There is no sugar coating it. This year’s budget will see Australia’s foreign aid reach the lowest levels of generosity in our history. But there are some silver linings within the budget allocations and process. Bilateral programs, which were savaged last year, have been by and large protected. And DFAT looks to be maturing in its role as custodian of Australian aid, with aid transparency and budget documentation vastly improving.
A run through the numbers provides a bleak picture of the aid program. When adjusted for inflation, the $224 million cut this year amounts to a 7.4% cut to the program. This is the sixth-largest cut in any one year in our program’s history, a painful fact the aid community is no doubt numb to after last year, when the program was slashed by 20%. After four consecutive years of budget cuts, the aid program is now 30% smaller in real terms than it was at its peak under Labor in the 2012-13 budget. Our aid generosity, as measured by aid expenditure as a proportion of gross national income, has also dropped from 0.34% to 0.23%. This is the lowest in our nation’s history and well below the OECD average.
Growth in the aid program is now pegged to inflation over the forward estimates period, meaning the cuts have finally come to an end. Sadly, that doesn’t provide much solace when the aid budget is at rock bottom.
Figure 1: Australia’s new norm of aid generosity
The Government has been quick to argue that the overarching budget situation made tough decisions necessary. Shrinking the aid budget might indeed be justifiable in times of austerity. However, total government expenditure has actually increased by 9.3% over the same period that aid has been cut by 30%. Over that same period, aid as a share of government expenditure has dropped from 1.32% to 0.85%. It seems the tough decision taken has been to prioritise other expenditure over foreign aid.
So that’s the bad news. What about the good?
Let’s start with how the cuts have been managed. Last year, Australia’s bilateral programs bore the brunt of the 20% cut to the aid budget. This year, they have been protected, with most bilateral programs remaining the same in nominal terms and the inflation-inflicted pain will be felt across the board. Instead, DFAT has implemented some crafty accounting to delay cash payments to multilateral agencies. We were assured in the lock-up that all commitments to multilateral agencies will be upheld, and the aim is to plug the gap with the small incremental increases the aid program is expected to receive over the forward estimates. The only downside to this approach is the jettisoning of the Coalition’s commitment to performance-based allocation of Australian aid, as discussed in detail at Devpolicy’s aid budget breakfast. Naturally this would have been much more palatable with a program that is scaling up rather than bottoming out.
Some other good news is the way the budget was delivered, with a lot more information and transparency. Since 2001-02 the budget had always been accompanied by an aid ‘blue book’, which provided invaluable information down to the country level. With the merger of AusAID into DFAT the blue book disappeared. We were assured that all information previously found in this resource would be put online but it wasn’t. Now, after a two year absence, the book is back (though it's now orange), allowing more detailed analysis into areas such as sectoral expenditure. It’s a relief to have it back, and even better that it is accompanied with the (still green) statistical annex that is invaluable for aid researchers like myself.
Another interesting point to note is that departmental costings to the aid program remain quite high. As a proportion of the total budget, staffing takes up 6.35% of expenditure this year. This is down from its 7.42% peak in 2013-14, but much larger than the 3.5% reported when the budget was at a comparable (inflation adjusted) level to today’s, back in 2007-08. With this increased level of staffing, and no future scale-up on the horizon, one would hope that the aid program would have more resourcing at its disposal, even with the blended roles many aid staff must now be working in DFAT. An adequately staffed aid program should mean we will be able to do more with less.
Overall what could be controlled by DFAT has been controlled well, all while giving back to the sector a lot of the transparency that was taken away in the AusAID merger. Perhaps this is in response to the sector's demands, or it could be because the aid program has found its feet within DFAT. Whatever the case, it’s good to see DFAT taking the first steps to being a mature custodian of the aid program, and we should all hope to see this continue.
Despite these silver linings, it’s hard not to drown in the negatives of a budget that sets the least generous aid program in our history as the new norm. Now that we are in this new reality it’s important that the sector as a whole continues to reflect on exactly how we got here. The government must bear the most responsibility for picking on the aid program so severely. But it's also on all of us, the supporters of aid, who have allowed this to happen. When in government, Labor should have better communicated why a scale-up of foreign aid was good not only for the world’s poor, but also good for Australia. Aid campaigners, who had a huge role in the bipartisan commitment to a 0.5% aid/GNI target back in 2007, should have kept the pressure on Labor as it continued to delay funding commitments (which in turn allowed the Coalition to walk from the table completely). The NGO community, which has the greatest advocacy resources and mobilisation power, has been too focused on its own funding and failed to effectively unite behind a cause that would lift all boats. Lastly, researchers and commentators like me tended to focus too much on the negative and overlooked the good work that Australian aid continues to deliver.
We should all be taking a look in the mirror.
A comprehensive dataset of all budget figures and assumptions in this piece is available here.
Photo courtesy of Flickr user DFAT