Australia donor profile

Australia is the 11^th-largest donor; ODA is set and capped at A$4.0 billion (US$3.0 billion)

According to data from the Organisation for Economic Co-operation and Development (OECD), Australia’s total Official Development Assistance (ODA) was US$3.1 billion in 2018, making it the eleventh-largest Development Assistance Committee (DAC) donor. When considering ODA as a percentage of GNI, however, Australia’s ranking drops significantly to nineteenth place. Australia’s spending on ODA represents just 0.23% of GNI, far below the DAC average of 0.38%.

These numbers are based on the new methodology for measuring ODA loans which the OECD DAC applied to ODA reporting for 2018 onward. This methodology, called ‘grant-equivalent’, is intended to better reflect “donor effort” because only the ‘grant’ portion of loans is counted as ODA. This reform had no impact on Australia’s past ODA volumes, as the country has not extended any ODA eligible loans between FY1997/98 and FY2018/19. (The FY in Australia runs from July 1, 2019 to June 30, 2020.) The OECD still publishes net ODA disbursements according to the ‘cash-flow’ methodology to allow for comparisons overtime. According to these figures, Australia’s ODA in 2018 increased by 5% compared to 2017, driven by increased contributions to the World Bank.

Despite the nominal increase in ODA in 2018, Australia’s development budget has decreased consistently since FY2013/14. According to budget documents, in FY2019/20 ODA will have shrunk by 34% (inflation considered) compared to the peak of Australia’s development spending in FY2013/14. Budget document estimates reveal that the country’s ODA to GNI ratio is expected to fall further from 0.21% in the FY2019/20 to 0.19% by FY2021/22.

The Liberal National Coalition has been in government since 2013 and has enacted multiple cuts to the ODA budget.

The Liberal National Coalition (center-right), which has been in government since 2013, has enacted multiple cuts to the ODA budget. The largest single cut in Australia’s development budget history came between FY2014/15 and FY2015/16, when it decreased from A$5.5 billion (US$4.1 billion) to A$4.5 billion (US$3.4 billion). In FY2017/18, the government imposed a A$4.0 billion (US$3.0 billion) cap on ODA until 2021. Under this freeze, ODA will not be increased even to align with inflation. Despite the cap, a one-off payment of A$161 million (US$120 million) to the Asian Infrastructure Investment Bank in FY2018/19 brought the ODA budget to A$4.2 billion (US$3.1 billion). The FY2019/20 budget, delivered by the Australian Treasurer in April 2019, has been set at A$4.0 billion (US$3.0 billion). In May 2019, the Liberal National Coalition was re-elected for another three-year term.

Unless otherwise indicated, all data in this section is based on the grant-equivalent measurement system. For more information, see our Donor Tracker Codebook.

Focus is on regional security and infrastructure investment in the Pacific

Australia’s development policy was updated in 2014 following a change in government. The policy, ‘Australian aid: promoting prosperity, reducing poverty, enhancing stability’, explains the purpose of Australia’s development: to “promote national interests by contributing to sustainable economic growth and poverty reduction” with a strengthened focus on the Indo-Pacific region. Australia’s ODA targets six priority areas: 1) infrastructure and trade, 2) agriculture, fisheries, and water, 3) effective governance, 4) education and health, 5) building resilience, and 6) gender equality and empowering women and girls. The policy is accompanied by a performance framework, ‘Making Performance Count: enhancing the accountability and effectiveness of Australian aid’.

Promoting private sector growth in developing countries is a key development priority. The ‘Strategy for Australia’s Aid Investment in Private Sector Development’ discusses how to use funding to foster investment environments and maximize the development impact of business. This strategy has been driven by the conviction that public financing represents an ever-diminishing proportion of funding for global development.

Since 2014, the government has prioritized the empowerment of women and girls. Australia established a Gender Equality Fund (funded with A$55 million [US$41 million] in FY2019/20) and launched the ‘Gender Equality and Women’s Empowerment Strategy’. In addition, they set a target that over 80% of development programs effectively integrate gender equality and women’s empowerment. According to ‘Performance of Australian Aid (POA)’ reports, the target has never been met.

The Department of Foreign Affairs and Trade (DFAT) released a Foreign Policy White Paper in 2017. It reiterates Australia’s focus on promoting security and strengthening the self-management of borders in the Indo-Pacific region to increase opportunities for trade and investments. Since 2018, the government has announced a number of major initiatives in the region, including a soft loan of A$2.0 billion (US$1.5 billion) for the Australian Infrastructure Financing Facility, which supports infrastructure development in Pacific countries and Timor‑Leste, an expanded Pacific Labor Scheme, which allows workers from the Pacific to fill labor shortages in Australia, and increased funding for scholarships and education.

