Australia’s foreign aid budget 2020–21 (2024)

Budget Review 2020–21 Index

Dr Angela Clare

Australia’s Official Development Assistance (ODA) will remainat $4billion in 2020–21, down $44 million from last year and in line with theGovernment’s freezeon aid funding expected to remain in place until 2022–23.

The Government also announced a one-offsupplement of $304.7 million for the COVID-19 response in the Pacific andTimor Leste over the next two years, and is providing a further$23.2 million for vaccine access and health security in the Pacific andSoutheast Asia over three years (BudgetRelated Paper 1.6: Foreign Affairs and Trade Portfolio, p. 19).These measures effectively increase Australia’s total aid expenditure to $4.211 billion in 2020–21, but for reasonsnot entirely clear they willnot be counted as ODA. Long-time aidobserver, Australian National University academic Stephen Howes, has suggestedthat the Government is ‘trying to keep theincrease in aid hidden ... to continue to be seen to be tough on aid’, orthat it ‘does not want to be seen to be providing a permanent boost to aid’. Healso noted that this is ‘the first budgeted aidincrease under the Coalition since their election to office in 2013’.

The 2020–21 ODA budget of $4 billion represents a one percent fall in nominal terms on last year’s budget estimate of $4.044 billion. ODAas a proportion of Gross National Income (GNI) is up slightly from 2019–20 at0.22 per cent, due to Australia’s lower GNIthis year (Figure 1). Australia remains below the Organisationfor Economic Co-operation and Development (OECD) country average of 0.30 percent, and among the least generous donors.

Figure 1: Australia’s ODA to GNIratio, 1972–73 to 2020–21

Source: Australian Council forInternational Development, 2020–21 development budget: facts and figures

Australia’s spending on ODA as a proportion of governmentexpenditure continuesits downward trajectory, falling from 1.32 per cent in 2012–13 (and a highof 2.43 per cent in 1971–72) to 0.62 per cent in 2020–21. Stephen Howes hasalso noted that theratio of defence-to-aid spending hit a record high in 2020.

Geographic focus

Australia’s aid to the Pacific continues to increase in linewith its PacificStep-up, offset by further cuts to South and West Asia, Africa and theMiddle East. Aid to Southeast Asia has remained steady. Table 1 below showsAustralian aid flows by region since 2018–19, while Figure 2 shows trends inregional allocations since 2010–11.

Table 1: total Australian ODA, 2018–19 to 2020–21, ($million), by region

Sources:

(a) Department of ForeignAffairs and Trade, Australia’sinternational development assistance: statistical summary 2018–19,December 2019.
(b) Department of Foreign Affairs and Trade, Australianaid budget summary, 2020–21.
(c) Includes regional and global programs that cannot bedisaggregated to a lower geographical level.

Figure 2: Australian bilateral aid flows by region, 2010–11to 2020–21 (constant 2020 $AU)

Source: ANU, Australian Aid Tracker: Destinations.

Pacific

The Pacific remains Australia’s foreign policy priority,with ODA to the region increasing by $50 million over last year to total $1.44billion—Australia’s highest ever aid spend in the region. Australiandevelopment assistance will extend the Pacific Step-up’s support foreconomies, regional stability and security to ‘support the delivery of criticalhealth and education services, budget support and job creation, includingthrough skills training and transformational and climate resilientinfrastructure’.

Details of how the $304.7 million COVID-19 Response Packagewill be allocated are not yet available, but the Department of Foreign Affairsand Trade (DFAT) has advised that of the aid funds repurposed for the
COVID-19 response in the Pacific, $100 million has beenearmarked for budget support. Pacific Island countries will also benefitfrom the Government’s commitmentto procure and deliver COVID-19 vaccines for the region through the COVAXAdvance Market Commitment.

