Redefinining Australian Aid

Australia recently began a review of its international development policy, the first in a decade. The review is set to redefine what Australia’s foreign aid expenditures are designed to achieve, to identify new and emerging priorities, and to reassess which countries Australia will provide support to, the amounts, and the projects that Canberra sees as being worthwhile. The review comes at a time when Australia is evaluating how it will negotiate a changing geopolitical environment – especially in its immediate region – and how best it can utilize its capabilities to defend its interests.

Canberra’s international development assistance has already undertaken a distinct reshuffle in recent years. As part of Australia’s “Pacific Step Up,” Canberra has redirected resources from other regions to the countries of the South Pacific. Most notably it has cut funding to Southeast Asian countries by 42 percent over the past five years. This has included halving assistance to both Indonesia and Vietnam, as well as major cuts to Cambodia, Laos, and the Philippines. The Pacific Step Up seems to have come by way of a Southeast Asia step down.

Yet even within the South Pacific there has been a significant shift in the allocation of aid funding. While overall this region will receive an extra US$142 million in the 2019-2020 international development budget (compared to the 2014-2015 budget), the distribution will not be evenly spread. Most of the increase will go to Papua New Guinea, the Solomon Island, and Nauru, while Vanuatu, Samoa and the Cook Islands will have major cuts to their assistance, with small cuts for Fiji, Kiribati, Tonga, and Tuvalu. In particular funding has been moved away from spending on health and toward large infrastructure projects, seemingly an attempt to mirror China’s regional development assistance.

Despite the review’s plan to reassess Australia’s priorities, the government has indicated that the overall amount Australia provides in development assistance – around US$2.7 billion – will not change. This figure, when adjusted for inflation, is around 27 percent less than at Australia’s foreign aid peak in 2013-2014. This sum is 0.21 percent of Australia’s overall GDP, below the average for countries of the Organization for Economic Cooperation and Development (OECD), and below the United Nations’ designated commitment of 0.7 percent of GDP. Current trends would place Australia in the bottom third of the 32 OECD states in regards to development assistance.

These recent developments seem to indicate two things about Australia’s approach to international development assistance. The first is that Australia lacks a serious commitment to foreign aid. This is understandable, as for political parties there are no votes in spending money outside of Australia and doing so makes them an easy target for cheap political point scoring. Yet Australia is one of the world’s most prosperous countries, and many of its immediate neighbors are not. This presents a number of challenges to regional security and stability, and therefore is it a strategic imperative for Australia to assist with enhancing regional development. So while governments may find it difficult to do so, it is their responsibility to explain these wider issues of the national interest to the public.

The second seems to be that Canberra has been spooked by the recent increase in Chinese activity within their traditional sphere of influence, and acted hastily in redirecting its foreign aid expenditures to try and head off this competition. This has come at the expense of Australia’s partners in Southeast Asia. While many of these countries are performing well, and therefore less in need of assistance, Canberra should wish to maintain a strong presence as these countries achieve their development goals, as ASEAN will play an increasingly important role in Australia’s wider interests as its member countries expand their wealth and capabilities. Development assistant remains an important instrument of influence building.

In a rapidly changing geopolitical landscape it is an intelligent move for Australia to engage in a wholesale reassessment of its development assistance priorities. It is likely that Canberra will use this review to double down on its commitment to its South Pacific neighbors, as it sees maintaining its influence in the region as its primary strategic goal. In this regard the review should take seriously an expansion of Australia’s labor mobility schemes for Pacific Islanders. Labor mobility remains the most powerful development tool that Australia can offer, and it contains two features that should make it highly attractive in Canberra; first, it costs the taxpayer nothing, and second, it is something that a strategic competitor like China will not match.