Budget Resources
Matthew Keene
The 2023–24 Budget provides a comprehensive
investment package for the Pacific that includes aspects of aid and development
and defence and security. In a joint media release on 9 May 2023, the Foreign
Minister announced ‘a
transformational package of support to the Pacific to respond to Pacific
priorities and ensure our shared interests in a peaceful, prosperous and
resilient region’.
While not
explicitly stated in this release, the Foreign Minister’s April 2023 National Press Club address, statements from government ministers on the Defence strategic review (DSR), and the multiple
mentions of geopolitical intensification in Budget strategy and outlook: budget paper no. 1: 2023–24 (pp. 138–9), suggests this investment is most likely in response to China’s growing interest in the region.
This article will
examine 4 separate measures in the 2023–24 Budget. Three of the 4 measures are funded from official development
assistance (ODA, or aid) funds and the fourth is part-funded from ODA. The
measures, found in Budget measures: budget paper no. 2: 2023–24, are:
- Enhancing Pacific Engagement (pp. 119–20)
- official development assistance (p. 115)
- expansion of the Emerging Markets Investment Fund (p. 120)
-
the Australian Infrastructure Financing Facility
for the Pacific – Sasape Shipyard (p.
117).
Enhancing Pacific Engagement
Through the ‘Enhancing Pacific Engagement’
measure, the Government is providing $1.9 billion over 5 years from 2022–23, blending aid functions with defence and
security. As described in the Portfolio budget statements 2023–24: budget related paper no. 1.8: foreign affairs and trade
portfolio (p. 14):
We are supporting Pacific regionalism, strengthening
Pacific regional architecture, and ensuring we are collectively equipped to
respond to the challenges we face. And we are advancing Pacific peace and
security, responding to Pacific priorities, and assisting our Pacific partners to
meet their own security needs.
This measure is
comprised of 4 components, with funding over 4 years (2023–24 to 2026–27):
- Pacific peace and security –
$1.4 billion
- Pacific Australia Labour Mobility scheme – $370.8 million
- Pacific regional unity – $114.3
million
- Deepening Pacific connections – $89.5 million.
The cost of this measure will be partially
met from the existing resources of the Department of
Employment and Workplace Relations and the
Department of Defence (see below). This measure will also be partially offset
by the 2022–23 March Budget measure, ‘Support to the Pacific and Timor-Leste – additional support’.
Pacific peace and security
The Pacific peace
and security component is the largest part of the ‘Enhancing Pacific Engagement’
measure, with $1.4 billion over 4 years (2023–24 to 2026–27). This includes
the ‘family first approach’ agreed by leaders of the
Pacific
Islands Forum, and the peace and
security commitments under the 2050 Strategy for the Blue Pacific continent.
Of this component,
the defence and security portfolios are the major beneficiaries, with funding
estimated at around $1.27 billion. Defence support will be expanded to develop
Pacific Island nations’ security
infrastructure and maritime security capability, including under the Pacific Maritime Security Program, and to cover any changes
that may flow from the DSR.
The funding also
provides for the involvement of the Australian Federal Police and Attorney-General’s Department in supporting Pacific law
enforcement and criminal justice initiatives. In addition, the Department of
Foreign Affairs and Trade (DFAT) will provide ‘cyber
resilience’ support.
Defence expenditure under this component is to be largely met from
existing resources. Reportedly, this will involve $923
million being reprioritised for ‘increased
maritime surveillance, providing patrol boats and other vessels, and
infrastructure upgrades such as wharves’.
In response to concerns that the increase in
Defence funding and activity in the Pacific militarises the region and thus
raises tensions, the Foreign Minister explained that the increased Defence
funding was to strengthen capacity in the region in order
to protect the Pacific’s large Economic Exclusion Zones.
Pacific Australia Labour Mobility scheme
The Pacific Australia Labour Mobility (PALM) scheme allows Australian
businesses to hire workers from 9 Pacific Island countries and Timor-Leste in
sectors where there are workforce shortages. These are unskilled, low-skilled or semi-skilled positions for
placements up to 4 years in any sector except for agriculture and agriculture
food product manufacturing. However, this use of migration to bring in
lowerskilled labour has been criticised by aid commentators for
its lack of policy rationale. The Government itself has acknowledged
contradictions within the scheme: the increase in lower paid migration,
according to the Department of Home Affairs review of the migration system
final report 2023, ‘presents complex economic and ethical challenges’ (p. 90).
