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Foreign Aid: An Uncertain Future

Fresh water in Kiribati
Lorrie Graham for AusAID
Fresh water in Kiribati

Last week’s Gillard Government budget announcement that it will not stick to its promise to increase Australia’s foreign aid  - to 0.5% of Australia’s gross national income by 2015-16 - comes at a time when aid budgets across the developed world are coming under increasing pressure due to global austerity measures. In 2011 aid to developing countries fell by nearly 3%.

The 2011 Lowy Institute poll found that on average Australians wanted 12% of the federal budget spent on foreign aid. Even with the recent increases, aid only represents around 1% of the budget.

Evidence suggests that Australia does not, despite  prominent commentary that it does, ‘punch above its weight’ on the international stage. Australia is lagging below the OECD international average, ranking behind the UK, Germany, Canada and France on net Overseas Development Assistance in 2011.

Emerging donors including China, India, Brazil and South Africa are having a noticeable impact on the international donor community. While often referred to as emerging donors many of these countries have been delivering overseas aid for decades, however rapid growth in the past few years have brought them to the attention of traditional donors, including Australia. These donors, who don’t belong to the traditional donor club (the OECD-DAC), are increasingly influential and are playing a more dominant role in development and economic assistance, including in Asia and the Pacific Islands regions – where the lionshare of Australian aid is delivered. Donors such as China and India also bring to the table the unique experience of being both aid recipients and donors, often simultaneously – this is an attractive characteristic for developing country partners.   

As Australia and the international development community face an uncertain future of unpredictable aid budgets, the presence of new and emerging donors and a fragmented international aid architecture the Lowy Institute will be continuing it’s role analysing aid and development issues, including where the opportunities are for Australia and what this means for Australia’s place in the world.