The ever-shrinking aid budget

Budget Review 2015–16 Index

Dr Ravi Tomar

Background

As noted in the Library’s Budget Review 2014–15, in January 2014, Foreign Minister Julie Bishop announced that from 2014–15 the $5 billion aid budget would grow annually in line with the Consumer Price Index.[1]

In keeping with that announcement, Australia’s Official Development Assistance (ODA) budget for 2014–15 was estimated to be $5,031.9 million.

The commitment to keep growth in the aid budget tied to the CPI did not last very long. The Mid–Year Economic and Fiscal Outlook 2014–15 (MYEFO) released on 15 December 2014 stated that the Government would save $3.7 billion over three years from 2015–16: $1,000.0 million in 2015–16, $1,350.0 million in 2016–17 and $1,377.0 million in 2017–18.[2]

In other words ODA would now be capped at around $4 billion and would decline in real terms in coming years, reaching an all-time ODA/GNI ratio low of 0.22 per cent in 2016–17.[3] If current budget forecasts are any guide, the ODA budget is in for a sustained period of decline in real terms.

ODA budget 2015–16

On 12 May 2015, the Government announced that the 2015–16 ODA budget was estimated to be $4,051.7 million.[4]

One aspect of the 2015–16 aid budget is the lack of overall detail. The statement found within the Department of Foreign Affairs and Trade (DFAT) website on the webpages for countries that have suffered budget cuts offers an indication as to why:

The website will be updated to reflect priorities following discussions with our partners. These priorities will be detailed further in new Aid Investment Plans which will be finalised by no later than 30 September 2015. 

Another change in the information on the 2015–16 aid budget is that unlike previous years, where the data for the coming year was compared with the estimated outcome of the current year, the comparison now is with the budget estimate for 2014–15. However, estimated outcome is a better measure of actual expenditure.

Some of the more significant changes to the 2015–16 aid budget are outlined in the table below.

Table 1: Fluctuations in ODA funding 2014–15 to 2015–16

2014–15 Budget Estimate $m
2015–16 Budget Estimate $m
% change
Papua New Guinea
502.1
477.3
-4.9
Indonesia
542.5
323.0
-40.5
Cambodia
52.4
52.4
0.0
Burma
70.1
42.1
-39.9
Afghanistan
130.9
78.5
-40.0
Sub-Saharan Africa
106.0
31.8
-70.0
United Nations Development Fund
21.2
12.7
-40.1
United Nations Children’s Fund
35.0
21.0
-40.0
United Nations Population Fund
15.4
9.2
-40.3
United Nations Program on HIV and AIDS
7.5
4.5
-40.0
World Health Organization
20.6
12.4
-39.8
Australian Volunteers Program
56.6
39.6
-30.0
  • PNG’s total allocation in 2015–16 goes up to $553.6 million after including expenditure by DFAT regional and global programs and by other government departments (OGDs) and agencies.
  • Indonesia’s allocation in 2015–16 rises to $366.4 million if expenditure by OGDs is included.
  • Although Cambodia’s allocation in 2015–16 remains unchanged at $52.4 million, it will receive an additional $10 million ‘in line with Australia and Cambodia’s agreement on refugee resettlement’. Total outlay for Cambodia (including expenditure by OGDs) will be $79.1 million.
  • The Gender Equality Fund to strengthen women’s economic empowerment is a new initiative with funding of $50.0 million.

Reactions to the aid budget

Since the 20 per cent cut in the 2015–16 aid budget and the delinking of it to the CPI was announced in the MYEFO, the issue has been commented on and discussed extensively, most notably by the Development Policy Centre.[5]

Gerry Hueston, chairman of Plan International Australia (and former president of BP Australia) commented:

The scale of these changes is unprecedented—and if business investors had been asked to cop changes of this magnitude they would simply have packed up and gone home. How can anyone plan for the future when the key determinants of that future are constantly chopped and changed by Government whim with no regard given to promises made?[6]

Overall, as the Australian Council for International Development (the peak body of Australian International NGOs) observed in its 2015–16 Federal Budget Analysis:

Almost $1 billion was cut from 2015–16, representing a 20% cut for the year. The budget also confirms $2.7 billion of additional cuts in 2016–17 and 2017–18. By 2016–17, total Australian Overseas Development Assistance (ODA) as a share of Gross National Income (GNI) will fall to 0.22%. This is the lowest ever level since records began.[7]

Economist Matthew Morris drew an interesting analogy in the context of the recent UK elections. Noting that the UK has legislated a target of an ODA/GNI ratio of 0.7 per cent with bipartisan support, he commented:

In short, expect business as usual on UK aid. But it is sobering to note that the party which best reflects Australian aid policy is the far-right UKIP. It wants UK aid to be cut to 0.2% of GNI. Australia’s aid-to-GNI ratio? 0.22% in 2016–17.[8]



[1].          R Tomar and W Bruere, ‘Official Development Assistance–the future of Australian aid’, Budget review 2013–14, Research paper series, Parliamentary Library, Canberra, 2013.

[2].          J Hockey (Treasurer) and M Cormann (Minister for Finance), Mid–year economic and fiscal outlook 2014–15, p. 164.

[3].          S Howes and J Pryke, ‘Biggest aid cuts ever produce our least generous aid budget ever’, Devpolicy Blog, weblog, 15 December 2014.

[4].          The budget figures in this article have been taken from the following website (including country pages) unless otherwise sourced: Department of Foreign Affairs and Trade, ‘Budget highlights 2015–16’, website.

[5].          Development Policy Centre, Devpolicy Blog, weblog.

[6].          G Hueston, ‘Australia: one of the richest countries, but also one of the meanest’, The Sydney Morning Herald, 12 May 2015.

[7].          Australian Council for International Development (ACFID), ‘Federal Budget analysis 2015–16’, ACFID website, 14 May 2015.

[8].          M Morris, ‘UK elections and aid (and Australia’s UKIP aid policy)’, Devpolicy Blog, weblog, 8 May 2015.

 

All online articles accessed May 2015. 

For copyright reasons some linked items are only available to members of Parliament.


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