The PALM scheme is funded at $370.8 million over 4
years (2023–24 to 2026–27), which builds on
$67.5 million over 4 years from 2022–23 (and $12.4 million per year ongoing from 2025–26) in the ‘Enhancing the
Pacific Australia Labour Mobility Scheme’ measure in the 2022–23 October Budget (pp. 111–112).
The funding also provides training places for PALM workers to
prepare them for work in priority areas in the Pacific (and Timor-Leste), and
where there are workforce gaps in Australia (p. 42). This component is also
expected to generate revenue with the expansion and improvement of the PALM
scheme estimated to bring in $300 million over 4 years from 2023–24.
Pacific regional unity
The next component
sees $114.3 million being provided over 4 years to ‘support a
stronger, more united Pacific region’ as they face the impacts of climate
change (p. 120). This is done by supporting the development of regional
architecture that will assist in the provision of humanitarian relief and in
disaster preparedness. The funding also covers improving diplomatic capability;
however, it is unclear whether this funding is for DFAT or for developing
Pacific Islander diplomats.
The
Pacific
Islands Forum recently produced the Pacific security outlook report 2022–23. The report draws on
specialist analysis to provide forum members with an overview of current
regional security issues to inform their policy
approaches. Climate change is described as a ‘threat multiplier’ across regional security priority areas, which include natural disasters,
gender-based violence, illegal unreported and unregulated (IUU) fishing,
cybercrime, and transnational organised crime.
Arguably, the
budget funding focuses on addressing the impacts of climate change, rather than
the causes. The Foreign Minister was asked in a media interview on 11 May 2023 whether
Australia would meet the call of 6 Pacific nations asking for global backing of
a fossil fuel non-proliferation treaty, to which the minister responded that
Australia is taking a different approach to rolling back fossil fuel impacts.
However, the Government’s budget statement states that ‘climate change is the single greatest threat to
the livelihoods, security and wellbeing of the Pacific family. We will do more
to help the Pacific address what is an existential threat, especially for
smaller Pacific nations’ (p. 14).
Deepening Pacific connections
Lastly, there is $89.5 million over 4 years
to ‘deepen Pacific connections by
strengthening cultural and people-to-people ties with the region and promote
shared values’. This includes
improving access to Australian media, with $8.5 million being provided to the
Australian Broadcasting Corporation, and strengthening sporting ties. The
Government is also funding investment in education and social protection systems, and investments to
empower women and girls and people with a disability to participate more fully
in all aspects of life.
Official development assistance
Australia’s official development assistance (ODA) budget measure has 2 components – the main aid budget and funding to DFAT for
program administration and related activities such as evaluation. The aim of
the ODA program in the past has been to help alleviate poverty in developing
countries. However, there has been a shift with this year’s Budget to one that more
explicitly links aid with security. In a world where ‘climate change, geostrategic competition, and international economic
uncertainties are reshaping our region’, the Government argues that Australia needs ‘a development program shaping the world for the better’. This new approach packages
aid funding with defence and security, as outlined under the Enhancing Pacific
Engagement measure.
In 2023–24 the ODA budget has gone from $4.65 billion in the October 2022–23 Budget to $4.77 billion in this Budget, and increased by $158.6
million over the next 4 years. In addition, funding in the forward estimates
allocates $8.6 billion over 10 years from 2026–27, an increase of 2.5% each year. This measure builds on the 2022–23 October Budget measure, ‘Additional Official Development Assistance’ (p.
19).
Departmental
funding for DFAT to deliver the ODA program is now $288.4 million, up from
$274.4 million in the October 2022–23
Budget. This additional $36.8 million to DFAT is for ‘program design, procurement, monitoring and
evaluation capabilities’.
The portion of ODA
allocated to the Pacific for 2023–24 is $1.90 billion. This equates to roughly
40% of the 2023–24 aid budget. The
top 4 recipients are (Table 2, p. 8):
- Papua New Guinea – $616.2
million
- Solomon Islands – $171.3
million
- Fiji – $88.1 million
- Vanuatu – $84.6 million.
The Australian
Council for International Development (ACFID) has welcomed the increased spending, including the funding to DFAT.
However, it does describe Australia’s overall performance
as an aid donor as ‘lagging’.
The Australian National University’s Development Policy Centre points out that the aid
budget amounts to an indexation of ODA funding with no real dollar value
increases. However, this indexation, particularly the out-years beyond the
forward estimates (2026–27), does
provide a level of certainty for Australia’s international development program.
