Defence and
Security Section
The 2019–20 aid budget
The 2019–20
Department of Foreign Affairs and Trade (DFAT) budget contains few
surprises for Australia’s aid program. In 2019–20 total aid expenditure is
estimated to be $4.04 billion, a fall of around $117 million from last year’s
$4.16 billion estimate, and the sixth consecutive year that the aid budget has
been cut in real terms.[1]
Over the forward estimates, ODA is anticipated to remain at around $4 billion
until indexing
of the aid budget in line with inflation recommences in
2022–23.[2]
As indicated in the figure below, under the
present government aid as a proportion of gross national income (GNI)—a
long-standing measure used to rank OECD donors—has fallen considerably, from
0.32 per cent in 2014–15 (or $5.1 billion) to an estimated 0.21 per cent of GNI
in 2019–20 ($4 billion).[3] After inflation, the ANU’s Development Policy Centre estimates
that aid has been cut by 27 per
cent since the last Labor Budget of 2012–13.
Australia’s ODA to GNI ratio, 2012–13 to 2022–23
Source: ANU DevPolicy 2019–20 Aid aggregates spreadsheet, 3 April 2019.
Key points: aid budget 2019–20
Australia’s 2017 Foreign Policy White Paper continues
to provide the policy framework for the aid program. Australia’s Pacific ‘step-up’,
one of the priority initiatives under this framework, gathered momentum in 2018
with a range of new government commitments, including strengthened
security cooperation and increased financing for infrastructure. Countering
China’s growing influence and investment in the region is
one of the main drivers of Australia’s heightened Pacific engagement.
In line with its Pacific pivot, Australia’s total
aid to the Pacific will increase by around $100 million to ‘a record level’ of
$1.4 billion.[4]
Bilateral aid to most Pacific countries remains steady, with most of the
increase coming through regional, global and other government departments’
expenditure.[5]
The $2
billion Australian Infrastructure Financing Facility for the Pacific (AIFFP)
is the Government’s major initiative in the Pacific. Announced in November
2018, the four-year AIFFP comprises a $1.5 billion loan facility and $500
million grants component. The Facility aims to fund priority gaps in telecommunications,
energy, transport and water infrastructure. While the loans
will be non-concessional and therefore not ODA-eligible, the grants are ODA-eligible
and will be drawn from the aid budget. DFAT will receive an
additional $12.7 million to manage the AIFFP when the facility starts in
the middle of the year. The AIFFP spend in 2019–20 is estimated to be $50
million.[6]
Total aid to the Pacific includes the
$70 million Pacific Labour Scheme (2018–19 to
2022–23), which has been expanded to include Timor
Leste as
well as Fiji, Kiribati, Nauru, Papua New Guinea, Samoa, Solomon Islands, Tonga,
Tuvalu and Vanuatu. The scheme enables workers from Pacific Island countries to
take up low and semi-skilled work opportunities in rural and regional Australia
for up to three years.
Expanded funding for secondary school
scholarships and scholarships for vocational training and education is also a
feature of Australia’s aid to the Pacific in 2019–20.
The increase in aid to the Pacific is offset
by cuts
to other regional and country programs, as shown in the table below. Total
aid to Pakistan will fall from $49 to $32 million, Nepal drops from $31 million
to $23 million, and Indonesia and Cambodia will each fall by around $18 million.
Aid to the Middle East and Palestinian Territories also drops from $137 million
to $81 million in 2019–20.
Total Australian ODA, 2017–18 to
2019–20 (A$,’000) by program
| Region |
2017–18 (a)
(actual) |
2018–19 (b)
(est.) |
2019–20 (b)
(est.) |
Real change (c) (%)
2018–19 to 2019–20 |
| PNG and the Pacific |
1 107 200 |
1 286 300 |
1 381 400 |
+5.0 |
| Global |
1 199 400 |
1 301 200 |
1 187
400 |
–10.8 |
| Southeast and East Asia |
1 065 900 |
1 027 200 |
1 005 800 |
–4.2 |
| Middle East and Africa |
339 400 |
258 500 |
199 800 |
–24.4 |
| South and West Asia |
361 500 |
284 800 |
266 200 |
–8.6 |
| Latin America & the Caribbean |
8 900 |
5 900 |
3 300 |
–45.3 |
| Total ODA |
4
082 328 |
4 161
000 |
4 044 000 |
–5.0 |
Sources: (a) DFAT, Australia’s international development assistance: statistical
summary 2017–18 (b)
DFAT, Australian aid budget summary, 2019–20 (c) Parliamentary Library calculation:
real conversion based on CPI for 2017–18 and Budget 2019–20 CPI forecasts for
2018–19 and 2019–20.
