Australia

Australia

At a glance

Funding trends

  • Australia is the 14th-largest donor country on the Organisation for Economic Cooperation and Development’s (OECD’s) Development Assistance Committee (DAC), spending US$2.6 billion (current prices) on official development assistance (ODA) in 2020. This represents 0.19% of Australia’s gross national income (GNI) and an 11% decline compared to 2019.
  • Australia’s ODA budget has been declining since its peak in fiscal year (FY) 2013/14. The government capped ODA at A$4.0 billion (US$2.8 billion, in constant 2019 prices) and this figure is not being adjusted for inflation. However, as a result of additional funds to support temporary and targeted measures, in FY2022/23 ODA exceeded the cap (A$4.6 billion or US$3.2 billion).
  • The latest budget includes A$460 million (US$320 million) in “temporary, targeted & supplementary measures” that support COVID-19 assistance, economic recovery, and regional partnerships in FY2022/23, bringing total ODA to US$4.6 billion (US$3.2 billion in constant 2019 prices); however, to maintain the appearance of an ODA budget within the cap, these funds are separated from the main budget allocations.
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Strategic priorities

  • The center-right Liberal-National Coalition has been in government since 2013 and a May 2019 election returned them to government for a further three years. The Coalition is not a strong supporter of development funding and tends to tie Australia’s development program to its diplomatic and security interests. The next federal election is on May 21, 2022.
  • Australia’s development strategy, ‘Partnerships for Recovery: Australia’s COVID-19 Development Response’ reorients the country’s development programming to focus on addressing the health, social, and economic challenges created by COVID-19 at least until 2022. Australia lacks an international development policy beyond the COVID-19 response, meaning an update to Australia’s development program is likely following the upcoming election.
  • The ‘Pacific Step-up’ remains one of Australia’s most important development priorities. 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.
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Outlook

  • Since coming to power, the Liberal-National Coalition has made major cuts to Australia’s development budget. Although ODA has increased because of COVID-19, the government will likely not maintain higher funding levels beyond FY2022/23 if they remain in office. Pandemic funding is marked as “temporary, targeted and supplementary (TTS)” and, as a result, the COVID-19 Response Fund ended last fiscal year, with any ongoing COVID-19 response being taken forward through global and regional health programs. The COVID-19 Response Fund did not count towards 2020-21 and 2021-22 humanitarian expenditure.
  • The launch of the Australian Infrastructure Financing Facility for the Pacific (AIFFP) in 2019 and loans extended to Southeast Asia in support of their COVID-19 recovery might indicate that Australia is shifting away from grant-funded development programming and toward loan-financed infrastructure projects.
  • As part of its 2022 election platform, Australia’s opposition party has committed to rebuilding the country’s development program. The party has called for a clearer direction for the Department of Foreign Affairs and Trade (DFAT), a stronger focus on women and girls and eliminating slavery, and stronger relationships in Southeast Asia.

Policy Priorities

Australia pivoted its focus to supporting partners through the COVID-19 crisis; the Pacific remains its primary priority

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 policy, Australia’s development strategy was incorporated into a regional COVID-19 response, though it also left 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.

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, as the one before, names the Indo-Pacific region as its focus. The government has met its target of spending at least 90% of country programmable assistance on this region every year since FY2014/15. Programming, however, will likely continue to concentrate almost exclusively on the Pacific and Southeast Asia; the Pacific, Timor-Leste, and Indonesia are named “first-tier priorities”. In 2018, Australia’s deepening commitment to the region was reaffirmed by the Prime Minister and in 2019, DFAT established an Office of the Pacific, thereby expanding the internal resources devoted to Pacific policy. Australia’s focus on the Pacific is, in part, an attempt to counter China’s growing influence and investment in the region. This illustrates the government’s shift toward using official development assistance (ODA) for strategic purposes.

Although funding to the Pacific remains central, Australia is resuming a greater focus on Southeast Asia following major cuts to country allocations in recent years. This is reflected in Australia’s new engagement as part of the ‘Quad countries’ (Japan, USA, Australia, and India) which are increasing assistance to the region.

Given its COVID-19 orientation, it is unsurprising that health security a key pillar of DFAT’s new ‘Partnerships for Recovery’ strategy. Health security is emphasized in the latest budget (FY2021/22), for example through Australia’s A$21 million (US$15 million) allocation to the ASEAN Centre for Public Health Emergencies and Emerging Diseases between 2021 and 2023.  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. Australia’s ‘2017 Foreign Policy White Paper’ 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’). The FY2019/20 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.

