Australia donor profile

Australia is the 12^th-largest donor; ODA is at its lowest level since 2009

According to OECD data, Australia’s net ODA was US$3 billion in 2017 (current prices), making it the 12^th-largest DAC donor. Net ODA decreased by 14% compared to 2016, driven by cuts to multilateral ODA. The ODA budget has been declining consistently since 2012. ODA as a share of GNI declined from 0.27% in 2016 to 0.23% in 2017. According to the latest two budgets, ODA for FY2017/18 was estimated to drop to 0.22% of GNI and remain there for FY2018/19. In overall terms, net ODA will have decreased by 25% between 2012 and 2019, according to the latest budget for FY2018/19.

The Liberal National Coalition has been in government since 2013 and 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 billion (US$3.8 billion) to A$4 billion (US$3.1 billion).

The Australian Treasurer delivered the FY2018/19 (for July 2018 to June 2019) budget in May 2018. The ODA budget was set at A$4.2 billion (US$3.2 billion). The increase over the budget for FY2017/18 (A$3.9 billion, US$3 billion) was due to a one-off payment to the AIIB of A$161 million (US$123 million). Otherwise the ODA budget has been capped at A$4 billion (US$3.1 billion) since FY2017/18. From 2019 to 2021, the government plans to freeze ODA increases in line with inflation that would otherwise maintain the real value of the ODA budget.  

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

According to OECD data, ODA has decreased from 0.36% of GNI in 2012 to 0.23% in 2017. It is expected to drop further after FY2019/20 if the inflation freeze is upheld. This share of net ODA in 2017 ranks Australia the 17th-largest donor relative to its GNI. A federal election is due by May 18, 2019. If it forms government, the opposition Australian Labor Party has committed to a targeted ODA/GNI ratio of 0.5%, but without a specific timescale. 

Focus on promoting national interest and ‘aid for trade’

Australia’s development policy was last updated in 2014 following a change in government. The policy, called ‘Australian aid: promoting prosperity, reducing poverty, enhancing stability’, outlines objectives and priorities. According to the strategy, the purpose of Australia’s development program is to “promote national interests by contributing to sustainable economic growth and poverty reduction” with a strengthened focus on the Indo-Pacific region. In the ministerial foreword, former Minister for Foreign Affairs Julie Bishop states that the Australian development program “is not charity; it represents an investment in the future of the Indo-Pacific region,” complementing its diplomatic and security efforts to promote regional stability.

Engaging the private sector and promoting its growth in developing countries is one of the government’s key development priorities. The government has set a funding target for ‘aid for trade’ of 20% by 2020, which it has met since the FY2016/17 budget. Aid for trade refers to investments that strengthen country’s integration in the global trading system, through investment in value chains, infrastructure, support for entrepreneurs to export goods. These investments are in line with the ‘Strategy for Australia’s Aid Investment in Private Sector Development’, which discusses how to use funding to foster investment environments, support growth, and maximize the development impact of business.

Since 2014, the government has prioritized the empowerment of women and girls by establishing a Gender Equality Fund (funded with US$41 million in FY2018/19), launching the ‘Gender Equality and Women’s Empowerment Strategy’, and setting a target that over 80% of development programs effectively integrate gender equality and women’s empowerment.

Australia tailors investments according to its own national interest and each individual country context in six priority sectors and 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.

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.

This strategy is driven by the conviction that public financing represents an ever-diminishing proportion of financing for global development. As such, Australia’s development strategy documents focus on drivers of growth and development and on strengthening already‑established development partnerships. The country’s efforts to improve development effectiveness and efficiency are centered on concepts such as transparency, value for money, fraud and anti-corruption, risk and safeguards, consolidation, and the choice of effective partners.

The policy is accompanied by a performance framework, ‘Making Performance Count: enhancing the accountability and effectiveness of Australian aid’, using eight assessment criteria: effectiveness, efficiency, relevance, sustainability, monitoring and evaluation, gender, risk management, and innovation.

The Department of Foreign Affairs and Trade (DFAT) released a Foreign Policy White Paper in 2017 that outlines Australia’s priorities for its broader foreign policy. It reiterates Australia’s development policy focus on promoting economic stability and addressing poverty in the Indo-Pacific region, in line with national interests. The White Paper specifically references global health risks as an important focus issue and commits Australia to supporting global health research and development (R&D), particularly in the areas of drug-resistant tuberculosis and malaria. The White Paper mentions Timor‑Leste as the focus of its engagement with neighboring countries. Overall the White Paper does not give strong emphasis to the role of development assistance.