In line with its
shift towards economic partnerships and away from funding services in Southeast
Asia, the Government is investing $121 million to provide technical
advice to ASEAN governments on how best to manage infrastructure
development, including avoiding debt traps. It is also increasing funding for
cybersecurity in both ASEAN and the Pacific from $15 million in 2018–19 to $34
million in 2019–20.[7]
Humanitarian aid (which includes funding for
emergencies and disaster risk reduction as well as for international
organisations providing support to refugees and displaced people), will
increase from $410 million to $450 million, moving the Government a step closer
to meeting its 2017–18
commitment to increase overall spending in this area to $500 million per
annum.
Commentary
Non-government
organisations (NGO), which have previously warned that there is no fat
left to trim after more than $11 billion of cuts since the Coalition came to
power in 2013, have attacked the aid
budget as short-sighted and ill-conceived. Aid groups are particularly critical of the
Government’s move towards using aid for more strategic purposes at the expense
of traditional aid, such as health and education programs, as well as climate
change and inequality. They have also criticised the Government’s failure to increase aid
funding in the face of a forecast return to surplus.
The Australian Infrastructure Financing
Facility for the Pacific has been cautiously
welcomed as a step towards meeting the region’s infrastructure needs.[8]
It has also been seen as a significant
shift in Australia’s financing for development, which to date has been provided
almost entirely in grants.[9] While full details of how the
AIFFP will be managed are not yet available, a number
of concerns have been raised about its potential operations. These include
the non-concessional nature of loans, the region’s capacity to effectively
absorb more finance, and how policy reform, skills transfer, good governance
and infrastructure maintenance can be built into its projects.
Whether a declining aid budget can
effectively support Australia’s foreign policy objectives remains a critical issue
for aid and foreign policy analysts. Some argue that Australia’s
Pacific ‘step-up’ has come at the expense of South and Southeast Asia. Citing
the Coalition’s $690 million of cuts to aid to Asia since 2012–13, the ANU’s Stephen Howes
asks:
... does it make sense to keep
robbing Asian aid programs to expand Pacific ones? Asia has a bright future,
but it also still has a lot of need, and instability. Aid works better in Asia
– DFAT’s own data shows that. And whatever the strategic arguments for
providing aid to the Pacific, they are equally strong for aid to Asia.[10]
The provision of aid to Southeast Asian countries would
likely support their transition through middle-income status, and possibly better
position Australia to advance the shared socio-economic, environmental and
strategic interests in the region. A re-balance of the aid program towards Asia
may assist future governments to shore up Australia’s position as the ‘partner
of choice’ for its regional neighbours.[11]
Looking more widely, Jonathon Pearlman (Australian
Foreign Affairs Weekly) writes that in the face of intensifying
international challenges, the
budget presents a ‘pitiful response’:
Admittedly, many of the
problems that the nation and region face will not be solved by spending
measures but by careful, creative diplomacy. This would include handling
alliances and partnerships shrewdly, and demonstrating a commitment to active
and humane global cooperation that can serve as an international example and
ensure that Australia has a credible voice when it demands that other nations
do more. Yet, when it comes to funding, the budget indicates that the
government is unwilling to commit to long-term solutions to the challenges it
outlined.
The Labor Opposition has also criticised the cuts to the aid
budget, arguing that they lessen
Australia’s influence at a time when ‘our national interest compels us to
engage more deeply’. The comments follow their pledge to
increase Official Development Assistance as a percentage of GNI every year that
it is in office, if re-elected. The Australian Greens have
committed to a 0.7 per cent GNI aid target by 2030.
The aid budget continues to be a topic that ignites public debate.
