Foreign affairs and Official Development Assistance

Budget Review 2018–19 Index

Dr Geoff Wade and Dr Cameron Hill

A domestically-focused 2018–19 Budget sees little change in the profile and tasks of the Department of Foreign Affairs and Trade (DFAT). The departmental appropriation of $1.96 billion represents a slight decrease (2 per cent) relative to the 2017–18 estimated actual, while overall resourcing is slated to climb by almost 2 per cent to $6.1 billion. Average staffing levels will also rise from 5,700 to 5,741.[1]

Guided by the 2017 Foreign Policy White Paper, DFAT’s strategic attention remains in the Indo-Pacific.[2] Australian diplomatic representation is proposed to expand through a new Consulate-General in Kolkata, India, and a new High Commission in Tuvalu. The Government describes these new posts as being part of the ‘largest expansion of our diplomatic network in 40 years’.[3] Remarkable, though, is the absence in DFAT’s Strategic Direction Statement of any reference to Australia’s links with the United States, despite the frequency of such references in the White Paper and earlier budget papers.

The Pacific has assumed a larger profile than in previous budgets, with increased ‘support for a more resilient Pacific and Timor-Leste’ being listed as ‘one of the five objectives of fundamental importance to Australia’s security and prosperity’—an agenda adopted in the White Paper.[4]

An Australia Pacific Security College is being funded ‘to deliver security and law enforcement training at the leadership level’.[5] This initiative could be seen as a mechanism to counter China’s growing security and law enforcement engagement with Pacific nations.[6] Funding for the College is included in the $37.9 million to be provided over four years from 2017–18 for initiatives supporting the White Paper.[7] Increased defence engagement with the Pacific is being funded through an expanded Defence Cooperation Program.[8]

Australia’s engagement with Southeast Asia will be further expanded through a ‘package of new maritime cooperation initiatives’, agreed at the 2018 ASEAN–Australia Leaders’ Summit in March.[9] Again, this might be seen as a response to China, which has issued its own ‘Vision for Maritime Cooperation under the Belt and Road Initiative’.[10] Specifics about the Australian maritime initiatives with Southeast Asia have not been publicly detailed.

On the trade front, the stress on the original Trans-Pacific Partnership agreement has shifted to enthusiasm for the now-signed Comprehensive and Progressive Agreement for the Trans-Pacific Partnership (TPP-11). Ongoing free trade agreement talks with Indonesia, Hong Kong and the Pacific, as well as impending negotiations with the European Union, are also underlined.

More than $50.3 million is being provided over four years to fund Australia’s participation in a Dutch national prosecution of those responsible for bringing down Malaysia Airlines flight MH17.[11]

Over the next two years Australia’s total Official Development Assistance (ODA) will increase slightly in nominal terms, rising from an adjusted estimate of $4.077 billion in 2017–18 to around $4.161 billion in 2018–19 and $4.170 billion in 2019–2020.[12] Over the forward estimates, however, aid will be subject to real cuts totalling $141 million as the Government extends a previous funding cap of $4 billion to 2021–22.[13] Australia’s ODA as a proportion of Gross National Income is expected to fall to 0.19 per cent by 2021–22, its lowest recorded level.[14] While the new cuts are significant, they amount to less than the $400 million reduction reportedly considered prior to the Budget.[15]

Much of the increase in this year’s funding will be used to finance the ODA-eligible portion of Australia’s contribution to the China-led Asian Infrastructure Investment Bank ($161 million in 2018­–19).[16] Cuts in aid to Indonesia ($30 million) and Cambodia ($6 million) will help meet the costs of building undersea communications cables for Papua New Guinea and the Solomon Islands.[17] Australia committed to co-finance this initiative following reports of national security concerns surrounding the involvement of the Chinese telecommunications company, Huawei, in the Solomon Islands project.[18] The Government has not published the costs of this initiative in the budget papers.[19] One estimate puts the cost at around $200 million, and completion is reportedly expected within two years.[20]

In line with the broader focus on the Pacific, Australia’s total aid to this region is expected to increase to $1.283 billion in 2018–19. The Government has described this as ‘our largest ever contribution’.[21] In real terms, aid to the Pacific will be slightly higher than in 2014–15, the Coalition’s first budget (see Table 1). Australia’s assistance will include the new Australia Pacific Security College, and increased support for new Pacific labour mobility initiatives.[22]

Table 1: total Australian ODA, 2014–15 and 2018–19 (A$,’000)  

Region 2014–15 (a) 2018–19 (est.) (b) Real change (%) (c)
PNG and the Pacific 1 160 269 1 283 600 +2.9
Global 1 567 397 1 301 200 –22.8
East/Southeast Asia 1 358 646 1 027 200 –29.7
Middle East and Africa 387 589 258 500 –38.0
South and West Asia 475 338 284 800 –44.3
Latin America and the Caribbean 23 873 5 900 –77.0

Sources: (a) DFAT, Australia’s International Development Assistance: statistical summary 2014–15, Australian Government, 2016, pp. 5–6;  (b) DFAT, Australian aid budget summary, 2018–19, Australian Government, May 2017, pp. 10–11; (c) Parliamentary Library calculation: real conversion based on CPI for 2014–15 to 2016–17 and Budget 2018–19 CPI forecasts for 2017–18 and 2018–19.