Australia’s six development priority areas:

1. Infrastructure and trade;
2. Agriculture, fisheries, and water;
3. Effective governance;
4. Education and health;
5. Building resilience; and
6. Gender equality and empowering women and girls.

The White Paper also specifically references global health risks as an important focus and commits Australia to supporting global health research and development (R&D), particularly in the areas of drug-resistant tuberculosis and malaria. (See ‘Sector: Global Health R&D’ for details.) In 2020, Australia committed to providing technical assistance and supplies to the Pacific and Timor-Leste to deal with the COVID-19 pandemic. This includes personal protective equipment for health workers and assistance to improve laboratory diagnosis. Australia is also helping with surveillance, planning, and response budgeting. This funding will be drawn from both the humanitarian emergency budget and bilateral country programs.

Increasing funding to the Pacific has come at the expense of development spending in other geographic regions. Australia’s bilateral assistance to Pakistan will be reduced from A$39 million (US$29 million) in FY2018/19 to A$19 million (US$14 million) in FY2019/20, before phasing out completely in FY2020/21. According to the latest budget the government will also reduce bilateral ODA to Nepal by 42% compared to FY2018/19.

The May 2019 election returned the Liberal National Coalition to power for a third term. In late 2019, they began the process of reviewing Australia’s development policy. The updated policy is expected to reflect a continued commitment to the government’s longstanding priorities; it will build on the 2017 Foreign Policy White Paper and it will likely focus on regional security, infrastructure, and the provision of funding beyond official development assistance (ODA). The government has been criticized for its move toward using ODA for strategic purposes and for its shift away from funding sectors such as health, education, and climate change. The policy review will not consider any potential increase in the development budget. Its final report will be delivered in July 2020.

Australia continues to prioritize bilateral development support, delivered as grants

Australia channeled 81% (US$2.6 billion) of its ODA bilaterally, putting it above the DAC average of 59%. This includes both bilateral funding (US$1.9 billion) and earmarked funding, which is channeled through multilaterals for a specific region or sector (US$592 million, reported as bilateral funding by the OECD). The country’s focus on bilateral support is primarily due to its prioritization of neighboring countries in the Indo-Pacific region. Australia provides almost all bilateral ODA as grants, but a small share of its funding will be disbursed in loans to the Pacific in the coming years, through the Australian Infrastructure Investment Facility.  

Australia’s highest funded sectors were cut in 2018, while funding to health and populations increased by 59% from a very low base

Australia spent 18% of its bilateral ODA in 2018 on multisectoral activities. This sector saw a 7% decline in funding compared to 2017. Multisector activities include funding for scholarships granted to students studying in Australia. 17% of Australia’s bilateral ODA in 2018 went toward projects targeting government and civil society, in line with the country’s emphasis on economic growth, private sector investment, trade, and regional security.

Health and populations represented 12% of Australia’s development spending through bilateral channels in 2018, an increase of 59% over 2017 levels. Health, particularly regional health security, has become increasingly important to Australia as many of its neighbors have faced serious health challenges in recent years. The 2018 growth may be due to increased spending to address the spread of multidrug-resistant tuberculosis in Papua New Guinea and the announcement of — and — initial spending on, the Regional Health Security initiative in October 2018. (See ‘Sector: Health’ and ‘Sector: Health R&D’ for further details.)

Funding to education, which in 2018 accounted for 8% of spending, has also increased since 2017, though more modestly (by 12%). Donor administration costs (8%) were the fifth largest area of expenditure in 2018, accounting for the same share of bilateral disbursements as in previous years. Humanitarian support (7%), agriculture (7%), and infrastructure (5%), while still priority sectors, received a relatively smaller share of Australia’s bilateral ODA in 2018.

Australia's focus on bilateral support is primarily due to its focus on neighboring countries in the Indo-Pacific.

Most of Australia’s funding goes to the Indo-Pacific region; middle-income countries receive much of the ODA

Australia’s bilateral ODA focuses on the neighboring Indo-Pacific region. The government plans to continue concentrating at least 90% of country-specific program funding on the Indo-Pacific region (and has done so since FY2015/16) while scaling back programs in other regions. As a result, the share of country- or region-specific bilateral ODA going to sub-Saharan Africa (3% in 2018) is far below the DAC average of 21%. According to OECD data, Australia disbursed 33% of bilateral ODA to Oceania and 31% to Asian countries in 2018. Australia heavily concentrates its development support on neighboring lower-middle-income countries (LMICs). In 2018, LMICs received 51% (US$1.3 billion) of Australia’s bilateral ODA. In recent years, Australia has consistently spent around half of its ODA on LMICs.