Senator Pauline Hanson’s February 2019 Senate motion
sparked ongoing social media debates on the proposal to divert
the aid budget to farmers and others affected by natural disasters in
Australia.
In March 2019 over 50 community leaders and public figures
called for bi-partisan leadership to rebuild
Australian aid, after five consecutive years of cuts which they claim has
left Australia’s aid budget at its lowest level in history. NGOs have welcomed
Labor’s commitment to increase the aid budget over time if elected to
government, which includes modest
increases to the Australian NGO Cooperation Program (ANCP).
Non-government organisations, led by the Australian Council
for International Development (ACFID), have long campaigned to halt cuts to the
aid budget and restore ODA levels. ACFID’s 2019
pre-Budget submission calls on the
Government to increase the aid funding by ten per cent each year for the
next six years, towards the UN-recommended
target of 0.7 per cent of GNI by 2030.
Parliamentary inquiry into Australia’s aid program
On 3 April 2019 the Joint Standing Committee on Foreign
Affairs, Defence and Trade released the first report of its inquiry
into Australia’s aid program in the Indo-Pacific. The report found that the
aid program is an important vehicle through which Australia can exercise
strategic influence, and has a record of considerable achievement. It noted
that there was a need to strengthen Australians’ confidence in the aid program,
and recommended changing its name to reflect the mutual benefits that flow to
Australia and its partner countries. It also recommended the Government support
efforts to increase public awareness of and support for the aid program.
The report noted that Australia can do more, and that
stability and certainty in the aid budget would enable the aid program to build
on its achievements, particularly in regard to women and girls, people with a
disability, the poor and other marginalised groups. Noting the importance of
returning to a bi-partisan agreement on Australia’s development assistance, the
report recommended that the Government commit to increasing the aid budget to at
least 0.5 per cent of GNI within five years, and a second timeframe to reach
0.7 per cent of GNI over ten years. The Committee recommended that the
Australian Parliament introduce a legislated floor of an initial 0.5 per cent
and then 0.7 per cent of GNI for aid, once these funding levels have been reached.
[1].
The updated estimated ODA outcome for 2018–19 in the 2019–20 Budget papers
has increased to $4.33 billion. See DFAT’s Australian
aid budget summary, 2019–20, p. 105. In May 2018 the
ABC’s Fact Check confirmed that the aid budget had been cut in real
terms over
five consecutive years.
[2].
The 2018–19
budget paper no. 2 notes that total ODA will trend back towards $4 billion
in 2020–21 due to the finalisation of Asian Infrastructure Investment Bank
funding contributions (p.103).
[3].
Development Policy Centre, Australian aid tracker: trends,
Australian National University website.
[4].
Minister’s Foreword, Australian
aid budget summary, 2019–20.
[5].
For an overview of other government department expenditure, see the Australian
aid budget summary, 2019–20, pp. 99–102.
[6].
As reported by the Australian Council for International Development’s (ACFID)
2019–20
federal budget analysis, citing Treasury officials.
[7].
Australian aid budget summary, 2019–20, op. cit., p. 9.
[8].
J Hayward-Jones, ‘Labor’s
ambitions in the Pacific’, Lowy Interpreter, blog, November 2018.
Jones argues that the AIFFP ‘appears to be a constructive way of supporting the
infrastructure demands of our neighbours without resorting to raids on the aid
budget (as occurred when the Turnbull government decided to fund the undersea
internet cables for Papua New Guinea and Solomon Islands). However, we should
be cautious in assuming how well funded such an investment bank would be and
how capable it would be of offering a genuinely better option than Chinese
concessional loans’.
[9].
S Howes and M Dornan, ‘Moving
beyond grants: questions about Australian infrastructure financing for the
Pacific’, Draft paper, ANU Development Policy Centre, 20 February 2019.
[10].
S Howes, ‘An
incoherent aid budget’, Devpolicy blog, 3 April 2019.
[11].
G Earl, ‘Economic
diplomacy: trade and traps in ASEAN’, Lowy Interpreter, 14 March
2019. Earl cites Richard Moore’s point that Australia is now at the tail end of
the top ten development partners in Southeast Asia and ‘most worryingly,
Southeast Asia has all but disappeared in the public policy discussion of
Australia’s development policy interests’.
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