Aid & development, explained.
Sectors most obviously gutted by recent global aid cuts have been humanitarian assistance, civil society, and public health (Brett Sherriff/Defence Department)
The local debates are only just starting about responding to dramatic global shifts.
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Australian aid budget 2025: Choices on holdAustralian aid budget 2025: Choices on hold
The big question for Australia’s pre-election aid budget released this week was how it would respond to a global development landscape in turmoil. Deep aid cuts by the United States and, to a lesser extent, cuts by several European donors pose huge global funding gaps.
Domestic politics also matters. A lift in Australia’s foreign aid was always unlikely to be a priority amid a cost-of-living crisis still playing out at home.
So it transpired. Australia is aiming for stability while reprioritising at the margin.
The budget has total aid at $5.1 billion, little changed in inflation-adjusted terms from last year and slightly lower as a share of national income.
If there are to be sharp policy changes in response to dramatic shifts in the global environment, the domestic debates required are only just getting started.
We’ve argued previously that the gaps Australia should worry about most due to cuts by other donors lie in several hard-hit sectors affecting Australia’s immediate region, the provision of global public goods, and the defunding of the multilateral system.
The sectors most obviously gutted by recent global aid cuts have been humanitarian assistance, civil society, and public health.
On humanitarian assistance, the budget announced a $370 million new package for refugees in Myanmar and Bangladesh. This is an act of common sense and compassion in Australia’s near region. Still, total humanitarian funding has increased by only five per cent from last year, barely above inflation.
When it comes to global collective action problems, Australia cannot avoid worrying about what happens in countries beyond its immediate region.
An extra $4 million for the newly established Civil Society Partnerships Fund will not go far in the face of US withdrawal as the major donor in this area. Though Australia’s new fund is only just getting started, so it’s conceivable that more support might follow. A particularly devastating consequence of US aid cuts has been the shutdown of Radio Free Asia. Stepped-up funding for Australia’s existing international media strategy would be one useful response.
On health, there’s a $180 million multi-year regional package on HIV, maternal and neonatal health, as well as a program designed to curb zoonotic outbreaks in Indonesia. But there’s also an almost $40 million cut from Australia’s contributions to global health programs for this year, on net delivering a slight reduction in Australia’s total aid spend on health compared to last year.
Where there is a somewhat material increase, it is for governance and economic infrastructure projects – linked it seems to a new $1 billion package over five years for economic resilience in the Pacific and Southeast Asia. Not irrelevant to the global situation given rising economic and environmental risks and the region’s vulnerability to these.
Overall, there is relatively little change in the focus of Australia’s aid program in terms of sectoral priorities.
On global public goods, the government for now seems to be continuing its existing approach by mostly looking to contribute through regional action on issues such as preventing pandemics and addressing climate change. The regional health package and $355 million over four years for regional climate action being cases in point.
This is a broadly reasonable strategy. Southeast Asia is vital to both preventing pandemics and cutting global emissions. But when it comes to global collective action problems, Australia cannot avoid worrying about what happens in countries beyond its immediate region.
The Trump administration has already withdrawn from the World Health Organisation. It also now plans to cut funding to GAVI, which does vital work global vaccine work. The result will not only cost lives but open a huge hole in the world’s defences against future pandemics.
This brings us to the related broader question of support for the multilateral system. The budget highlights a tighter geographic focus on Australia’s immediate region – with a record 75 per cent of aid directed to the Indo-Pacific. In practice, the increase is quite small, but the flipside is that this appears to have been achieved via a slight reduction in funding to multilateral organisations. Bilateral allocations to other regions meanwhile have mostly been protected.
One multilateral bright spot is a solid $660 million pledge (over three years) to the World Bank’s arm for the poorest countries – simultaneously supporting a vital global development institution but one that delivers large benefits for Australia’s region.
Still, Australia will have to grapple with more difficult questions and trade-offs about what parts of the multilateral system it is willing to support, as the US in particular cuts back. It will also matter for Australia’s desire to secure a seat on the UN Security Council.
Tough questions for Australia’s aid program will eventually need to be confronted, and choices made. Those decisions will be even harder if there is no eventual lift in Australia’s total aid budget, despite the increased need to do more.
About the authors
Grace Stanhope
Grace Stanhope is a former Research Fellow in the Indo-Pacific Development Centre at the Lowy Institute, working on the Southeast Asia Aid Map. Her work focused on tracking and analysing foreign aid and development finance flows to Southeast Asia.
Roland Rajah
Roland Rajah is Lead Economist and Director of the Indo-Pacific Development Centre at the Lowy Institute, focusing on economic development challenges across Southeast Asia, the Pacific Islands, and South Asia. His research spans macroeconomics, aid and development finance, geoeconomics, and regional integration.
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