The initial media reaction to Tuesday’s budget has focused overwhelmingly on the confused fiscal strategy of the Abbott government, and the reversal of many of its harshest measures from the 2014 budget.
In particular, the 2015 budget backs away from the debt and deficit, doomsday rhetoric that characterised the Coalition in opposition and in its first year and a half of government.
On the issue of foreign aid, however, there has been no backdown from the huge $11.3 billion cuts in last year’s budget and budget update (MYEFO). Indeed, the government has doubled down on its debt and deficit rhetoric to justify ongoing cuts, even as this rhetoric has faded as a general fiscal narrative.
The $7.6 billion cuts in last year’s budget stalled planned increases in aid spending announced by the Rudd and Gillard governments. The further $3.7 billion cuts in MYEFO were doubly cruel, since they involved a cut from the baseline level of aid spending. These latter cuts were to be absorbed over three years, with $1 billion to be cut this fiscal year.
Tuesday’s budget finally outlined where the cuts would come from, and they are as devastating as you would expect from what amounts to a 20 per cent cut in a single year. Foreign aid to Sub-Saharan Africa has been cut by 70 per cent, and there is an approximate 40% across the board cut for East Asian countries, including Indonesia.
There is scant mention of foreign aid – denoted as ‘official development assistance’ (ODA) – in this year’s budget. Clearly, the government sought to bury its cuts in MYEFO so they wouldn’t become the main story this time around. The budget eschews references to aid to such an extent that it omits a table included in previous budgets that breaks down ODA spending by region and provides forward estimates.
The only meaningful mention of development assistance comes in Budget Paper One, which explains that the Coalition is ‘returning the level of official development assistance expenditure in real terms to the levels that applied when ODA was last funded from Budget surpluses rather than debt.’
The Coalition has long run this line on foreign aid. It’s a nonsensical argument from an economic point of view, since governments borrow to finance productive spending that boosts economic growth and tax revenue in the long term, and thus boosts our capacity to fund aid.
But it also implies that the government is happy to see the aid budget fall as a proportion of Gross National Income (GNI). This is the truly alarming take home.
The last time aid was ‘funded from budget surpluses’ – incidentally, in the last year of the Howard government – it stood at 0.28 per cent of GNI. Aid is set to fall to 0.22 per cent of GNI in the 2016/17 fiscal year. To put this in context, the United Nations Millennium Development aid target for rich countries is 0.7 per cent of GNI.
In the United Kingdom, which was throttled by savage austerity during the first term of the Cameron government, the three major parties nonetheless enshrined in law a commitment to the 0.7 per cent target each year. Even more shamefully, Australia’s current aid policy would be applauded by the far right UK Independence Party, which campaigned on a platform of cutting aid to 0.2 per cent of GNI in the recent UK election.
A number of other countries in the OECD, particularly those in Scandinavia, contribute more than the 0.7 per cent UN target per year . The average aid contribution among OECD countries in 2014 was 0.39 per cent. By any metric, Australia is doing woefully.
Perhaps the most damning indictment on the Coalition’s aid policy, though, is the fact that the government has consistently attempted to score political points on disaster relief: after the MH17 crash, in response to the Ebola crisis (though there was a delay before personnel were sent), and recently after the Nepal earthquake.
As if to confirm that these humanitarian overtures were all for show, aid to Nepal was mooted to be cut this year until a last minute decision was made to maintain the current level of funding in real terms, presumably when someone thought about the potential headlines.
Of course, even if you don’t believe in foreign aid on purely humanitarian grounds, it is a form of soft power that only a foolish government would neglect to exploit. It makes little sense to spend big on defence but neglect non-violent ways to pursue security objectives. The US, in particular, has long understood the value of pursuing its national security interests under the guise of foreign aid.
China understands this too, and will no doubt continue to project soft power into the Asia Pacific while Australia is withdrawing.
Notwithstanding this, we should reject arguments that justify aid spending solely on national security or diplomatic grounds. It is well understood that aid needs to be targeted and carefully monitored to ensure its effectiveness, but equally, it can and does save lives in the poorest parts of the world.
Kevin Rudd tried and failed to raise Australia’s aid contribution to 0.5 per cent of GNI. The Abbott government is now on course to drive aid lower than it has ever been. Aid programs take time to implement and require a stable stream of funding. Australia’s political parties would do well to follow the near consensus of their parliamentary counterparts in the UK and legislate a fixed aid target for each fiscal year.