Aid & development, explained.
Where and how money is spent tells a story about how the government sees Australia's place in the world (Getty Images)
It should be easier to judge the budget against the warnings of challenging times.
Subscribe to The Informer for monthly expert analysis, and to Events for advance notice of visiting world leaders and distinguished guests.
You may unsubscribe from Lowy Institute newsletters at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
Balancing the books on Australian statecraftBalancing the books on Australian statecraft
Foreign Minister Penny Wong repeatedly declares an “ambition in our statecraft” for Australia to confront uncertain times. But Australia’s international budget books don’t match the ramped-up rhetoric of Australian leaders when it comes to using “statecraft”. The prospect of a Trump-led inwards turn by the United States ought to force a rethink about the rate, scale and depth of Australia’s international engagement needed in the years ahead.
Indeed, “statecraft” has become something of a motif to justify Australian foreign, development and defence policy. Treasurer Jim Chalmers has also gone so far as to say economic policy is “almost indistinguishable” from foreign policy. But the relevant budget numbers reveal this commitment to be mixed.
Our new report released today from Development Intelligence Lab makes this clear.
Defence is a budget mammoth: spending in 2024-25 is almost $56 billion in real terms, a little more than twice what Australia devoted in 1999. If the total federal budget were a $100 note, then defence spending would make up $7.8 this year. Australia’s aid budget, in a widely discussed comparison, makes up 70 cents of that $100 note.
But changes elsewhere over the last 25 years have been less remarked upon. Investment in the intelligence community has grown more than fivefold since 1999, albeit from a low base. Spending on the Australian Federal Police budget has tripled. Yet funding for Australian diplomacy has been volatile.
Australia’s choices can be put into broader perspective by comparing Australia’s budget levels to key partner countries.
The OECD-DAC’s Gross National Income ratio measures provide an authoritative set of comparisons for aid spending. According to this data, regularly analysed by ANU’s DevPol, the 2023 figures showed the United States at 0.24%, the United Kingdom 0.58%, Canada 0.38%, New Zealand 0.3%, South Korea 0.18% and Japan 0.44%. Australia’s $4.96 billion for the current financial year amounts to 0.19% of GNI.
The latest SIPRI data provides an equally ready set of comparisons on Defence spending, using the accepted Gross Domestic Product ratio measure. By SIPRI’s count, military budgets across the same sample for 2023 had the United States at 3.26%, the United Kingdom 2.26%, Canada 1.29%, New Zealand 1.22%, South Korea 2.81% and Japan 1.2%. Australia’s $55.6 billion budget for the current financial year amounts, on our calculation, to 2.09% of GDP.
The Lowy Institute’s Global Diplomacy Index provides a comparison of different countries’ diplomatic footprints. This is an imperfect proxy for funding levels and effectiveness, but Australia comes in at 26th (124 posts), falling significantly behind the United States at second (271 posts), Japan at 4th (251 posts), the United Kingdom at 7th (225 posts), South Korea at 13th (187 posts) and Canada at 15th (157 posts). New Zealand falls at 47th with 68 posts.
Direct international comparisons are challenging for intelligence agencies, given the nature of the work as well as reporting and transparency discrepancies, but some are possible. Australia’s intelligence spend is 0.26% of the total federal budget compared to at least 1.13% in the US budget, for example.
Underinvestment in diplomacy and official development assistance limits Australia’s influence.
But these comparisons, interesting as they might be, can only provide a broad set of markers.
The more important judgement is whether Australia’s budget balancing act fits its own declared policy and individual strategic circumstances.
Data transparency and availability barriers make it tough to get a grip on Australia’s budgets, where international engagement is spread across departments and agencies. Fixing this would be simple: the Department of Finance could publish an authoritative comparison of the various international affairs funding lines alongside the budget every year.
But clearly there is imbalance both between Australia’s various arms of international policy and the demands of the near region.
Australia's budget allocations over the past 25 years entail a dramatic growth in intelligence spending, a doubling of the defence budget, and steady increases in its policing spend. Credible military capabilities are expensive, and the AFP plays an important role in cooperation in the Pacific and Southeast Asia.
But the volatile funding provided for Australian diplomacy and relative stagnation in the aid budget cannot be dismissed. And while Australia's development finance initiatives now total about $10 billion, even when combined with partners’ efforts they still lag the known development and climate financing needs of both Southeast Asia and the Pacific.
Australia’s region is comprised of low- and middle-income countries preoccupied with their development pathways. Underinvestment in diplomacy and official development assistance limits Australia’s influence in this context. Fragility in the region is interacting with geostrategic competition, yet defence and intelligence capabilities can’t address those risks alone.
An easy policy win would be publishing Australia’s international affairs budgets in a more digestible way. This would lay the groundwork for assessing Australia’s “statecraft” against the circumstances that the government describes, to answer whether Australia’s level of investment across development, diplomacy, defence and intelligence is aligned to the challenges it faces.
About the authors
William Leben
William Leben is a Senior Analyst at the Development Intelligence Lab and an Expert Associate at the National Security College, Australian National University.
Ruby Saulwick
Ruby Saulwick is a Project Officer at the Development Intelligence Lab.
The most-pressing world events explained by Lowy Institute experts and global contributors, in your inbox, every Thursday.
You may unsubscribe from The Interpreter at any time. For information on our privacy practices and how to unsubscribe, see our Privacy Policy.