Australia continues to prioritize bilateral development support, delivered as grants

Australia’s core ODA funding to multilaterals stood at US$624 million or 20% of gross ODA disbursements in 2017. Australia provides almost all bilateral ODA as grants, but a small share of ODA will be disbursed in loans to the Pacific in the coming years, following the establishment of the Australian Infrastructure Investment Facility.

Australia’s funding aligns with its development strategy priorities, including governance and humanitarian support

Australia mainly provides ODA through bilateral channels, which amounted to 80% (US$2.4 billion) of total ODA in 2017, well above the OECD Development Assistance Committee (DAC) average of 60%. This large share is primarily due to Australia’s focus on providing ODA to neighboring countries in the Indo-Pacific region.

Australia spent the largest share of bilateral ODA in 2017 on multisector activities (20%), which includes funding for ‘Australia awards’, scholarships for students studying in Australia. This is followed closely by government and civil society (19%). Australia allocated relatively smaller proportions of the budget to humanitarian support (9%, an increase from 6% in 2016), education (8%); health and population (8%); agriculture, forestry, fishing, and rural development (7%, an increase from 5% in 2016); and infrastructure (5%). The country spent 8% of bilateral ODA in 2017 on administrative costs, the same as in 2016.

Papua New Guinea and Indonesia are the largest recipients of Australia’s bilateral ODA, receiving US$381 million or 16% of bilateral ODA in 2017, and US$205 million or 8%, respectively.

In 2017, half of Australia’s ODA (49%) targeted gender equality as either a significant or principal objective, according to OECD data. While this is above the DAC average (39%), it is still well below Australia’s target of 80%.

This funding share broadly reflects the six priority sectors in Australia’s development strategy: effective governance, infrastructure, humanitarian support (‘building resilience’), education, health, agriculture, and cross-sectoral empowerment of women and girls.

Funding is concentrated in 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 to concentrate 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 (4% from 2015 to 2017) is far below the DAC average of 21% in 2017.According to OECD data, Australia disbursed 35% of bilateral ODA to Asian countries and 32% to Oceania between 2015 and 2017.

Papua New Guinea and Indonesia are the largest recipients of Australia’s bilateral ODA, receiving US$381 million or 16% of bilateral ODA in 2017, and US$205 million or 8%, respectively. Given their close bilateral relations with Australia, both countries are likely to remain priorities. While funding to Papua New Guinea has remained largely stable in recent years, ODA to Indonesia decreased 22% between 2016 and 2017 alone (from US$262 to US$205 million). This is linked to heavy reductions in Australia’s overall ODA and, to a lesser extent, Indonesia’s recent strong economic growth.

Australia heavily concentrates its development support on neighboring middle-income countries (MICs). Between 2015 and 2017 Australia allocated 44% of total bilateral ODA to MICs (DAC average: 33% in 2017) and 26% to low-income countries (LICs, DAC average: 24% in 2017).

For a deeper understanding of funding at the recipient level, please consult data from the International Aid Transparency Initiative (IATI). IATI is a reporting standard and platform on which organizations and governments voluntarily publish data on their development cooperation, including more recent activity than is available through OECD data.

Data can be searched by recipient country, the ‘publisher’ (including funders that do not report to the OECD), and other filters. Click here for more information on IATI’s data. Click here to go directly to IATI’s ‘d-portal’, a user-friendly interface for data searches.

Australia channels low amounts of ODA through multilateral organizations compared with other members of the OECD DAC

As a result of its focus on promoting national interests and strengthening bilateral relationships, Australia’s multilateral focus is low compared to other members of the OECD DAC. It channels 20% of ODA through multilaterals, compared to the DAC average of 40%). Key recipients of multilateral ODA in 2017 were regional development banks (44% in 2017, including 24% to the Asian Development Bank alone) and UN agencies (28%). The World Bank received 17% of multilateral funding.

In addition to core contributions, Australia channeled 16% of its ODA as earmarked funding through multilaterals in 2017, which is reported as bilateral ODA (DAC average: 13%). 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.

Spending on multilaterals was previously informed by an internal program of performance assessments of multilateral agencies. Key criteria included alignment with government priorities, results, and value for money. Australia now draws on assessments by the Multilateral Organization Performance Assessment Network (MOPAN) of 18 donors to avoid duplicating other donors’ reviews. MOPAN’s assessments of WFP, FAO, and UN Women have recently been released. The latest OECD Peer Review, completed in 2018, recommended that DFAT communicate more clearly how such performance assessments inform its funding decisions.

