Australia
Australia
At a glance
Funding trends
- Australia is the 12th-largest donor country, spending US$2.9 billion (current prices) on official development assistance (ODA) in 2019. This represents 0.22% of Australia’s gross national income (GNI). According to budget document estimates, ODA to GNI will fall in the coming years to 0.19% by FY2021/22, though GNI projections may not hold given the economic impacts of the COVID-19 crisis.
- According to the Organisation for Economic Co-operation and Development (OECD), Australia’s ODA fell by 2.5% between 2018 and 2019 leading to a decrease in bilateral assistance. Australia’s ODA has been cut annually for six years, with budget documents from FY2019/20 indicating a 28% decline in ODA since its peak in FY2013/14.
- Australia’s ODA budget has been capped at A$4.0 billion (US$3.0 billion, in constant 2018 prices) until 2021 and is not being adjusted for inflation.
Strategic priorities
- Australia’s development strategy, ‘Partnerships for Recovery: Australia’s COVID-19 Development Response’ and accompanying performance framework (launched May 2020), reorients the country’s development programming to focus on addressing the health, social, and economic challenges created by COVID-19 for the next two years. It retains the country’s focus on the Indo-Pacific region (and the Pacific, Timor-Leste, and Indonesia in particular).
- The ‘Pacific Step-up’ remains one of Australia’s most important development priorities, with ODA to the region set to reach record levels, according to the FY2019/20 budget. Australia’s heightened engagement is, in part, an attempt to counter China’s growing influence and investment in the region.
- Increasing funding to the Pacific has come at the expense of development spending for other regions. Australia plans to phase out its bilateral ODA to Pakistan completely in FY2020/21. The latest budget (FY2019/20) also outlines a 42% cut to funding for Nepal compared to FY2018/19.
Outlook
- The Liberal-National Coalition has made major cuts to Australia’s development budget in the six years since they came to power. A federal election in May 2019 returned the Liberal-National Coalition to government for a further 3 years. According to forward estimates, ODA will remain frozen until FY2022/23.
- In 2019 and 2020, devastating bush fires, ash rain, dust storms, hailstorms, and flash floods ravaged Australia, leading to increased calls from civil society groups, academics, and opposition politicians for the government to reassess its position on climate change and to include emissions reduction as an international development priority.
- Despite the increased development challenges resulting from the COVID-19 crisis highlighted in Australia’s new development policy, no additional funding has been allocated to increase the development budget. In the second quarter of FY2019/20 7% of ODA was redirected away from regular programs toward the international response to COVID-19. It is likely that many development programs will need to be cut in coming years to cover COVID-19 related spending.
ODA Trends
Australia is the 12th-largest donor; ODA is set and capped at 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$2.9 billion in 2019 (current prices), making it the 12th-largest Development Assistance Committee (DAC) donor. When considering ODA as a percentage of GNI, however, Australia’s ranking drops significantly to 19th-place. Australia’s spending on ODA represents just 0.22% of GNI, well below the DAC average of 0.38%. In 2019, ODA fell by 2.5% compared to 2018 (from US$3.15 billion to US$3.07 billion in constant 2018 prices), due to the government’s decision not to index the development assistance budget for inflation. Budget document estimates reveal that the country’s ODA to GNI ratio is expected to fall further to 0.19% by FY2021/22, though it is unclear whether these predictions will hold given the economic uncertainty caused by the COVID-19 crisis.
The Liberal National Coalition (center-right) — which has been in government since 2013 and was most recently re-elected in May 2019 for another three-year term — has enacted multiple cuts to the ODA budget. According to budget documents, in FY2019/20 ODA will have been cut by 28% (inflation considered) compared to the peak of Australia’s development spending in FY2013/14. 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, between 2019 and 2021, ODA will not be increased even to align with inflation.
Even though Australia’s new development policy (‘Partnerships for Recovery: Australia’s COVID-19 Development Response’, launched in late May 2020), recognizes the severity of potential impacts of COVID-19 on development outcomes, it does not outline any development budget increases in the next two years. As a result, increased spending on COVID-19 in the coming years will likely necessarily involve programming cuts in other areas. Already in the second quarter of FY2019/20, A$280 million (US$209 million or 7% of the overall ODA budget) has been moved from funding programs that are unable to continue or are seen as no longer relevant given the challenges of COVID-19 and is being spent on Australia’s international response to COVID-19.
Unless otherwise indicated, all data in this section is based on the grant-equivalent measurement system. For more information, see our Donor Tracker Codebook.
Policy Priorities
Focus is on regional security and infrastructure investment in the Pacific
In late May 2020, Australia’s Department of Foreign Affairs and Trade (DFAT) launched a new development policy ‘Partnerships for Recovery: Australia’s COVID-19’, abandoning the previously planned development policy review. According to this new policy, Australia’s whole development strategy for the next two years has been incorporated into a regional COVID-19 response, though it also leaves some room for some pre-existing initiatives to remain in place. The policy concentrates on Australia’s “immediate neighborhood” and names three action areas: 1) strengthening health security, 2) maintaining social stability (including education, governance, and violence against women), and 3) stimulating economic recovery. Protecting vulnerable groups — particularly women and girls — is an overarching focus. Like the previous development policy, it proposes that development programming should be aligned with Australia’s overall strategic, foreign policy, and economic objectives. The policy is accompanied by a new three-tier performance framework and a promise of improved transparency, monitoring, evaluation, research, learning, and adaptation.