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. Australia’s new development policy, ‘Partnerships in Recovery’, outlines a ‘whole-of-government approach’ to international development combining the tools of diplomacy, trade, economics, and security. Partnerships with governments, non-government actors, and the private sector are central to the new policy. It highlights the need for new strategies for maximizing impact, including through the provision of funding beyond ODA, and suggests that development financing will increasingly include contributions from Australia’s private sector as well as its academic and scientific institutions.

ODA Breakdown

Australia continues to prioritize bilateral development support, delivered as grants

Australia mainly provides official development assistance (ODA) through bilateral channels: 77% (US$2.2 billion) in 2019, well above the average of the Organisation for Economic Cooperation’s (OECD’s) Development Development Assistance Committee (DAC) average of 59%. Australia’s focus on bilateral support is primarily due to its prioritization of neighboring countries in the Indo-Pacific region and is reflective of the government’s focus on promoting national interest and strengthening bilateral relationships.

Australia provided all its ODA as grants in 2019. The last time Australia extended ODA loans was in 2015, however, with the launch of the Australian Infrastructure Financing Facility for the Pacific (AIFFP) in 2019, it has begun disbursing some ODA as loans to the Pacific. In FY2022/23, Australia is doubling the AIFFP’s lending headroom from A$1.5 billion (US$ 1 billion) to A$3 billion (US$ 2.1 billion) to boost its capacity in supporting the development of sustainable infrastructure in the Pacific and Timor-Leste. Civil society organizations (CSOs) have expressed concern that this could mark the beginning of a shift away from grant-funded development programming and toward loan-financed infrastructure projects in Pacific countries, of concern because many of these countries are already suffering from ‘debt distress’. In 2020, Australia also extended a A$1.5 billion (US$1.0 billion) COVID-related loan to Indonesia as part of a larger package of support to Southeast Asia’s recovery from COVID-19.

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In line with overall funding cuts, ODA for Australia’s highest funded sectors declined in 2019 excepting humanitarian assistance which grew 26%

Australia spent 18% of its bilateral ODA in 2019 on multisectoral activities. Multisector activities include funding for scholarships granted to students studying in Australia. Funding from this sector has seen a multi-year decline, falling from a high of US$594 million in 2015 to US$396 million in 2019.

16% of Australia’s bilateral ODA in 2019 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. This sector too has seen a steady decline from falling 26% from US$488 to US$360 between 2015 and 2019.

ODA for humanitarian assistance accounted for 10% of Australia’s total bilateral ODA in 2019. Humanitarian assistance jumped from being Australia’s seventh-highest funded sector in 2018 to third-highest in 2019 with a 26% boost in funding (from US$176 million to US$222 million, back to 2015 levels). In line with its regional prioritization, in FY2019/20 Australia focused most of its humanitarian efforts on countries in the Indo-Pacific, according to budget documents.

The health and population sector received 10% of Australia’s development spending through bilateral channels in 2019, though total funding to this sector declined 26% compared to 2018, reversing a large share of the increase seen between 2017 and 2018. Funding for health will likely increase again in 2020 as a result of COVID-19.

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

Australia heavily concentrates its development support on neighboring lower-middle-income countries (LMICs) in its neighboring Indo-Pacific region. According to OECD data, in 2019 LMICs received 47% (US$1.0 billion) of Australia’s bilateral ODA. Australia disbursed 37% (US$820 million) of its bilateral ODA to Oceania and 30% (US$674 million) to Asian countries.

Papua New Guinea (PNG), Indonesia, and the Solomon Islands remain the largest recipients of Australia’s bilateral ODA, receiving 19% (US$415 million), 8% (US$188 million), and 5% (US$120 million) of bilateral ODA in 2019, respectively. Funding to both PNG and the Solomon Islands increased in 2019, while funding for Indonesia decreased by 26% compared to 2018.

The growth in ODA to PNG and the Solomon Islands was driven by the Pacific Step-up (see ‘Policy Priorities’). The decrease in funding to Indonesia between 2018 and 2019, on the other hand, was the result of a slight rebound in funding in 2018 driven by investments in infrastructure projects and the initiation of the Australia-Indonesia Partnership for Economic Development. This was the first increase since 2014.

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Australia channels a low proportion of ODA through multilateral organizations

Australia’s focus on promoting its own national interests and strengthening bilateral relationships is reflected in its minimal use of multilateral channels. Australia’s core ODA funding to multilaterals stood at US$660 million or 23% of gross ODA disbursements in 2019 (DAC average of 41%). Key recipients of multilateral ODA in 2019 were regional development banks (35% in 2019, including US$115 million to the Asian Infrastructure Investment Bank and US$95 million to the Asian Development Fund), the World Bank Group (31%), and UN agencies (18%).

In addition to core contributions, Australia channeled 18% of its ODA as earmarked funding through multilaterals in 2019, 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 Australia’s Department of Foreign Affairs and Trade (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.

