The 2015-16 budget for the Foreign Affairs and Trade portfolio evokes A Tale of Two Cities.
For aid, it's a case of the 'worst of times': the Government has cut $1 billion from overseas development assistance this financial year (as announced in the Mid-Year Economic and Fiscal Outlook), $1.35 billion in the next, and $1.38 billion in 2017-18. This delivers a total saving of $3.7 billion since the last budget and a hefty $10 billion over the forward estimates since this Government took the reins in late 2013.
After the last budget, everyone was busy calculating the impact of the Coalition's abandonment of the former government's goal of reaching 0.5% GNI by 2017-18, instead freezing the aid spend at $5 billion and indexing future growth to CPI. In this budget, Australia's foreign aid budget suffers its most significant contraction since its nadir in 2003-4 (dramatically depicted in Devpolicyblog's charts and spreadsheets in December last year). The 2014-15 aid budget was $5.0 billion (roughly the same as the 2013-14 spend, which itself was around $100 million less than the previous year's). In 2015-16, the budget is $4.052 billion. This is a 20% cut overall, with assistance to Indonesia and Africa the most affected. Australia slips to 13th in the OECD rankings of aid donors in the developed world, and 16th in the ratio of ODA to GNI.
Now on to the other tale. It might be an overstatement to call this year's budget the 'best of times' for Australia's overseas representation, but it's up there.
In what appears to be a sweetener for the Foreign Minister in an otherwise unpalatable serving, Australia's diplomatic network (yes, something we at the Lowy Institute may have raised once or twice) gets nearly $100 million to add five new posts to its diplomatic footprint, bringing the total to a nice round 100. The last time Australia got a new diplomatic mission was the Gillard Government's Chengdu post, opened in 2013. The Gillard Government announced another new post in West Africa (Senegal), but that one got scratched in last year's budget.
The five new posts announced last night are Buka (PNG), Doha (Qatar), Makassar (Indonesia), Phuket (Thailand) and Ulaanbaatar (Mongolia). Interestingly, only two of those were in former DFAT Secretary Dennis Richardson's wishlist, which he put in a submission to the Foreign Affairs, Defence and Trade Joint Standing Committee's 2012 inquiry into Australia's overseas representation. That list was weighted to Africa and Central Europe.
The mission in Phuket, presumably a consulate-general, was probably the first priority on anyone's list. Phuket is Australians' fourth most popular travel destination, and one of the most demanding places for DFAT to provide consular services, accounting for the largest number of Australian deaths overseas.
The Makassar post, in eastern Indonesia, was also on the Lowy Institute's list, in order to serve Australia's considerable interests there (although the cuts to Indonesia aid trim those interests somewhat). Of the others, the post in Bougainville anticipates the independence referendum sometime in the next five years, the Ulaanbaatar post was in Mr Richardson's top five, and the Doha post is more of a surprise – presumably it's to serve increasing bilateral trade and investment interests.
While the expansion of the diplomatic footprint helps realise one of the Foreign Minister's long-held ambitions, the excitement of this budget measure is somewhat dulled by the more sobering picture the budget paints for the Department overall.
After its merger with AUSAID, DFAT has had to cope with a reduction of 500 staff since the last budget – nearly 10% of its overall staff. By comparison, the overall public service (the general government sector) has shrunk by only 5% since the 2012/13 financial year (the year this government was elected) and 0.03% since last year, despite much fanfare about 'a smaller more agile public service' in this year's Budget.
DFAT Secretary Peter Varghese is not given to hyperbole, but his comments in February's Estimates hearings about staff morale following this intense period of post-merger restructuring are telling:
As you would expect, if you go through a merger this big and this complicated you are going to have an unsettled period. Unsettled periods in my experience usually mean a certain cost in morale.
It's hard to deduce from the post-integration budget papers exactly what the impact of the merger has been on the Department's overall budget situation. Excluding equity injections and administered appropriations (aid), and special accounts, DFAT's finances of around $1.4 billion look to be slightly (1.6% or $22 million) improved. But a considerable amount of its budget over the next four years will be consumed by new funding ($106 million) for keeping open the Baghdad embassy to serve Australia's commitments in Iraq, as well as continued funding ($138 million) for the embassy in Kabul.1 The injection of $98 million to open the five new posts includes $37 million in capital funding. As we know from the some of the Government's other budget announcements over the past week, the $389 million in new budget measures for DFAT from last night's Budget won't come out of thin air.2 They will cause the Department considerable pain.
Clarification: 1. The funding for the Baghdad and Kabul embassies in the forward estimates is for two years only, to 2016-2017, with further funding for consideration at that point. 2. The expense measures for Foreign Affairs and Trade in this Budget (including for the Baghdad and Kabul embassies) are new funding allocated by Government, and do not detract from the Department's overall funding base. The 'pain' to which I refer is that which emanates from the cuts to the aid budget and their impact on the Department. 3. Australia opened an interim embassy in Kyiv, colocated with Canada's, in February.
Photo by Flickr user Bentley Smith.