DFAT manages almost all of Australia’s overseas development programs

Australian Prime Minister Scott Morrison leads overall development policy decision-making. He has served as prime minister 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 has been in government since 2013. The next federal election is due by end-May 2019.

The minister for foreign affairs, Marise Payne, is responsible for directing Australia’s development program. She is traditionally a strong parliamentary supporter of human rights and action on HIV/AIDS. The assistant minister for international development and the Pacific, Anne Ruston, works under Payne to strengthen Australia’s relationships with the Pacific Islands. Launched by then-Prime Minister Turnbull in 2015 as a ministerial-level position, the position was downgraded to assistant minister in August 2018.

The Department of Foreign Affairs and Trade (DFAT) manages development policy and the development budget and delivers almost all Australia’s overseas programs. DFAT managed 93% of Australia’s ODA in 2017. The department cooperates with other government agencies, including the Treasury and the Australian Federal Police, which deliver the remaining development assistance.

The minister for foreign affairs, currently Marise Payne, is responsible for directing Australia’s development program.

Within DFAT, the deputy secretary for Global Cooperation, Development, and Partnerships oversees four development divisions. These include the Multilateral Development and Finance Division, which manages contributions to multilateral organizations, and the Multilateral Policy Division, which includes the Gender Equality Branch. DFAT’s innovation hub, known as ‘innovationXchange’, is hosted at DFAT and guided by a 14-member International Reference Group.

Based on the government’s overall development policies, DFAT sets the country program priorities. DFAT’s geographic branches develop three-year ‘Aid Investment Plans’ with major recipient countries, outlining Australia’s priorities and expected results. Individual development activities are implemented within the agreed investment plan. DFAT executive staff responsible for geographic branches make final recommendations on funding for specific programs to the foreign affairs minister, who approves major initiatives or delegates her funding power. 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 each year. The budget is passed into law before the end of June, the end of the fiscal year. 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. This committee can seek information on the proposed development program but has no power to amend the budget.

Civil Society: The government channels bilateral ODA through civil society organizations (CSOs) under the umbrella of its ‘Global Programs’ budget component. In 2017, CSOs were funded with US$238 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 and highly regarded Code of Conduct, which defines standards of good development practice for its members. As the primary entry point for collaboration and collective action by development NGOs in Australia, 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. Accredited Australian NGOs are partners who have demonstrated their community support and their organizational capacity to deliver results, which enables them to receive funding from the government.

There are two major funding lines; DFAT manages 93% of the ODA budget

Australia’s ODA budget for FY2018-19 stands at A$4.2 billion (US$3.1 billion). Within the ODA budget, almost all ODA is managed by the Department of Foreign Affairs and Trade (DFAT; 93%), 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 7%.

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. It also includes a budget line on ‘Cross-regional Programs’, which contains funding for activities that cannot be clearly categorized to a specific region, such as scholarships. This budget line can also include allocations that were not finalized at the time of the budget announcement, such as for multilateral fund replenishments.
• 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) runs from July 1 to June 30:

• Budget proposals and changes are developed between October and November: New initiatives are also advocated for and considered between October and December.
• The Expenditure Review Committee determines budget priorities: The Expenditure Review Committee (ERC) of Cabinet – consisting of the prime minister, treasurer, finance minister, and selected other ministers – meets in November and determines budget priorities. Based on these priorities, the Department of Foreign Affairs and Trade (DFAT) and other departments start to prepare requests for overall funding.
• DFAT prepares and develops its budget: From December to February, DFAT (along with other departments) prepares its overall budget proposal and requests for specific budget lines. The calculation includes the expected budget for the upcoming fiscal year. 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. On the basis of the overall budget allocated to DFAT, the foreign affairs minister makes a final decision on internal budget allocations.
• Parliament reviews the budget: The treasurer usually announces the budget on the second Tuesday in May (‘budget night’) and delivers it to Parliament in a televised address. In 2019, the budget will be delivered on April 2, ahead of the federal election due by end-May. Between May and June, the Australian Parliament debates and formally reviews the budget. Importantly, the development budget is embedded in the foreign affairs budget and is not featured as 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. This committee can seek information on the proposed development program but has no power to amend the budget.
• Parliament approves the budget: After examination and debate, the parliament formally approves the government’s budget in June. 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 FY, DFAT holds a significant amount of discretion on the distribution of not yet allocated funds, such as in cross-regional programs.