For more granular and up-to-date development finance data on Australia, including information on where and in which sectors it is spending both ODA and non-ODA funds, please consult the IATI d-portal. IATI is a reporting standard and platform on which organizations and governments voluntarily publish data on their development cooperation.

Main Actors

Department of Foreign Affairs and Trade manages almost all of Australia’s overseas development programs

Australian Prime Minister, Scott Morrison, leads the decision-making for development policy. He has served as Prime Minister 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, Zed Seselja, works under Payne to strengthen Australia’s relationships with the Pacific Islands. Seselja 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 FY2020/21 budget, DFAT will manage 92% of Australia’s official development assistance (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 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 Organisation Chart

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 some of Australia’s bilateral ODA through civil society organizations (CSOs) under the umbrella of ‘Global Programs’. In 2018, CSOs were funded with US$265 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 50 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; Department of Foreign Affairs and Trade manages 94% of the ODA budget

Australia’s official development assistance (ODA) budget for FY2022/23 stands at A$4.1 billion (US$2.8 billion). 94% of funding within the ODA budget is managed by the Department of Foreign Affairs and Trade (DFAT), while the remaining funds are channeled by other government departments including the Australian Centre for International Agriculture Research (ACIAR; 2%); the Treasury (2%); the Australian Federal Police (1%); and Agriculture, Water and the Environment (1%).

The budget is composed of two major funding lines: ‘Country and Regional Programs’ and ‘Global Programs’:

  • The ‘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’.

In addition to the ‘core’ ODA budget, the FY2022/23 budget includes a table outlining “temporary, targeted and supplementary (TTS) measures” which come on top of the A$4.0 billion (US$2.8 billion) budget cap. Much of this funding was announced in 2020 to be disbursed over two fiscal years. Although it is not being billed as an increase in the ODA budget by the government, in effect, these funds constitute the first increase in ODA spending since the current Liberal-National Coalition government came to power in 2013.

Australia’s ODA for health saw an increase compared to previous years as a result of COVID-19-related commitments. The ‘Contributions to Global Health Programs’ budget line saw a 68% increase compared to FY2021/22, however, this is not indicative of new funding. Rather, the increase is linked to the payment of prior replenishment commitments and the reallocation of COVID-19 funding from the now-concluded COVID-19 Response Fund to global and regional health programs. Funding for ‘Climate partnerships’ also increased; up 13% from the previous budget. Funding for education bounced back after large reductions to accommodate increases in other sectors last fiscal year: ‘Global Education Partnerships’ nearly tripled while ‘Regional Scholarships and Education’ declined by a marginal 1%.

Overview: FY2022/23 ODA budget

millions
A$

millions
US$
DFAT - Country and Regional Programs 2,288 1,590
Pacific 1,067 742
Southeast & East Asia 627 436
South & West Asia 124 86
Africa & the Middle East 32 22
Gender Equality Initiatives 65 45
Indo-Pacific sectoral programs (formerly cross-regional programs) 363 252
DFAT - Global Programs 1,247 867
Humanitarian, Refugees, and COVID-19 Response 470 327
    Humanitarian Emergency Fund 150 104
    Global Humanitarian Partnerships 124 86

    Protracted Crisis & Strengthening Humanitarian Action

 145 101
    Disaster Risk Reduction, Preparedness, & Response 52 36
Cash payments to multilaterals 339 235
UN, Commonwealth, and other International Organizations, of which: 345

240
    United Nations Children's Fund 19 13
    United Nations Development Fund 13 9
    World Health Organisation 13 9
    United Nations Population Fund 9 6
    UN Women 8 5
    United Nations Programme on HIV and AIDS 5 3
    Commonwealth Organisations 6 4
    Contributions to Global Health Programs 191 132
    Contributions to Global Education Partnerships 15 10
    Other ODA eligible contributions 67 47
NGO, Volunteer, and Community Programs 173

120
Departmental (ODA) 271 188
Other departments (Treasury, AFP etc.) 253 176
Adjustments -50 -35
Total ODA 4,089 2,842
     
     
Australian ODA temporary, targeted and supplementary (TTS) measures FY2022/3
  A$ millions US$ millions
Vaccine Access and Health Security Initiative (US$261 million; 2022-2027) 98 68
COVID-19 Response Package for the Pacific and Timor-Leste (US$218 million; 2022-2024) 281 195
Economic, Development and Security Measures for Southeast Asia Recovery (US$347 million; 2020-2023) 62 43
Pacific Labour Mobility 14 9
ASEAN Comprehensive Strategic Partnership 6 4
Total 335 233

Budget Process

From October to December new initiatives are advocated for and considered

Budget process

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 (known as ‘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. 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.