Budget Review 2021–22 Index

Angela Clare

Australia’s aid spend will total an estimated $4.335 billion in 2021–22, a decrease of $144 million on the 2020–21 aid budget estimate of $4.480 billion. This represents a cut of 4.9% after inflation.

Similar to the format used in the Government’s October 2020 aid budget, the 2021–22 figure is made up of two parts: a $4 billion core budget, reported as ‘total ODA’ (Official Development Assistance), and a further $335.3 million in temporary support for COVID-19. The two figures—both ODA—are presented separately in the aid budget summary, allowing the Government to maintain its freeze on ‘base’ aid funding (2018-19 Budget paper no. 2, p.103) while providing additional support for COVID-19 in the region.

Forward estimates show a further decline in 2022­–23 to $4.118 billion, and for aid spending to return to indexation based on inflation (p. 57) thereafter.

Last year saw the first increase in aid spending since the Coalition came to power in 2013, with an extra $480 million provided for COVID-19 recovery efforts in the Pacific and Southeast Asia. The additional funds were announced in the 2020–21 Budget and a series of later announcements, with a further upwards revision made on budget night. Last minute adjustments to the 2020–21 Budget were the result of ‘front-loading’ expenditure on vaccines and other COVID-19-related support, reducing 2021–22 expenditure estimates.

The 2021–22 Budget has disappointed aid groups, hopeful for a stronger response from the Government in the context of the global COVID-19 crisis and Australia’s relatively healthy economic performance. The Australian Global Health Alliance—Australia’s peak body for global health organisations—and Pacific Friends of Global Health expressed their alarm at the Government’s decision to decrease the foreign aid budget ‘during the worst global health and economic crisis in a century’.

The decrease to the aid budget comes as new data from the OECD shows that donors have stepped up their response to the pandemic with global foreign aid rising to an all-time high in 2020—a 3.5% increase in real terms on 2019. Australian National University (ANU) academic, Stephen Howes, has noted that Australia stands out for recording one of the largest drops in ODA among DAC donors in 2020. While this may be partially explained by delays to aid spending over the 2020 calendar year, the data confirms a longer term trend that has seen Australian aid fall by 31% between 2011 and 2020, while globally aid has increased by 26%.

The Government denies it is cutting the aid program in 2021–22, arguing that it has maintained the ‘standard’ aid budget of $4 billion and committed ‘around a billion dollars’ in ‘temporary and targeted measures’ to respond to COVID-19 in the region.

ODA to GNI ratio

Australia’s ODA as a proportion of Gross National Income (GNI)—the official measure of development assistance—is estimated to drop from 0.22% in 2020–21 to 0.21% in 2021–22 (see Figure 1), placing Australia well below the OECD DAC country average of 0.32%.

Figure 1: Australia’s ODA to GNI ratio, 1984–85 to 2024–25 (estimated)

Source: Australian Aid Tracker

The aid budget’s proportion of Government spending also continues to decline, representing 0.74% of the Government’s budget in 2021–22, down from 1.56% in 1984–85. Stephen Howes shows that the Government spent ten times more on defence than it did on foreign aid in 2020–21, compared to a five-to-one ratio in 2013–14.

Looking forward, as Table 1 below shows, ANU Development Policy Centre analysis of DFAT’s forward estimates suggests that the aid budget will fall by a total of 12% from the current year out to 2024–25.

Table 1: estimated change to the aid budget, 2019–20 to 2024–25

	2019–20(a)	2020–21	2021–22	2022–23	2023–24	2024–25
Expenditure ($ million)	4,070	4,480	4,335	4,189	4,282	4,308
% change on previous year	--	6.3%	-4.9%	-5.5%	-0.3%	-1.9%

(a) Actual expenditure reported in Australian Official Development Assistance: Statistical Summary, 2019–20

Source: ANU Devpolicy aid budget breakfast presentation, 12 May 2021

Geographic and sector focus

Australia’s allocation of aid across countries and global and regional programs in 2021–22 remains largely stable, with a continued focus on the Pacific ($1.4 billion, or around 40% of the aid program). Of the more significant changes, aid to Bangladesh is up by 140% (from $56 million to $134 million)—which includes funding to support the Rohingya population—and South and West Asia Regional programs have increased from $18.6 million to $30 million, or 63%.

Table 2 shows Australian aid flows by region since 2019–20, while Figure 2 shows trends in regional allocations since 2011–12. Allocations are derived from the budget papers, and do not include additional COVID-19 support.

Table 2: total Australian ODA ($ million), 2019–20 to 2021–22, by region

Region	2019–20(a) (actual)	2020–21(b) (estimate)	2021–22(b) (estimate)
PNG & the Pacific	1,298.5	1,440.6	1,441.8
PNG	618.9	596.0	587.8
Other Pacific countries	679.6	844.6	854.0
Global & other ODA (c)	1,310.6	1,260.6	1,180.9
Southeast & East Asia	861.3	1,009.9	1,012.0
South & West Asia	312.6	193.4	273.1
Middle East & Africa	283.5	93.0	90.7
Latin America & the Caribbean	3.6	2.5	1.6
Total ODA	4,070	4,000	4,000

Sources:

(a) Department of Foreign Affairs and Trade, Australia’s Official Development Assistance: Statistical Summary 2019–20
(b) Department of Foreign Affairs and Trade, Australian Aid Budget Summary, table 4, 2021–22
(c) Includes regional and global programs that cannot be disaggregated to a lower geographical level

Figure 2: Australian bilateral aid flows by region, 2011–12 to 2021–22 (constant 2021–22 $A)

Source: ANU, Australian Aid Tracker: Destinations

The additional $335 million in COVID-19 support in 2021–22 is allocated as follows:

• $162.6 million for vaccines in the Pacific and Southeast Asia
• $100 million to address the impacts of COVID-19 in the Pacific and Timor-Leste ($200 million in
  2020–21)
• $56 million to support economic recovery in Southeast Asia and
• $16.7 million for emergency medical supplies to India ($20 million in 2020–21).