In 2022, according
to the accepted measure of aid generosity, the official development assistance
to gross national income ratio (ODA/GNI), Australia ranked 27th
out of 30 OECD countries. The OECD Development Assistance Committee (DAC) sets
a target for member countries of 0.7% ODA/GNI – it is worth noting that only a small percentage of countries meet this target. The average rate for 2022
was 0.36%, with Australia at 0.19%, or 4th lowest.
Another measure of
aid generosity is simply the percentage of total budget. The 2023–24 ODA budget comprises approximately 0.70% of
the total Budget, which is an all-time low. It is estimated that Australia’s ODA/GNI ratio will slip further down the rankings over the
next 4 years, with some stabilisation after that (from 2026–27).
There have been
calls for the Australian Government to increase its level of aid investment, including recommending it
be tied to the OECD target of 0.7% of GNI. To get
Australia there, in its 2022 policy brief, Elevating development to the heart of Australian foreign
policy, ACFID calls for Australia’s overseas aid funding to be
legislated at 0.5% ODA/GNI by 2025–26,
then 0.7% ODA/GNI by 2029–30 (p. 1).
This was reiterated in ACFID’s 2023–24 pre-Budget submission in which it called for
immediate action on developing a budget framework to reach 0.5% ODA/GNI (p.
4).
It seems these
calls went unanswered; however, the Government is formulating a new international development policy following a public
submission process and targeted consultations held in 2022. According to the terms of reference:
The new policy will set the long-term direction for Australia’s
international development program. It will deliver on the Government’s
commitment to work in partnership with our neighbours in the Pacific and Southeast Asia to address
shared challenges and achieve our shared aspirations. It will also see
Australia contribute to a global system that can help meet present and future
development needs.
There is also a
concurrent and related Development Finance Review being conducted. This
review:
… will examine existing sovereign and non-sovereign mechanisms
used by the Government and draw on regional and global innovative approaches to
development finance. It will examine blended finance mechanisms where
government financing instruments such as grants and loans are used in
combination with, and to leverage, private sector and philanthropic investment
in development.
Based on available
government information, the review appears to be more about making do with
existing resources rather than considering increasing ODA funding to the 0.7%
ODA/GNI international standard. It also provides glimpses of what the new
international development policy will include – development that benefits both recipient and donor, and where private interests play a greater role.
However, this
investment does not, of course, sit in isolation, and this year in particular
linkages are made real between development and the security of our region. The
ODA and ‘Enhancing Pacific Engagement’ budget measures combined comprise a significant
investment that is likely more effective than if the 2 measures were applied
separately. As ACFID notes, it will be
important to maximise these linkages:
This budget also includes a significant package of
non-ODA support to the Pacific. We hope to see these measures brought into line
with the core development program, especially on transparency and safeguards. This will ensure
coherence and maximise the impact of Australia’s support to the region.
Expansion of Emerging Markets Investment Fund
By providing $210 million over 4 years from
2023–24, this measure will expand the
Emerging Markets Investment Fund (EMIF) from $40 million to $250 million. The
EMIF provides finance for small and medium enterprises in the Indo-Pacific and
supports assigning additional finance for development outcomes. As mentioned
above, this measure is part of the ODA budget, but similar to the PALM scheme
generating tax revenue, increases in the EMIF funding cap are an attempt to leverage private sector development, which is predicted to
generate financial returns of 3:1, increasing the underlying
cash balance. The Lowy Institute sees this as a move away
from more traditional forms of development towards ones that also directly
benefit Australia.
Australian Infrastructure Financing Facility for the Pacific – Sasape
Shipyard
The Sasape International
Shipyard is a major shipyard located on Tulagi Island
in Solomon Islands, located around 25 nautical miles off the coast of the
capital Honiara.
The Australian Government is providing an
undisclosed amount to support the Sasape Shipyard to expand its physical
footprint through land purchases and for capital upgrades. The measure includes
a loan through the Australian Infrastructure Financing Facility for the Pacific
(AIFFP) together with a grant from the budgeted ODA funding. This
preferencing of loans over grants by aid donors has been criticised for its potential to
create debt crises in developing countries.
The measure builds on the October 2022–23 Budget funding for AIFFP, which saw a
doubling of available grant funding to $1 billion. The funding of the 2023–24 measure is marked ‘not for publication’ due to
commercial sensitivities. This capital works project that sits as a separate
budget measure with an undisclosed funding figure for the only Pacific nation
to have a security pact with China, is another example of the
new blending of aid and security considerations.
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