Budget Review 2014–15 Index

Dr Ravi Tomar and Wendy Bruere

Background

Decisions made since the change of government in September 2013 have had significant implications for Australia’s aid program, in administrative arrangements and aid priorities as well as the quantum of aid.

According to administrative changes announced on 18 September 2013, AusAID would cease to be an executive agency and be merged into the Department of Foreign Affairs and Trade (DFAT). This was to take effect from 1 November 2013, with a ‘final integrated structure in place by 1 July 2014’.[1]

On 18 January 2014, Foreign Minister Julie Bishop announced that Australia’s Official Development Assistance (ODA) budget for 2013–14 would be:

$5.042 billion, refocused on reducing poverty in the Indo-Pacific region and tied to rigorous benchmarks … This year's aid expenditure will be $107 million less than last year. From 2014–15 the $5 billion aid budget will grow each year in line with the Consumer Price Index.[2] (emphasis added)

While the figure of $107 million is accurate when compared to the 2012–13 outlay, it in fact represented a reduction of $650 million on the 2013–14 Budget Estimate.[3] This also indicated that the internationally recognised concept of ODA/GNI (Gross National Income) as a measure of a donor’s aid budget would no longer be immediately relevant in the Australian context.

In contrast, the UK’s aid budget increased by 30.5% in 2013, representing 0.72% of GNI, about which Prime Minister David Cameron is reported to have said, ‘I don’t think you break your promise to the poorest people in the poorest countries in the world’.[4] The UK has joined Luxembourg (1.00%), Norway (1.07%) and Denmark (0.85%) in having an ODA/GNI ratio of over 0.7%.[5]

In keeping with a recommendation of the Independent Review of Aid Effectiveness (2011), according to the 2013–14 Aid Budget Statement, ‘the fundamental purpose of Australian aid is to help people overcome poverty. This serves Australia’s national interests by promoting stability and prosperity both in our region and beyond’.[6] However, the Foreign Minister said in early 2014:

[w]e are refocussing our efforts, placing our aid program more clearly in the context of Australia’s national interest … We have created a single department with responsibility for advancing Australia’s interest in diplomatic trade and development context.[7]

Aid-for-trade (and greater private sector involvement) is therefore expected to be the basis of this policy approach. The Government has also promised to institute new quality assurance measures and performance benchmarks.[8]

ODA budget 2014–15

On 13 May 2014, the Government announced that the 2014–15 ODA budget was estimated to be $5,031.9 million.[9] Contrary to the commitment given earlier by the Foreign Minister in her January 2014 statement (above) to increase the aid budget in line with the Consumer Price Index (CPI) from 2014–15, the outlay will be ‘stabilised at $5 billion in 2015–16, thereafter increasing annually by CPI’.[10] In effect, the Government expects to ‘save’ $7.7 billion over five years by maintaining ODA at its 2013–14 level of $5 billion in 2014–15 and 2015–16 before it starts to grow in line with CPI from 2016–17. ‘The savings include $2.0 billion in 2017–18 by removing the provision previously set aside for ODA spending’.[11]

Contributing to these savings will be the reversal of previous decisions to join the African Development Bank Group and the International Fund for Agricultural Development as well as a decision to cap departmental costs to ‘administer ODA equivalent to 5 per cent of DFAT’s total ODA budget’.[12]

As Stephen Howes of the Development Policy Centre at the Australian National University (ANU) observed:

In this budget, the Coalition has delivered something quite different: a reduction in aid by 10% in real terms by 2015–16. In nominal terms, aid was cut 2.3% in 2013–14 relative to 2012–13, and then is held constant for the next two years (2014–15 and 2015–16). Add inflation to this, and we have a real (or constant price) 5.3% cut in 2013–14, and then another 2.25% this year and another 2.4% next year. This adds up to a 9.7% cut by 2015–16 relative to the 2012–13 base.[13]

Another significant feature of the 2014–15 aid budget is the lack of detail. The annual aid budget statement (the ‘Blue Book’) which provided details of aid spending and has been published since at least 2001, was not issued this year. Instead, it was announced that ‘more details on a new aid policy and performance benchmarks will be delivered in the coming weeks’.[14]

Significant decisions in the 2014–15 ODA budget include:

• an increase of about $57 million to the estimated 2014–15 outlay for PNG to $577.1 million
• a substantial decrease of ODA to Sub-Saharan Africa and the Middle East, down from $344.4 million in 2013–14 to an estimated $252.4 million
• ODA to Latin America and the Caribbean down from $29.6 million to $21.6 million. Funding for Humanitarian, Emergencies and Refugees has been restored back to 2013–14 Budget Estimate levels at $338.6 million ($339.6 million in 2013–14) and
• the amount of ODA administered by other government departments will drop to $390.0 million, from $701.2 million in 2012–13.

Reactions to the aid budget

As Howes has noted, ‘ODA by sectoral spend is simply not provided … For a government which promised to enhance aid transparency and to protect the real value of aid, it is a discouraging beginning’.[15]

Susan Harris Rimmer, Director of Studies at the ANU’s Asia Pacific College of Diplomacy, also laments the lack of detail in the aid budget, referring to it as part of Australia’s ‘under-investment’ in international relations, and noting that linking ODA to CPI instead of GNI is not in line with international standards.[16] The Lowy Institute has argued that while Australia is backing away from ‘ambitions to be a global aid player’, its ‘long-held position as the Pacific Islands region's principal development partner’ is safe for now.[17]

Australian NGOs and their peak body, the Australian Council for International Development (ACFID) have criticised the Budget for failing to increase ODA in line with inflation, as promised. UNICEF Australia claims that the cuts to the aid budget mean that despite being ‘one of the world’s wealthiest nations’, Australia is set to become ‘one of the world’s least generous donors’.[18] Care Australia said, ‘these cuts may begin to put many of the outstanding gains made in our region at risk’.[19] Oxfam argued that the aid cut ‘means the poorest of the world are shouldering by far the largest of all cuts over the next four years’.[20] ACFID also called on the Government to ‘to commit to a target and timetable of 0.5% of GNI’ as was Australia’s goal previously.[21]

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