The future of Australian aid

It has been just over a year since the Trump administration's dramatic cuts to America's foreign aid budget and the shuttering of USAID. With other major donors also slashing their aid programs — potentially causing 22 million additional avoidable deaths by 2030 — what does this mean for Australia's development efforts? A new OECD review of Australia's aid program provides a timely opportunity to assess the health and future direction of Australian development assistance.

The Lowy Institute’s Roland Rajah and Grace Stanhope are joined by Cameron Hill from the Development Policy Centre at the Australian National University and Bridi Rice, CEO of Development Intelligence Lab, to discuss the global aid landscape, Australia's comparative advantage in the region, and the tensions between short-term transactional wins and long-term transformational development.

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ROLAND: Hello and welcome to Development Futures, a podcast brought to you by the Indo-Pacific Development Centre here at the Lowy Institute. I'm Roland Raja.

GRACE: And I'm Grace Stanhope.

ROLAND: So Grace, today we are talking about foreign aid and the future of Australian aid in particular.

GRACE: That's right. It's been just over a year now since Donald Trump's pretty dramatic cuts to America's foreign aid budget and the shuttering of the US Agency for International Development. We've seen other donors also deliver large rounds of aid cuts, which may cause an additional 22 million avoidable deaths by 2030. It's hard to get a sense of the scale and what that could mean for Australia. But a new review by the OECD of Australia's aid program provides a really good opportunity for us to consider the health and the future of Australia's development efforts, and we have two of the country's best minds in aid and development here with us to do that.

ROLAND: Yes, it's great to have two really great people to be talking about this very important issue for the world and for Australia. First, Cameron Hill of the Development Policy Centre at the Australian National University, and Bridi Rice, the CEO of Development Intelligence Lab. Bridi and Cam, welcome to the podcast.

CAMERON: Thanks Roland. Great to be here.

BRIDI: Thanks Grace. Thanks Roland. Yeah, thanks for having us.

ROLAND: So Cam, why don't we start with you? Can you give us a bit of an update in terms of what's happening with global aid right now and where you see Australia fitting into all of that?

CAMERON: Yeah, thanks Roland. So at the start of 2026 it looks like the US Congress has moderated some of Trump's proposed additional aid reductions for this year, but the cuts are still coming and are unprecedented. We have four of the largest providers of ODA — the US, the UK, Germany and France — all cutting aid simultaneously, as are around a dozen other smaller OECD donors. So globally, we're probably going to see aid fall by as much as a third between 2023 and 2026. That's the equivalent of about US$70 billion — a massive and unprecedented cut.

As you say, Australia hasn't joined this unseemly rush to cut aid. Australia is stabilising but not slashing its aid budget. That's a low bar, but it's a good thing. And as you say, we made our big aid cuts over a decade ago, as well as abolishing our development agency.

I think part of the reason that Australia may not be in a rush to cut aid is that public support for aid in Australia has actually remained fairly positive. According to our annual public opinion surveys, it has actually grown slowly and steadily over the last decade. And importantly, this growth in public support for aid has come from across the political spectrum — not just from the left.

But I do think the aid cuts raise big policy questions for Australia. For a long time, we've been able to free ride on the global humanitarian, health and multilateral aid provided by the US and European donors. The question for Australia now is what parts of the multilateral system do we want to protect — including through additional core funding — as this system faces an existential funding crisis.

If you look at where we reprioritised aid funding in the 2025 budget, it was primarily by deferring or cutting Australia's core multilateral funding, which is already comparatively quite low. This seems quite at odds with some of the Foreign Minister's statements about the importance of the multilateral system, our role as president of the negotiations for COP31 this year, and also our ambitions for a non-permanent seat on the UN Security Council in 2029–30.

I think ultimately these and other policy tensions arise from the fact that Australia's aid budget in real terms will remain flat at its 2007 levels for the next decade — and yet at the same time, we're asking the development program to do more and more, both in development and geopolitical terms.

GRACE: Bridi, Cam's raised that increasing interaction between geopolitics, geostrategy and development. Australia has come a really long way on this. We've deployed new financing instruments, there's a big focus on infrastructure, there's been a succession of bilateral deals and closer integration with the Pacific. What's your take on that evolution? Do you think it makes Australia competitive?

