Aid and foreign policy initiatives


Budget Review October 2022–23 Index 

Dr Angela Clare

The October 2022 aid budget increases Australia’s development assistance to the region by $1.43 billion over the next 4 years, driven by growing security concerns and development needs in the region.

Australia’s official development assistance (ODA, or aid) for 2022–23 now totals $4,651.1 million, an increase of $102 million on the March 2022 budget estimate ($4,549 million).

The bulk of the extra funding falls in the following 3 years (2023–24, 2024–25 and 2025­–26), which see an average gain of $440 million on previous estimates. Table 1 shows forward estimates in nominal prices.

Table 1        Official development assistance, 2021–20 to 2025–26, nominal prices  

$ million  2021–20 Oct 2022–23 2023–24  2024–25  2025–26
Expenditure  4,457(a) 4,651(b) 4,768(c)  4,784(c) 4,871(c)

(a) Department of Foreign Affairs and Trade (DFAT), ODA Budget Summary 2022–23 (March 2022)
(b) DFAT, ODA Budget Summary October 2022–23 (October 2022)
(c) Australian Council for International Development, October 2022–23 Supplementary Federal Budget

The COVID-19-related temporary measures introduced by the Morrison Government over the last 3 years have been folded into the aid budget ‘base’, making these increases permanent.

Despite the increases, ANU Development Policy Centre analysis suggests that aid will continue to fall in real terms across the forward estimates, decreasing by 5% by 2025–26 when adjusted for inflation. Figure 1 compares aid adjusted for inflation under the previous and current governments.

Figure 1       Aid adjusted for inflation under the Coalition and Labor

Graph - showing Aid adjusted for inflation under the Coalition and Labor

Source: ANU Development Policy Centre

The October 2022 Budget sees no change in Australia’s ODA to gross national income (GNI) ratio, which is estimated to remain at 0.20% in 2022–23, well below the current OECD Development Assistance Committee (DAC) average of 0.33%. Australia ranks 21 out of 29 OECD DAC countries on generosity of ODA programs, despite being the ninth largest economy in the group.

Specific measures

The additional $1.43 billion in development assistance over the forward estimates (details of which can be found in Budget measures: budget paper no. 2: October 2022–23, pages 110–115) includes:

  • $900 million to the Pacific and Timor-Leste (up from the $525 million pre-election commitment)
  • $470 million for Southeast Asia (no change from pre-election commitments)
  • $30 million for the Australian NGO Cooperation Program (no change from pre-election commitments)
  • $26.6 million in additional departmental resourcing for DFAT program administration.

Pacific

Australia’s increased aid to Pacific Island countries – estimated to total a record high of $1.9 billion in 2022–23 – aims to ensure that ‘we remain a partner of choice for the countries of our region and responsive to Pacific priorities’ (p. 1).

The Government identifies support for action on climate change and COVID-19 recovery among its priorities in the region. This includes ‘supporting Pacific economies to grow, unlock opportunities and boost connectivity to priority sectors’, providing direct budget support to Pacific Island countries to ensure the delivery of essential government services such as health, water and sanitation, education and investing in women and girls, which ‘has a powerful effect on economic growth and wellbeing’.

While a detailed breakdown of how the new funding will be allocated has not yet been provided, $75 million has been directed through bilateral programs, with Kiribati (up by 32%) and Samoa (up by 22%) receiving the largest increases. Regional programs will increase by 39%, or $212 million.

Specific measures include:

  • $500 million to increase grants for infrastructure in the Pacific and Timor-Leste, a doubling of grant funding under the Australian Infrastructure Financing Facility for the Pacific (AIFFP). The AIFFP now totals $4 billion: $1 billion in grants and $3 billion in loans. The additional funding is over 10 years and will be met from the existing ODA program (p. 110). It includes:
    • $50 million from existing funds to establish a Pacific Climate Infrastructure Financing Partnership
    • $25 million in additional funding over 4 years to DFAT to administer the facility.

The Government has also announced a number of non-ODA initiatives to support ‘security and engagement priorities’ in the region. These are largely funded through existing resources and include:

  • $67.5 million over 4 years (and $12.4 million per year ongoing) to enhance the Pacific Australia Labour Mobility Scheme (p. 111)
  • a new Pacific Engagement Visa, allowing up to 3,000 nationals of Pacific Island countries and Timor-Leste to permanently migrate to Australia each year (p. 150)
  • Pacific Security and Engagement Initiatives (pp. 114–115):
    • $45.7 million over 2 years to support Australian Federal Police deployment in Honiara through Solomon Islands’ International Assistance Force
    • $6.9 million to establish an Australia-Pacific Defence School
    • $30.4 million over 4 years (and $14.5 million ongoing) to upgrade aerial surveillance capability under the Pacific Maritime Security Program
    • $22.3 million (and $6.4 million ongoing) to establish a network of Australian Border Force officers across the Pacific
    • $32 million over 4 years for the ABC to expand its content and transmission in the region.

