Official Development Assistance: steady, but still shrinking

Budget Review 2017–18 Index

Dr Cameron Hill

Overview: trends, comparisons and responses

Australia’s Official Development Assistance (ODA) budget will increase in line with inflation in 2017–18 and 2018–19. However, the Government has decided to freeze ODA at $4.0 billion in 2019–20 and 2020–21.[1] These two consecutive freezes—worth an estimated $303 million in savings over the forward estimates—represent the fifth and sixth cuts, in real terms, to aid funding since 2013–14.[2] In cumulative terms, the ODA budget has been cut (or is projected to be cut) by almost one third (32.8 per cent) since the Gillard Government’s 2013–14 Budget, which represented a high point for aid funding.[3] The Government has indicated that the aid program is unlikely to rise in real terms until the budget returns to surplus.[4]

The freezes accelerate Australia’s diminishing aid generosity: ODA as a proportion of Gross National Income (GNI) will fall to 0.22 per cent in 2017­–18 and to an unprecedented low of 0.20 per cent in
2020–21 (see Figure 1).[5]

Figure 1: Australian ODA/GNI ratio, 1965 to 2021

Figure 1: Australian ODA/GNI ratio, 1965 to 2021

Source: Development Policy Centre, Australian aid tracker: trends

Aid is projected to continue to decline as a proportion of (increased) government outlays, falling to a new recorded low of 0.77 per cent of government expenditure in 2020–21.[6]

These cuts are also expected to see Australia fall further down the ladder of developed country donors and well below the current Organisation for Economic Co-operation and Development ODA/GNI average of 0.32 per cent.[7] In 2016, Australia ranked 17th out of 29 OECD bilateral donors for aid generosity, and is projected to fall to 21st in the coming years.[8] Australia is currently the world’s 13th largest economy.[9]

Although global ODA increased in 2016, Australia is not alone in cutting aid. The Trump administration has mooted cutting US development assistance programs by almost one-third, with some of the largest cuts slated for Australia’s region.[10] In contrast, the UK Conservative Government has committed to maintaining ODA/GNI at its current level of 0.7 per cent if re-elected in June 2017.[11]

Allocations for countries and regional programs will remain largely unchanged in 2017–18 (see Table 1). A nominal $84 million increase in ODA will be directed to increases in humanitarian assistance, the Middle East and global health programs.[12] In the Pacific, ODA will be redirected from the Department of Foreign Affairs and Trade to the Australian Federal Police to help fund policing programs in PNG and the Solomon Islands.[13]

Table 1: estimated total Australian ODA by region (AUD million)

  2016–17 Budget 2016–17 outcome 2017–18 Budget
Pacific (including PNG) 1 138.4 1 126.4 1 097.8
Southeast and East Asia 887.7 892.9 883.0
South and West Asia 282.8 292.0 283.9
Africa and the Middle East 184.9 263.5 253.6
Latin America and the Caribbean 11.0 11.4 5.9
ODA not attributed to regions/countries 1 322.9 1 241.6 1 388.1

Source: DFAT, Australian aid budget summary, 2017–18, 9 May 2017.

Non-government organisations and the Opposition have criticised the latest cuts. The Australian Council for International Development has stated that the aid budget ‘does not add up to a vision of what role we want to play in the world’.[14] The Labor Opposition has described the cuts as ‘at odds with the generous spirit of the Australian people’ but has not re-committed to its previous 0.5 per cent ODA/GNI target.[15]

Looking ahead: aid, development and Australia’s international engagement  

Beyond the Budget, the Government’s forthcoming foreign policy white paper, the first since 2003, will consider the role of aid and development in advancing Australia’s interests and values.[16] The Prime Minister has also promised a new whole-of-government ‘Pacific strategy’, the first of its kind.[17] Given Australia’s position as the leading donor in the Pacific, development issues should feature prominently.

In 2018, Australia will host a joint summit with the ten leaders of the Association of Southeast Asian Nations (ASEAN).[18] Australia’s aid to the developing ASEAN states will total almost $800 million in 2017–18. In addition to security and trade ties, the role of development cooperation in advancing our relationship with this important regional grouping will likely be a focus.

Finally, a scheduled 2018 OECD ‘peer review’ of Australia’s aid program—the first since the abolition of AusAID in 2013 and the implementation of  successive  budget cuts—will be an opportunity to assess overall policy coherence and development effectiveness following a period of significant upheaval in aid programming and administration.[19]



[1].         Australian Government, Portfolio budget statements 2017–18: budget related paper no.1.9: Foreign Affairs and Trade Portfolio, p. 20; J Bishop (Minister for Foreign Affairs), 2017 foreign affairs budget, media release, 9 May 2017.

[2].         S Howes, ‘A small target budget with a sting in the tail’, DevPolicy, Development Policy Centre blog, 9 May 2017.

[3].         Ibid. While actual aid expenditure was higher in 2012–13, the 2013–14 Budget further increased ODA. This increase was subsequently cut in the 2013–14 MYEFO.

[4].         F Hunter, ‘Julie Bishop says foreign aid will stay in freezer until budget reaches surplus’, The Sydney Morning  Herald, online, 12 May 2017.

[5].         Development Policy Centre, Australian aid tracker: trends, Development Policy Centre website. Recorded data for ODA goes back to 1962.

[6].         Ibid.

[7].         Organisation for Economic Co-operation and Development (OECD), Development aid rises again in 2016 but flows to poorest countries dip, media release, 11 April 2017.

[8].         Development Policy Centre, Australian aid tracker: comparisons, Development Policy Centre website; ‘Julie Bishop says foreign aid will stay in freezer until budget reaches surplus’, op. cit.

[9].         World Bank, Data: GDP ranking, World Bank website.

[10].      C Hill, ‘A different kind of ‘pivot’: the Trump administration’s proposed aid cuts and Australia’s region’, FlagPost, Parliamentary Library blog, 8 May 2017.

[11].      G Parker, ‘Theresa May says Tories will keep 0.7% overseas aid target’, Financial Times, online, 22 April 2017.

[12].      Department of Foreign Affairs and Trade, Australian aid budget summary, 2017–18, 9 May 2017, pp. 10–11.

[13].      C Barker, ‘Law enforcement overview’, Budget review 2017–18, Research paper series, 2016–17, Parliamentary Library, Canberra, 2017.

[14].      Australian Council for International Development, Aid budget bounces along the bottom, media release, 9 May 2017.

[15].      P Wong (Shadow Minister for Foreign Affairs) and C Moore (Shadow Minister for International Development and the Pacific), Aid funding plunges to new low as Bishop rolled again, media release, 8 May 2017.

[16].      C Hill, ‘Australian foreign policy in 2017: a year of delivery?’, FlagPost, Parliamentary Library blog, 28 March 2017.

[17].      M Turnbull (Prime Minister), Remarks at Pacific island Forum—Micronesia, transcript, 9 September 2016.

[18].      M Turnbull (Prime Minister), ASEAN-Australia special summit 2018, media release, 23 February 2017.

[19].       OECD, Australia—DAC peer review of development co-operation, OECD website.

 

All online articles accessed May 2017. 

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