BRIDI: Yeah, I mean the first thing I would probably say is that geopolitics, geostrategic competition and development have always been interrelated. Australia has never run its aid program outside of geopolitics or a range of Australian national interests. You just have to think about Vietnam as a perfect example. We know that having neighbours with strong economies makes for better trading partners. What we saw after the Vietnam War was Australia becoming a very big and critical donor, supporting Vietnam's economic development, building bilateral relations and certainly contributing to bringing millions of Vietnamese people out of poverty — but also growing its economy to a point where now Vietnam is one of Australia's most critical trading partners.

So the idea that geopolitics, war and trade shape the context of a development program isn't new. But what everybody is picking up on at this point in time is how the intensity of the strategic environment has changed — and frankly, the extent to which an aid program is co-opted for non-development purposes.

I think where we find ourselves now — and Grace, I've read your work on this and I think it's fabulous — is that as geostrategic competition ramps up, as what Foreign Minister Wong describes as this permanent stage of competition intensifies, it's perfectly natural that governments ask: what can the aid program do for our interests? How can we use it to compete for influence in the region?

But when they ask that natural but sometimes tricky question for an aid advocate, too often the conversation divides down binary lines. On one hand: geostrategic competition is evil, and aid must only be about poverty alleviation. On the other: we ought to throw everything into the knife fight for influence, and the aid program absolutely should be harnessed as a tool of statecraft — which often really means countering Chinese influence. And then there's a third camp, perhaps the most quizzical of all, which pretends the aid program can do it all and that there's no tension between these things.

So I think that is where Australia finds itself. Yes, the geostrategic competition is tough. Yes, aid and development trends in the region are also tough. But to your question about whether we are competitive — I'm simply not convinced that Australia can compete with China on things like speed, scale, and kickbacks. Australia's comparative advantage is not speed. It's trust. It's our geography. It's access to our education and health partnerships and our economy. It's our long-term presence.

The tension right now is that if we distort our development program to chase short-term influence, we may win a headline and at the same time lose a generation that we might need to collaborate with in a decade's time. One simple way of putting it: it's not security versus development, but maybe it's short-term versus long-term — and how do you get the right balance?

Cam, did you want to jump in on any of that?

CAMERON: No, I think I agree. It is about long-term versus short-term, and the record of aid in securing tactical foreign policy gains has been pretty poor. We've got the experiment of the Cold War to show us what happens when great powers try to use aid for tactical foreign policy gains. Basically, both superpowers got taken for a ride by some pretty savvy elites in Africa and Asia. We've got the record there to look at.

ROLAND: That's a good addition, Cam. Let's go to the OECD review. You've actually written a nice blog for Dev Policy on this. It's one of those periodic reviews — done every few years, independent — a good pulse check in terms of where the aid program is up to. What was your takeaway? What did you make of it?

CAMERON: Well, given Australia hasn't done an independent aid review since 2011, these external independent reviews are important. When you look at the report and set aside issues around Australia's generosity on aid — which is pretty woeful and declining — and put aside a couple of more politically sensitive issues like fossil fuel exports and refugee offshoring, I think overall you could say the review was a pretty solid and technocratic assessment of the state of Australian aid. I don't think anyone within DFAT working on development, or outside DFAT working on development, would be particularly surprised by its conclusions.

On objectives, the review highlighted the issue of adding too many explicit and implicit objectives to an aid program which is not growing — it's not being cut, but it's also not growing. On policy coherence — which is something the DAC always looks at — it highlighted the need to get more out of Australia's engagement with various forms of non-grant development finance, much of which remains fragmented and some of which lacks a clear poverty focus. On capability, it highlighted the need to strengthen career paths for DFAT's locally engaged staff, to better use evaluations to shape programming, and to provide more space for contestability through structures like DFAT's Development Program Committee. It's also important to note the review was very complimentary of Australia's work in areas like gender, disability and inclusion, and humanitarian assistance and crisis response.

The key question now is what the government does with the review — and whether, for example, it will issue some kind of public response to its findings and recommendations.

ROLAND: Bridi, anything you'd add on the OECD review?

BRIDI: A couple of interesting things I also picked up on. Obviously it did make the point Cam has made so well about Australia's aid budget, but it was also clear that the low resourcing of our foreign affairs in general is also a problem. One of our analysts, William Leeben, has done a lot of work showing that Australia spends 9% of its total budget each year on all of its foreign affairs — and in fact, we've done that for 25 years. So it's hard to swallow a government and all of us agreeing that our geostrategic and global circumstances have gotten tougher, and yet there is really no commensurate investment in how we're responding.