While funding to PNG and the Solomon Islands—the largestrecipients of Australia’s aid in the Pacific—has dropped slightly on last year’sestimates, most other countries have seen increased funding: Vanuatu receives a14 per cent increase (an extra $9.5 million), Tonga 32 per cent ($8.5 million),Samoa 16percent ($5.2 million), and Tuvalu, a 44 per cent increase(an extra $4.1 million). Regional programs have increased by 14 per cent ($48million), to total $384.5 million.

The Government’s flagship Pacific Step-up initiative, the $2billion Australian Infrastructure FinancingFacility for the Pacific (AIFFP) has approved three projects so far, withonly one releasingfunding details: the AIFFP is contributing $1.5 million to an underseatelecommunications cable study in Timor Leste. Other projects approved forfunding are the Solomon Islands Tina River Hydropower project and the PNGMarkham Valley Solar Farm project. A further five projects have been endorsedby the AIFFP Board.

The AustraliaPacific Training Coalition will receive $38.8 million to support workreadiness and skills development in Pacific Islanders—including for employmentin Australia—with ‘a focus on workers that have lost jobs due to the pandemic’.

Southeast and East Asia

ODA to the region remains virtually unchanged, although somebilateral programs have seen modest increases on last year: Timor Lestereceives an extra $4.5 million, Myanmar $7 million, and Laos $2.1million.Measures to note include a $60million package of initiatives to ASEAN countries to strengthen healthsecurity and the region’s COVID-19 response, economic integration, digitalconnectivity, and support for the most vulnerable people and communities.

South and West Asia

Overall aid to the region has been cut by 27 per cent, with threecountries seeing the largest falls: Afghanistan drops from $82 million to $54million, Bangladesh $70 to $56 million, and Pakistan from $32to $11million. Australia no longer provides bilateral aid to Pakistan—a move that hasbeen stronglycriticised by commentators—but continues to fund regional and humanitarianprograms in the country.

The Middle East and Africa

Aid to Sub-Saharan Africa drops by 48 per cent to $61.4million, while aid to the Middle East and North Africa falls by 61 per cent,from $80.9 million to $31.6 million. These cuts come on top of a 23per cent reduction in Australia’s aid to the Middle East and Africa in lastyear’s Budget.

Humanitarian and emergency

At $475.7 million in 2020–21 the Government has moved closerto its target of $500 million for humanitarian programs, announced in the 2017Foreign Policy White Paper. The Humanitarian Emergency and COVID-19Response Fund (previously DFAT’s emergency response fund) has increased by 25per cent, but the International Committee of the Red Cross, the World FoodProgramme and the United Nation’s Relief and Works Agency for PalestineRefugees in the Near East (UNRWA) have all seen cuts. The Government is reportedto be maintainingits response to the Rohingya crisis.

Global and regional programs

Gender equality initiatives and regional health, water andsanitation programs in the Pacific and Southeast Asia have been boosted, whilespending on other sectors, including infrastructure and rural development and climate-relatedprograms has been cut. Community engagement programs have also seen falls(noting that some scholarships and volunteerprograms have been unableto proceed due to travel restrictions), with CBM Australia—the leadingdisability-inclusive international development agency—reporting that aidfunding for people with disabilities has been cut.

Global investments to note include Australia’s $80 millionpledge to Gavi’s COVAX Facility,a global coordinating mechanism to support the equitable distribution of aCOVID-19 vaccine, once one is available.

Australia’s 2020–23 contribution to the World Bank’s International Development Association(IDA19) isdown by 26 per cent from its 2017–20 pledge, and 46 per cent lower than its2011–14 contribution. Australia is now the 18th largest donor under IDA19,compared to its position as the 12th largest under IDA18.

COVID-19 and the aid program

With the impacts of COVID-19 felt most acutelyby the poorest and most vulnerable, development agencies have estimated that up to halfa billion people may be pushed into poverty.

In May the Australian Government acknowledgedthe pandemic’s threat to global development with the release of itsdevelopment response to COVID-19, Partnershipsfor Recovery. The policy refocusedthe aid program on minimising the pandemic’s impact in the region, with particularfocus on helping governments in the Pacific and Southeast Asia deliveressential medical and social services, strengthening health systems, and providingeconomic recovery measures, including emergency budget support.

