The Federal Budget and what it means for foreign aid…

By Mark Rice, RESULTS Australia’s Policy and Advocacy Manager

The annual Federal Budget is always an important time for RESULTS Australia, as the contents of the Budget is a measure of how much influence our advocacy has on Government spending priorities and how much the Government’s objectives for the Australian aid program are aligned with ours.  

Commentary in the media on the Federal Budget

The commentary and analysis in the media by advocacy partners has already covered the overall trends in the aid program in 2019-20 and the following three years:   

  • The gradual reduction in the aid program as a proportion of the the national economy is set to continue, with the aid program set to drop year-on-year below 0.2 per cent of gross national income (GNI) by 2021-22. This equates to $4 billion.  
  • In 2019-20, aid to the Pacific is increasing at the expense of aid to Asia. This means that several countries in Asia with acute needs of assistance, such as Nepal and Pakistan, are set to lose a significant part of their bilateral assistance from Australia.
  • Support for infrastructure is set to increase, at the expense of other types of services that aid supports.

However, the aid program in 2019-20 also includes some gains and losses that are less obvious but important to RESULTS:

Gains from the Federal Budget 

Aid increased in real terms in 2018-19

At the time of last year’s Budget, many commentators noted that the aid program was set to fall in real terms (i.e, after adjusting for inflation) for five successive years.  However, as $170 million in funding for multilateral organisations is now to be paid in 2018-19 instead of 2019-20, the aid program in 2018-19 of $4.33 billion will exceed both the Budget estimate and the actual program in 2017-18 ($4.08 billion). The $250 million increase from 2017-18 to 2018-19 is a real increase of approximately 4.2 per cent. 

Of course, this increase is a temporary lift in aid due to a change in the timing of spending, and real reductions in the aid program are set to resume in the next three years.  Nevertheless, we are seeing in the current year the first real increase in aid for five years.

Health spending is increasing in 2019-20

Australian aid for health in 2019-20 is estimated to be $100 million higher than the Budget estimate for 2018-19.  The increase is due to increased contributions to the multilateral health initiatives, such as the Global Fund to Fight AIDS, TB and Malaria, and Gavi, the Vaccine Alliance, which are now receiving extra funding from multilateral payments being brought forward.  The other source of increased health spending is the growth in funding from the Indo-Pacific Health Security Initiative, announced in 2017.

Humanitarian and emergency spending is increasing:  

The 2019-20 Budget provides $450 million for humanitarian and emergency assistance, an increase of $40 million from 2018-19.  This is making progress towards the commitment in the Foreign Policy White Paper to increase humanitarian funding to $500 million per year.  Given the scale of emergencies in many parts of the world, this increase is welcomed by RESULTS Australia and a further increase to $500 million next year is a priority we suggest for the next Budget.

Losses and risks 

Little room for increased multilateral replenishments

With the dollar amount of the aid program set to be flat over the next few years, the federal government will have little scope to increase Australia’s contribution when various replenishments and pledging occasions are scheduled over the next two years. These events include: The Global Fund to Fight AIDS, TB and Malaria; Gavi the Vaccine Alliance; the Global Polio Eradication Initiative and the Global Partnership for Education.   RESULTS Australia made a priority of seeking an aggregate increase in multilateral pledges in our Budget submission this year. Achieving this increase will require a return to growth in the overall aid program.

Reduced bilateral assistance to Asian countries

A number of countries in South-East Asia and South Asia are losing some bilateral assistance in 2019-20.  Some of these countries have made significant economic and social progress, but still have widespread poverty.  It would be difficult to justify reducing aid to Pakistan or Nepal on the basis that they are ready to transition to reduced assistance.

Lack of a clear transition framework

The Department of Foreign Affairs and Trade is working on a paper concerning assistance to middle-income countries.  Transition should be based on a country being strong enough economically and socially to manage with reduced assistance. Completing and implementing a policy on transition is a high priority for DFAT in the next term of government. 

Of course, an election is coming…

The initial response to this year’s Budget gives us some questions and proposals to raise with parties and candidates during the Australian federal election campaign, including: 

  • Are you willing to commit to a medium term target to increase Australian aid significantly?
  • Will you support continued and increased contributions to key multilateral health and education initiatives?
  • Will you adopt a consistent policy for assisting countries to make the transition to reduced external support, and ensure Australia maintains or increases support to the countries with the greatest needs?

Watch this space…