I also noticed a couple of gentler recommendations that didn't make the front page but were really interesting to me. I felt the report as a whole was saying: you can't run a more ambitious development program without capability. People matter, including staff wellbeing and culture. I work with some extraordinarily talented people throughout the Department of Foreign Affairs and Trade — they're working hard and they're tired, and I thought it was important to see that reflected there.

And then the big one for me was on AI. Australia is one of the few donors that doesn't have an approach on digital and AI. There was just a gentle comment in there around how Australia would inevitably have to grapple with that going forward.

GRACE: Yeah, thanks for that, Bridi and Cam. I think those are both very fair assessments. I wonder what you think as well, Grace — you've written about this. I think it's good to see there are some positive things in there about the progress Australia is making, and many of the criticisms reflect some of the tensions we've already spoken about. Grace, what did you make of it?

GRACE: Look, I thought there was a lot in the review that sounded exactly like the 2018 review — the last OECD review. There were a few recommendations from then that have been implemented, but a lot of it feels pretty structural and consistent. And I guess what's changed is that all of a sudden we're just very grateful for the aid program that we have. Even if it's not perfect, it stacks up right now. And obviously all of us are working to try and improve it. But in this context, I think we probably just take the win.

Bridi, beyond the review, there's another shift happening in this system that I wanted to hear your thoughts on. A couple of years ago, we were seeing a big focus on economic development angles — a big surge in infrastructure financing, climate, cyber, banking, labour mobility. But more recently, there's been this flurry of committee inquiries, guidance notes and strategy documents on themes like conflict prevention, civil society and locally led development. To my mind, those are decidedly more political — and possibly more on the transformational side than the transactional side you were speaking about earlier. What do you think is driving that shift, and what challenges do you see with that approach?

Bridi: Yeah, it's interesting, Grace. I actually hadn't thought about it in those terms, but you're absolutely right. In 2023 when the international development policy was launched, so too was a civil society partnership fund launched. A year later at one of our events, Minister Conroy announced additional funding for that fund. Fast forward another year or so, and there's been consultation and I understand some choices are being made about how that fund will ultimately roll out.

But in general, it's not just been the fund. Across the national security domains as well as the foreign policy and development domains, I'm hearing a lot more rhetoric and discussion around just how critical civil society is, how critical free media is — perhaps not quite going so far as to be on the democracy bandwagon, but moving in that direction. And the exact same journey has happened on conflict prevention. For years, it's always astounded me that Australia hasn't really had a proper conflict prevention or fragility capability for quite some time — it's something we decommissioned about a decade ago.

For a very long time I was gently and very politely told not to worry about such a thing. And yet here we are, seeing obvious regional trends prompting parliament to take a second look at how a development program can actually contribute to conflict prevention. I think Australia is actually becoming more sophisticated about how fragility interacts with geostrategic competition, and we're really seeing that if Australia is getting serious about resilience of countries in our region, then investing in political, social and institutional foundations is no longer seen as soft — it's actually great development and it's strategic as well.

I'm personally a big fan of that, but probably like yourselves I do worry a little bit — and I know Roland's published on this as well — about the evidence on how this works and at what cost when we keep asking our development program to be everything to everyone all at once. Grace, what's your take?

GRACE: I think I'm broadly positive. It's quite striking because it's quite principled, and it signals to me — maybe it's not virtue signalling exactly, but it does play a signalling function — that there's some serious interest in the quality and stability of development as well as the volume or pace of development. There's also quite an encouraging amount of risk appetite and ambition there. For example, I was so encouraged to see the international gender equality strategy published at a time when other governments were very explicitly rejecting that as a development priority. The new inquiry into gender equality in national security is another great example. So yeah, I'm broadly positive about it. Cam, what do you think?

CAMERON: On gender equality, it's non-negotiable, and I think it's well embedded in the aid program. There's been a lot of work over more than a decade on gender which has shown real rewards, including through that strategy.