Papua New Guinea (PNG) and Indonesia are the largest recipients of Australia’s bilateral ODA, receiving US$419 million or 16% of bilateral ODA, and US$263 million or 10% in 2018, respectively. Funding to both countries increased between 2017 and 2018; ODA to PNG grew by 11% from US$378 million and ODA to Indonesia rose by 28% from US$205 million. In 2015, the Australian government reduced development assistance funding to Indonesia by 40%. The slight rebound this year was driven by funding for infrastructure projects and the initiation of the Australia-Indonesia Partnership for Economic Development. The increase in ODA to PNG in 2018 was driven, in part, by funding for new undersea telecommunications cables to Papua New Guinea and the Solomon Islands. Funding for the Pacific Leadership and Governance Precinct (a project meant to strengthen public and private sector leadership in PNG and across the Pacific) and for the PNG-Australia Transport Sector Support Program (TSSP) (a multi-year investment in improving PNG’s transport infrastructure network) also increased in 2018.

Australia does not channel much of its ODA through multilateral organizations

Australia’s focus on promoting its own national interests and strengthening bilateral relationships is reflected in the fact that Australia does not channel much of its ODA through multilaterals compared to other members of the OECD DAC. Australia’s core ODA funding to multilaterals stood at US$599 million or 19% of gross ODA disbursements in 2018, compared to the DAC average of 41%. Key recipients of multilateral ODA in 2018 were regional development banks (41% in 2018, including US$125 million to the Asian Infrastructure Investment Bank and US$101 million to the Asian Development fund), the World Bank Group (26%), and UN agencies (28%).

In addition to core contributions, Australia channeled 19% of its ODA as earmarked funding through multilaterals in 2018, which is reported as bilateral ODA (DAC average: 14%). This funding is earmarked for particular regions, countries, or themes, rather than contributing to a multilateral’s core funding, which can be spent at the discretion of the multilateral itself. Australia’s spending on multilaterals is informed by the Multilateral Organization Performance Assessment Network (MOPAN) of 18 donors. The latest OECD Peer Review, completed in 2018, recommended that DFAT communicate more clearly how such performance assessments inform its funding decisions.

Unless otherwise indicated, all data in this section is based on the cash-flow basis measurement system. For more information, see our Donor Tracker Codebook.

DFAT manages almost all of Australia’s overseas development programs

Australian Prime Minister (PM), Scott Morrison, leads the decision-making for development policy. He has served as PM and leader of the conservative Liberal Party since August 2018, following an internal leadership shuffle which saw him replace Malcolm Turnbull. The Liberal-National Coalition, in government since 2013, was most recently re-elected in May 2019. The next federal election is due in 2022.

The Minister for Foreign Affairs, Marise Payne, is responsible for directing Australia’s development program. Payne was also appointed the Minister for Women in 2019. She is a strong supporter of human rights and action on HIV/AIDS. The Minister for International Development and the Pacific, Alex Hawke, works under Payne to strengthen Australia’s relationships with the Pacific Islands. Hawke is also the Assistant Minister for Defense.

The Department of Foreign Affairs and Trade (DFAT) manages development policy and budgets and delivers almost all of Australia’s overseas programs. According to the FY2019/20 budget, DFAT will manage 89% of Australia’s ODA. The Centre for International Agricultural Research is also a part of the Minister for Foreign Affairs’ portfolio. DFAT cooperates with other government agencies (e.g., Treasury, the Australian Federal Police, and the state and territory governments), which deliver the remaining development assistance.

The PM leads the overall decision-making on development policy, while the Minister for Foreign Affairs directs the development program.

Within DFAT, the Deputy Secretary for Global Cooperation, Development, and Partnerships (GPG) oversees four development divisions. DFAT underwent a restructuring in December 2019, which saw the renaming and reorganization of more than half of the branches and divisions under GPG. Health policy and the financing of global health funds such as Gavi, have been incorporated into one division, the Human Development and Governance Division (HGD).  In addition, the Office of the Chief Economist was moved, and will now jointly advise the GPG and the Trade, Investment, and Business Engagement group.