The ‘Pacific Step-up’ (which began in 2016 as the ‘Step-change’) remains one of Australia’s most important development priorities. Australia’s new development policy names the Indo-Pacific region as its focus; however, programming will likely continue to concentrate almost exclusively on the Pacific and Southeast Asia — the Pacific, Timor-Leste, and Indonesia are named “first-tier priorities” — while cuts to bilateral assistance to South Asia are set to continue. Australia’s bilateral assistance to Pakistan will be phased out completely in the current year (FY2020/21). The government also reduced bilateral ODA to Nepal to A$9 million (US$7 million) in FY2019/20 (a 42% cut). At the same time, according to the FY2019/20 budget, ODA to the Pacific is set to increase to record levels.
The Pacific has been a longstanding priority within Australian development policy. The region is a key focus in Australia's ‘2017 Foreign Policy White Paper’ and ‘2016 Defence White Paper’. The White Paper reiterates Australia’s focus on promoting security and strengthening the self-management of borders in the Pacific region to increase opportunities for trade and investments. As this overlap in development, defense, and foreign policy suggests, Australia’s heightened engagement is not purely development-related; it is in part, an attempt to counter China’s growing influence and investment in the region. This illustrates the government’s shift toward using ODA for strategic purposes.
In 2018, Australia’s deepening commitment to the region was reaffirmed with an announcement by the Prime Minister that Australia would be taking its engagement with the Pacific to a “new level”. Since then, the government has announced several major initiatives in the region. In 2019, DFAT established an Office of the Pacific, thereby expanding the internal resources devoted to Pacific policy. Other recent initiatives include an expanded Pacific Labor Scheme, which allows workers from the Pacific to fill labor shortages in Australia; increased funding for scholarships and education; and a soft loan fund 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. Civil society organizations have expressed concern about the reintroduction of loans into Australia’s development system with this new financing facility, arguing that it could mark the beginning of a shift in Australia’s approach to development financing, away from grant-funded development programming and toward loan-financed infrastructure projects in Pacific countries. This is of particular concern because many of these countries are already suffering from ‘debt-distress’. Australia’s newly released ‘Partnerships for Recovery’ strategy now states the government’s intention to investigate increased use of non-grant finance instruments (such as including loans, guarantees, equity investments, and impact investing) for supporting the long-term economic recovery in Pacific countries.
Given its COVID-19 orientation, it is unsurprising that health security a key pillar of DFAT’s new ‘Partnerships for Recovery’ strategy; however, despite an overall decline in funding to health in recent years, regional health security was an emerging focus of Australian development even before COVID-19 arose. The White Paper from 2017 also specifically references global health risks as an important issue 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.) The most recent budget saw a small rise in health-related funding due to the creation of the Indo-Pacific Centre for Health Security, which aims to “contribute to the avoidance and containment of infectious disease threats with the potential to cause social and economic harms on a national, regional or global scale”, a particularly prescient mission set against the backdrop of the COVID-19 crisis.
Since 2014, the government has also 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.
Promoting private sector growth in low-income countries has been a key development priority for the last several years, driven by the conviction that public financing represents an ever-diminishing proportion of funding for global development. The ‘Strategy for Australia’s Aid Investment in Private Sector Development’ from 2015, for example, discusses how to use funding to foster investment environments and maximize the development impact of business. Australia’s new development policy outlines a ‘whole-of-government approach’ to international development that combines the tools of diplomacy, trade, economic, and security partnerships, in which partnerships with governments, non-government actors, and the private sector are central. The policy recognizes that “the scale of the COVID-19 crisis will dwarf the resource [it] has available”, thereby highlighting the need for new strategies for maximizing impact, including through the provision of funding beyond ODA. It suggests that development financing will increasingly include contributions from Australia’s private sector, education, and scientific institutions.
ODA Breakdown
Australia continues to prioritize bilateral development support, delivered as grants
Australia channeled 81% (US$2.6 billion, in constant prices) of its ODA bilaterally in 2018, 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 included 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.
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.
Main Actors
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 that 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.
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, the Vaccine Alliance, 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.
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 amendments.
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.
Budget Structure
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’.
Overview: FY2019/20 ODA budget |
millions
|
millions
|
| DFAT - Country and Regional Programs | 2,277 | 1,745 |
|---|---|---|
| Pacific | 1,041 |
798 |
|
Southeast & East Asia |
611 | 468 |
| South & West Asia | 185 | 142 |
| Africa & the Middle East | 52 | 40 |
| Gender Equality Fund | 55 | 42 |
|
Indo-Pacific sectoral programs (formerly cross-regional programs) |
332 | 254 |
| DFAT - Global Programs | 1,165 | 893 |
|---|---|---|
| Cash payments to multilaterals | 235 |
180 |
|
Humanitarian, Emergencies, and Refugees |
450 | 345 |
| UN, Commonwealth and other International Organizations, of which | 288 | 221 |
| UN agencies (mostly voluntary) | 68 | 52 |
| Contributions to Global Health Programs | 128 | 98 |
| Contributions to Global Education Partnerships | 30 | 23 |
| Other multilateral organizations | 62 | 48 |
| NGO, Volunteer, and Community Programs | 192 | 147 |
| DFAT - Administration costs | 259 | 199 |
|---|
| Other departments (Treasury, AFP etc.) - includes AIIB and World Bank | 444 | 340 |
|---|
| Adjustments | -100 | -77 |
|---|
| Total ODA | 4,044 | 3,099 |
|---|
Budget Process
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 COVID-19 crisis. 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.