I don't think any of these areas — civil society, conflict prevention — are unimportant to development. But to go back to Bridi's point about an aid program that's trying to be everything to everyone: I do worry about whether we can keep adding more and more objectives to already pretty complex programs, and whether we can implement those effectively. At the end of the day, we want our aid programs to be scalable. We want a partner government to be able to see that they work and take them to scale. As you add more and more complexity, there's a trade-off with scale — it just gets harder and harder for partners to take them on.

So as with all of these things, it'll always come back to country context, local ownership and local drivers, and to the question of whether Australia is really in a position to make a difference. I'd just say on conflict prevention — this work should be as much about asking whether we are unintentionally exacerbating local elite contests for power and resources in our immediate region as it is about whether we should be directing more aid to things like peacebuilding.

ROLAND: Thanks for that, Cam — some good additional notes of caution alongside what is, otherwise, a more optimistic trend that we're seeing. Okay, we're at that point now where it's time for the final question that we'd like to ask our guests — one last big picture question. For both of you, if you could name only one, what is the biggest factor you think will shape the future of development in Australia's region, and what should Australian policymakers be doing about it? Cam, we'll keep going with you first.

CAMERON: I'm going to be a politician and change the question a little bit, but it's hard to pick one thing. I have been thinking about Prime Minister Carney's speech at Davos and what it might mean for a middle power like Australia when it comes to its development policy.

My takeaway is that Carney's model of progressive middle powers working more and more together as the old order has fallen apart will require taking some risks for middle powers like Australia, including on development policy.

Those things include, as we've talked about quite a lot today, being much clearer about what we want from our development assistance program. As the DAC review pointed out, Australia has been a bit fuzzy on this and has probably overloaded its program with too many objectives. You don't have to work in a public policy school to know that the more policy objectives you add to a policy instrument, the less likely you'll be able to effectively achieve any of them. So step one is: what do we want out of this tool?

I've also been thinking about working with other middle powers like Canada to push back on policies by the great powers — not just China and Russia, but also the US now — on things that threaten global development progress: gender equality, climate change, humanitarian need and neutrality. There are going to be times where we have to not just stick up for ourselves with China, but also with the US on some of these really important development issues.

I think it also means working with other middle powers to define which parts of the multilateral development system we're willing to fight and fund for, and which parts we think need fundamental reform. And finally, I think we need to redefine this notion of "like-minded." Who is like-minded? When we look around our region and around the world, we will have to build new coalitions to work together to solve these big shared development problems. Indonesia is one example — Indonesia is now a funder of Gavi, the vaccine alliance, having previously been a recipient. Could we work more with Indonesia on an issue like global health? That's just one example.

So that's kind of what I've been thinking about: what do we do with the Carney speech in the sector?

ROLAND: A little bit of cheating on the question, but points well made. Bridi, what are your thoughts?

BRIDI: Roland, it's pretty easy. The data checks out — the single biggest trend that's going to shape development in our region again and again and again, and that will dwarf geostrategic competition and possibly even dwarf war, is climate change. We've surveyed everyone we can possibly get our hands on in Southeast Asia and the Pacific, and every top foreign policy official in this country, and they all agree: climate change.

But the one that I think we're missing in action on — and it concerns me just as much — is AI. Australia is missing in action on understanding how AI is going to shape the region. At this point in time, many of us are just grappling with AI as a tool of efficiency: how can I draft my notes faster or easier? But I don't think we're very far down the line on thinking about AI as a tool of effectiveness — how it might actually enable access to health advice, or better quality research for government ministers who don't have entire departments in small island states. We're really just scratching the surface of that.

But what I'm most worried about is that we don't have a grip on how AI is actually going to shape the development of nations. Will it cement inequality? Will it perpetuate and quicken things like misinformation — the very things that challenge the foundations of a state?

So I'm also cheating a little. Climate is definitely going to shape the region. But it's AI that I feel we need to get a move on and get a grip on before it far outpaces the capability that Australian development has to offer today.

ROLAND: Thank you Bridi and Cam for joining us.

CAMERON: Thanks for having us.

BRIDI: Thanks Grace. Thanks Roland.

ROLAND: You've been listening to Development Futures, a podcast from the Indo-Pacific Development Centre at the Lowy Institute, hosted by Institute experts, produced by Sahlan Hayes, and supported by the Australian Department of Foreign Affairs and Trade. Development Futures is part of the Lowy Institute podcast network. You can find all our podcast series on our website at lowyinstitute.org/publications.