DFAT’s geographic branches develop three-year ‘Aid Investment Plans’ with major recipient countries, based on the government’s overall priorities. DFAT executive staff responsible for geographic branches make final recommendations on funding for specific programs to the Foreign Affairs Minister for approval. Performance benchmarks are set and reviewed through annual program performance reports. These are discussed each year with the partner country. The 2018 OECD Peer Review found that Australia’s multi-year investment plans increase the predictability of development assistance, at least in the medium-term.

AUSTRALIA'S DEVELOPMENT COOPERATION SYSTEM

Parliament: Australia’s Parliament is responsible for formally reviewing the final federal budget between May and June. The budget is passed into law before the end of the fiscal year (end of June). In practice, the budget, including the development budget component, is usually passed without amendments by the government majority in the House of Representatives. In the Senate, the proposed ODA budget is reviewed by the Foreign Affairs, Defense, and Trade Legislation Committee, which can seek information on the proposed development program but cannot make amenments.

Civil Society: The government channels bilateral ODA through civil society organizations (CSOs) under the umbrella of ‘Global Programs’. In 2018, CSOs were funded with US$264 million, or 10% of bilateral ODA, according to OECD data. In addition, Australian CSOs mobilize public support and voluntary contributions for development. More than 140 Australian non-government organizations (NGOs) operate under the Australian Council for International Development’s (ACFID) self-regulatory Code of Conduct. ACFID also supports policy engagement with the Australian government. Over fifty Australian NGOs have met comprehensive due-diligence requirements through accreditation under DFAT’s Australian NGO Cooperation Program, which enables them to receive funding from the government.

There are two major funding lines; DFAT manages 89% of the ODA budget

Australia’s ODA budget for FY2019/20 stands at A$4.0 billion (US$3.0 billion). 89% of funding within the ODA budget is managed by the Department of Foreign Affairs and Trade (DFAT), while the Australian Centre for International Agriculture Research (ACIAR) and other government departments, including the Australian Federal Police, Treasury, and the Department of Immigration and Border Protection, channel the remaining 11%.

DFAT’s ODA budget provides detailed information on funding channels by regions and countries, as well as multilateral organizations, and is composed of two major funding lines: ‘Country and Regional Programs’ and ‘Global Programs’.

• ‘Country and Regional Programs’ contains budget lines for major regions, which are further broken down by annual allocations to specific country programs.
• The ‘Global Programs’ envelope includes budget lines for multilaterals, CSOs, and humanitarian assistance to the ‘UN, Commonwealth, and Other International Organizations’. The Global Fund to Fight AIDS, Tuberculosis and Malaria (Global Fund); Gavi, the Vaccine Alliance (Gavi); and the Global Polio Eradication Initiative (GPEI) are usually included in the health-specific sub-funding line, ‘Contribution to Global Health Programs’.

From October to December, new initiatives are advocated for and considered

The fiscal year (FY) normally runs from July 1 to June 30:

• Budget proposals and changes are developed: Between October and November, budget proposals are developed and advocacy for new initiatives takes place.
• The Expenditure Review Committee (ERC) determines budget priorities: The ERC of Cabinet (Prime Minister, Treasurer, Finance Minister, and other ministers) meets in November to determine budget priorities. Based on these priorities, the Department of Foreign Affairs and Trade (DFAT) and other departments start to prepare requests for funding.
• DFAT prepares and develops its budget: From December to February, DFAT prepares its overall budget proposal and requests for specific budget lines. At the end of this process, the Foreign Affairs Minister submits the department’s budget request to the Cabinet’s ERC.
• ERC reviews draft budgets and departmental funding: From March to late April, ERC meets regularly to review the overall draft budget and departmental funding. Based on the overall budget allocated to DFAT, the Foreign Affairs Minister makes a final decision on internal budget allocations.
• Parliament reviews the budget: The Treasurer normally announces the budget on the second Tuesday in May (‘budget night’) and delivers it to Parliament in a televised address. Between May and June, Parliament debates and formally reviews the budget. Importantly, the development budget is embedded in the foreign affairs budget and is not a major point for negotiation in Australian budget politics. In the Senate, the development budget is reviewed by the Foreign Affairs, Defense, and Trade Legislation Committee, which can seek information on the proposed development program but has no power to amend the budget.
• Parliament approves the budget: After examination and debate, Parliament formally approves the government’s budget in June, however, delivery of the budget for FY2020/21 has been postponed until October 2020. This is due to the economic uncertainty caused by the novel coronavirus (COVID-19) pandemic. In practice, the budget, including the development budget component, is usually passed without amendments by the government majority in the House of Representatives. Throughout the financial year, DFAT holds a significant amount of discretion on the distribution of funds not yet allocated.