The Australian Council for International Development (ACFID)welcomedAustralia’s Partnerships for Recovery strategy, but criticised thelack of additional funding for its delivery, calling on the Government to domore to address health and livelihoods in the Asia-Pacific and the growing humanitariancrisis around the globe.

The 2020–21 Budget’s additional $304.7 million COVID-19response package for the Pacific and Timor Leste has been welcomed as amuch-needed addition to Australia’s support. But aid groups remain disappointedthat it failed to prevent further cuts to countriesand programs with high needs, such as South and West Asia, Africa, and theWorld Food Programme.

In its budgetresponse, ACFID argued that ‘reductions in South and West Asia belies theGovernment’s intentions to be an Indo-Pacific partner-of-choice’.

Aid groups were also disappointed that the additional funds donot represent a permanent increase to the aid budget, with Oxfam, for example, contendingthat the Budget ‘fallswell short’ of what is needed.

Labor’s Shadow Minister for International Development, PatConroy, argued that althoughthe Opposition is supportive of the Pacific Step-up, ‘it shouldn’t be atthe expense of assistance to other key strategic partners’, such as Indonesia,to which, he says, the Government has cut aid by 50 per cent.

Strategicconsiderations—most prominently, countering China’s growing influence inthe region—play an important role in Australia’s development assistance to thePacific. Recent Lowy Institute analysis identified a ‘surge’in foreign aid to the Pacific in 2018, ‘as geopolitical competition in theregion began ramping up’. Its analysis shows that expenditure on health has remained‘subdued’ despite the health challenges the region routinely faces, possibly dueto competition from the ‘more “strategically significant” sectors of governanceand transport’.

While few disagree with the need to fund development prioritiesin the Pacific, such as the ‘glaringgaps’ in domestic healthservices, some analysts questionthe merit of Australia’s ongoing aid increases to the region. The ANU’s Stephen Howes hasobserved:

It makes no sense to take $28 million from a country likeAfghanistan whose people are really suffering and give it to relatively stableand comparatively prosperous countries such as Samoa and Tonga. But, while theshare of Australian aid going to the Pacific seems destined to continue toincrease, it is something of a victory to at least see the government concedethat the Pacific Step-up cannot be executed without an increase in total aid.

Global trends

Fears that COVID-19 will acceleratethe trend towards a more ‘Hobbesian’, less cooperative world have prompted callsfor wealthy countries to do more. The Economist observes thatwhereas governments in rich countries have spentover 10 per cent ofGDPon pandemic recovery, the poorest nationshave spent less than one per cent. Safety-nets in low-income countries are ‘cobweb-thin’,with governments handing out ‘only $4 extra per person on social programmes—intotal, not per day’. The OECD contends that hard-won development gains arebeing lost, ‘putting even further strain on developing countries torespond’.

Aid flows have already been hit by the pandemic, withtraditional OECD donors in 2020 reportedto have cut aid by a third from last year: the UK’s aid commitments areestimated to be down by nearly 50 per cent, while in June delays to UShumanitarian assistance were described as ‘devastating’.

TheOECD acknowledges that while ODA is not ‘a replacement for strong domesticpublic financial management’, it can be crucial in times of crisis. ODA canplay a stabilising role and be ‘a transformativeforce’ to guide sustainable recoveries in developing countries. Compared toprivate finance, official development flows are:

... more easily shaped by political leadership, decisions andco-ordinated action that prioritise an inclusive global recovery. Greatertransparency of grants and official lending to developing countries from otherproviders can also make a big difference for the recovery. At present,developing countries do not have a complete picture of all sources of financingfor development, which can also undermine debt sustainability and macroeconomicstability.

In particular, the OECD argues, official support can play ‘a key role in building health and socialprotection systems in developing countries, which are critical to countries’ability to respond to the COVID-19 crisis and are central to resilience andrecovery’.

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