Southeast Asia

In line with its pre-election pledge to deepen Australia’s engagement with Southeast Asia, the Government has pledged an additional $470 million in aid to the region over the next 4 years. DFAT’s aid budget summary notes that this funding will ‘support sustainable economic growth that enables the active participation of women and invests in human capacity and resilience’, and that Australia will help countries in the region transition to net-zero emissions.

Myanmar will increase to $120.6 million (up 22%), Vietnam to $92.8 million (up 17.5%) and Cambodia to $12.9 million (up 19%). Regional programs will increase by $117.8 million to $372.5 million.

Specific initiatives for the region include:

  • $200 million for a Climate and Infrastructure Partnership with Indonesia, focusing on climate and infrastructure financing, disaster mitigation and renewable energy
  • $9 million (non-ODA) to appoint a Special Envoy to Southeast Asia and establish a new Southeast Asia office in DFAT
  • $4 million (non-ODA) to establish a pilot in-country language skills program in Vietnam.

The Government has also committed to supporting a regional order with ASEAN at its centre, and deepening Australia’s regional economic and security cooperation through the ASEAN-Australia Comprehensive Strategic Partnership.

Other foreign policy measures

  • $2 million over 2 years has been allocated to develop a First Nations Foreign Policy and to establish an Office of First Nations Engagement, headed by an Ambassador for First Nations People (p. 112)
  • $2.2 million has been allocated for Memorial Services for the Bali Bombings Travel Assistance Fund (p. 114).

Drivers of change

The boost to the aid program comes as global threats to security and development continue to escalate. According to the United Nations, the number of people affected by hunger has more than doubled in the past 3 years. Commenting on the recent release of its Poverty and shared prosperity report, World Bank President David Malpass noted:

Of concern to our mission is the rise in extreme poverty and decline of shared prosperity brought by inflation, currency depreciations, and broader overlapping crises facing development. It means a grim outlook for billions of people globally.

DFAT’s October 2022 aid budget summary notes that in a region where ‘22 of our 26 nearest neighbours are developing countries’, Australia will ‘play its part in supporting sustainable development’ and address the ‘shared challenges’ of ‘climate change, COVID-19 recovery and deteriorating global economic conditions’. It also notes:

For the first time in 20 years, the number of people living in extreme poverty has increased. Women and girls have been impacted most, with almost half a billion now living below the poverty line. Global food insecurity means over 800 million people go to bed hungry each night. (p. 1)

Growing instability in the region is also driving increased investment in Australia’s aid program. Announcing the Government’s increased assistance to the region, the Foreign Minister was reported to have stated:

… Without these investments, others will continue to fill the vacuum and Australia will continue to lose ground ...

Our assistance will help our regional partners become more economically resilient, develop critical infrastructure and provide their own security so they have less need to call on others.

New aid policy

On 14 October 2022 the Albanese Government called for submissions on the design of a new international development policy, to set the long-term direction of Australia’s aid program. The new aid strategy will replace the 2-year interim aid strategy, Partnerships for recovery, developed under the Morrison Government as a response to the COVID-19 crisis in 2020.

The Albanese Government has also asked DFAT to conduct a review into new forms of development finance for Australia, to ‘support Australia’s foreign policy, trade, security and development objectives and help countries in our region achieve their development and climate objectives’.

Commentary

In the context of growing strategic competition in the region, Pacific expert Joanne Wallis has argued that increased spending was ‘not the only answer’ for Australia to improve relationships with the region, and ‘a lot will depend on how the increased funding is spent’. Wallis suggests that ‘so far, the ALP government has struck a positive tone in their public statements about the Pacific and indicated a willingness to listen and respond to the Pacific’.

The boost to the aid budget has been welcomed by the Australian Council for International Development (ACFID), which has been concerned about the prospect of a fall in the aid budget as temporary COVID-19 measures come to an end in the next 2 years. ACFID has also welcomed the Government’s renewed focus on gender equality across the aid program, but called for this focus to translate into increased funding in the next Budget.

Some aid groups have strongly criticised the Government’s failure to increase the humanitarian budget in the face of ‘multiple global crises’ and have called for the Government to ‘broaden its focus on aid beyond the Pacific’. Help Fight Famine Australia has urged the Government to provide $150 million to address the urgent food crisis unfolding in Somalia, Yemen, Afghanistan, Syria and the Horn of Africa, in addition to the $15 million it has provided to date.

Some groups have also queried the development value of increases to the Australian Infrastructure Financing Facility for the Pacific (AIFFP), with ACFID concerned that ‘the Government is locking in significant funding from a limited ODA budget to a Facility which has a largely geostrategic rationale and has minimal proven development impact’ (p. 21). In particular, ACFID is concerned that without increasing funding for ‘social infrastructure to support inclusive and equitable economic recovery’, Australia risks compounding Pacific debt burdens and compromising governments’ abilities to fund essential services.

ACFID also expressed its disappointment that AIFFP climate-related investments will be fully or partially counted towards Australia’s $2 billion climate finance commitment, ‘given that the most significant climate needs in the Pacific are for adaptation, which AIFFP lending is unlikely to be able to fulfill’ (p. 21).

 

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