Gender equality remains a focus for the aid program, spearheaded by the new Pacific Women Lead program ($170 million, 2021–26). There is a small increase to global health funds, but aid groups are disappointed that the 25% cut to disability-inclusive development last year has not been restored. The Australian Council for International Development (ACFID) notes that there is no allocation for famine prevention, ‘despite high levels of food insecurity in the Middle East and Africa’.

Climate financing through private sector partnerships has received an additional $20 million in 2021–22, while funding for NGOs and volunteers remains steady.

At $485 million, humanitarian funding has not yet reached the Government’s pledge made in the 2017 Foreign Policy White Paper to spend $500 million annually in the sector.

ANU analysis suggests that while previous cuts to the health sector have now been restored, education and resilience (including disaster resistance and social protection) are the sectors which have borne the brunt of aid cuts in recent years.

COVID-19 and the aid program

In June 2020 the Department of Foreign Affairs and Trade (DFAT) released its ‘Partnerships for Recovery’ strategy (2020–2022) in response to the COVID-19 pandemic. The strategy refocused the aid program on responding to the immediate impacts of the pandemic in the Pacific and Southeast Asia, with particular focus on health security, stability and economic recovery.

DFAT estimates that 533 million people globally could be pushed back into poverty as a result of
COVID-19, ‘with women and people with disabilities disproportionately losing work opportunities’:

The pandemic is exacerbating impacts from underlying vulnerabilities, including natural disasters, malnutrition, health comorbidities, gender-based violence, and lack of water and sanitation facilities.

The 2021 Budget included a commitment of $100 million for vaccines under the Quad grouping, supplementing the $532 million pledged for vaccine access in the region through to 2023. The Government also pledged to provide ‘Australian manufactured doses’ of COVID-19 vaccines to the Pacific and Timor-Leste, but no further information on the amount of this support has been provided.

Australia has provided $80 million to the COVAX facility to ensure developing countries gain access to COVID-19 vaccines. Overall, Australia has provided 0.57% of global COVID-19 funding for the World Health Organization’s initiative to deliver COVID-19 testing, treatment and vaccines around the world.

So far Australia’s direct vaccine support to the region includes 20,000 Australian-manufactured vaccines to Timor Leste, 8,480 vaccine doses to Papua New Guinea and 10,000 vaccines to Fiji.

Commentary

Recent Lowy Institute polling suggests that while Australians have typically not been supportive of foreign aid, this view does not apply to COVID-19:

… eight in ten Australians (83%) say that Australia should help Pacific island countries pay for Covid-19 vaccines. This is striking in comparison to 2019, when less than half the population said that Australia should spend more in the Pacific. And six in ten (60%) say Australia should be helping Southeast Asian countries pay for vaccines.

In its pre-budget submission ACFID called on the Government to make its additional COVID-19 support permanent, develop a long-term aid budget strategy, and increase aid investments over future years to support the region’s COVID-19 recovery.

A number of foreign policy analysts have argued that the Government should increase its investment in foreign aid. Richard Maude, who headed the development of the 2017 foreign policy white paper as a senior DFAT official, has argued that repeated cuts to the aid program since 2013 have spread it very thin, and that the $4 billion Australia spends on foreign aid annually is not enough to achieve the nation’s goals in the region. Allan Gyngell, former head of the Office of National Assessments (now the Office of National Intelligence), has argued that the Government:

… did not value diplomacy and soft power to the same extent as defence and intelligence agencies. ‘‘It stems from the way we think about statecraft,’’ he said. ‘‘We accept the need to spend money on the instruments of defence and deterrence but we think that spending money on instruments of persuasion – whether that is aid, diplomacy or soft power – that’s somehow less real in terms of the effect that it has.’’

The Shadow Minister for Foreign Affairs, Penny Wong, and the Shadow Minister for International Development and the Pacific, Pat Conroy, have called on the Government to reverse its cuts to Australia’s aid budget, claiming that aid cuts ‘have diminished Australia’s standing in Indo-Pacific and have undermined our interests in a stable, secure and prosperous region’. Targets for the proposed increase were not provided.

For Stephen Howes, the recent OECD data on donor rankings ‘delivers a particularly harsh verdict on Australia’s aid effort, and on the extent and exceptional nature of our aid cuts over the last decade’. As one of the richest countries in the world, Howes contends, ‘we should be an aid leader, not an aid laggard’.

Howes grants that the Government may increase aid again through the year via specific announcements, as it did in 2020, but suggests that ‘Australia will come under pressure, both from the G7 and regionally, to do more’.

This brief was revised on 7 June 2021 to correct a minor error in Table 2.