Humanitarian aid will rise slightly, from $400 million to $410 million, as the Government moves to implement a commitment to increase overall spending in this area to $500 million per annum.[23]

Non-government organisations have criticised the Government’s application of new aid cuts, noting that the decision ‘puts us in a similar category to Greece and Hungary’.[24] The Labor Opposition has described the cuts as an ‘international embarrassment’, contrasting the Government’s approach with the decision by New Zealand to increase ODA by 30 per cent over the next four years.[25]

There are broader questions as to whether Australia can remain a ‘partner of choice’ for its developing country neighbours while the aid budget continues on a downward trajectory in real terms. The 2017 White Paper describes a more competitive Indo-Pacific and some have argued that aid—alongside more traditional forms of power—will play a prominent role in intensifying contests for regional influence.[26] These issues will attract further scrutiny in the months ahead as the Government undertakes its first ever review of Australia’s ‘soft power’ capabilities, and as a parliamentary inquiry into the ‘strategic effectiveness and outcomes of Australia’s aid to the Indo-Pacific’ commences.[27]



[1].         Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.8: Foreign Affairs and Trade Portfolio, 2018, pp. 16–17.

[2].         Department of Foreign Affairs and Trade (DFAT), 2017 Foreign policy white paper, Australian Government, November 2017. The White Paper defines the Indo-Pacific as ‘the region ranging from the eastern Indian Ocean to the Pacific Ocean connected by Southeast Asia, including India, North Asia and the United States’, p. 1.

[3].         Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.8, op. cit., p. 15.

[4].         Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.8, op. cit., p. 13; DFAT, 2017 Foreign policy white paper, op. cit., p. 3.

[5].         DFAT, 2017 Foreign policy white paper, op. cit., p. 103.

[6].         C Hill, ‘China’s policing assistance in the Pacific: a new era?’, FlagPost, Parliamentary Library blog, 6 April 2018.

[7].         S Morrison (Treasurer) and M Cormann (Minister for Finance), Mid-year economic and fiscal outlook 2017–18, p. 153.

[8].         Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.4A: Defence Portfolio, pp. 117–18.

[9].         Department of the Prime Minister and Cabinet, ASEAN–Australia Special Summit initiatives, ASEAN–Australia Special Summit 2018 website.

[10].      People’s Republic of China, Full text of the Vision for Maritime Cooperation under the Belt and Road Initiative, State Council website, June 2017.

[11].      Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.8, op. cit., p. 18. For background, see:  Memorandum of understanding between the Government of Australia, the Government of the Kingdom of Belgium, the Government of Malaysia, the Government of the Netherlands and the Government of Ukraine regarding political support for prosecuting the perpetrators of the downing of flight MH17 on 17 July 2014, 20 September 2017.

[12].       DFAT, Australian aid budget summary, 2018–19 , Australian Government, 8 May 2018, pp. 11, 126.

[13].       Australian Government, Portfolio budget statements 2018–19: budget related paper no.1.9, op. cit., p. 18.

[14].       Development Policy Centre, Australian aid tracker: trends, Australian National University website.

[15].       M Watt, ‘The Turnbull government is mulling more cuts to overseas aid’, Sydney Morning Herald (online), 28 March 2018.

[16].       DFAT, Aid budget summary, op. cit., p. 9.

[17].       Australian Government, Portfolio budget statements 2018–19: budget related paper no. 1.8, op. cit., p. 18; DFAT, Aid budget summary, op. cit., p. 7.

[18].       DFAT, Aid budget summary, op. cit., p. 8.

[19].       ABC News, ‘Undersea cable deal with PNG inked amid concerns over Chinese influence in the Pacific’, ABC News (online), 14 November 2017.

[20].       C Graue, ‘Budget 2018: Australia to pay for new high-speed internet cable for PNG and Solomons using aid funds’, ABC News (online), 6 May 2018; C Graue, ‘“Not a good look”: calls for transparency after Liberal Party donor wins Pacific cable contract’, ABC News (online), 8 May 2018.

[21].       J Bishop (Minister for Foreign Affairs) and S Ciobo (Minister for Trade, Tourism and Investment), 2018 Foreign Affairs and Trade, Tourism and Investment budget, media release, 8 May 2018.

[22].       DFAT, Aid budget summary, op. cit., p. 35.

[23].       Ibid., p. v.

[24].       Australian Council for International Development (ACFID), ACFID analysis of the 2018–19 Budget, 8 May 2018, p. 3. 

[25].       P Wong (Shadow Minister for Foreign Affairs) and C Moore (Shadow Minister for International Development and the Pacific), Aid cut again as Turnbull ignores wake up call, media release, 9 May 2018.

[26].       A Grigg and L Murray, ‘Defence establishment frowns on proposed Australian aid cuts’, Australian Financial Review (online), 6 April 2018.

[27].       DFAT, 2017 Foreign policy white paper,  op. cit., p. 107; Joint Standing Committee on Foreign Affairs, Defence and Trade, Inquiry into the strategic effectiveness and outcomes of Australia’s aid program in the Indo-Pacific and its role in supporting our regional interests, Parliament of Australia website.

 

All online articles accessed May 2018.

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