Tuesday May 31, 2016
Why Australia is stingy and getting stingier
By Matt Wade /Senior writer
Video: Budget 2015: cuts to foreign aid 'tragic'
Foreign aid saves lives, argues Greens senator Scott Ludlam as he criticises Hockey's "directionless" budget.
Australians like to think their government is a big-hearted foreign aid donor.
A recent opinion poll found voters believed our overseas aid budget to be about 10 times bigger, on average, than it actually was.
In fact, Australia has never been an especially open-handed donor compared with many other wealthy countries. And during this term of government, foreign aid spending has shifted from moderately generous to downright miserly with little prospect for improvement any time soon.
Illustration: Simon Letch
While aid is only about 1 per cent of budget expenditure it has made up around 25 per cent of all budget cuts announced by the government for the period 2013-14 to 2018-19.
As a result we've tumbled down the international league table that ranks wealthy countries according to their generosity. We were in 13th place a few years back but we'll slump to 19th by the end of the decade even though Australia is at one of the wealthiest moments in its history.
For every $100 dollars we earn as a nation we now give little more than a 20 cent piece in overseas aid - the least generous share on record.
Foreign aid has always been an easy option for budget savings. The main beneficiaries are very poor people who don't vote and, unlike most other savings options, foreign aid cuts don't need parliamentary approval and so can't be blocked in the Senate. While Australia's foreign aid program has been effective overall, it gets relatively little public attention.
The Abbott and Turnbull governments have not held back on this soft target - since the last election more than $11 billion has been slashed from the assistance Australia had promised to developing nations over the five years from 2013. No other significant area of Commonwealth expenditure has been harder hit.
As Australia hacked away at foreign aid spending, many other wealthy nations were doing the opposite, despite their own budget pressures. A report released by the Organisation for Economic Cooperation and Development (OECD) in April said 22 donor nations increased their aid spending last year, largely in response to the refugee crisis in the Mediterranean region. Australia and Portugal were the world's biggest foreign aid cutters in proportional terms.
The Coalition's approach to foreign aid is in striking contrast to their conservative counterparts in Britain. Even though the UK budget was hit hard by the global financial crisis, David Cameron's government has lifted foreign aid spending to 0.7 per cent of gross national income. It has pledged not to "balance the books on the backs of the world's poorest people." Now the political party in Britain with a position closest to Australia's aid policy is the far-right, anti-immigration UKIP which wants aid to be cut to 0.2 per
The Treasurer, Scott Morrison, has previously voiced strong support for foreign aid and called for more spending on it during his maiden speech to Parliament in 2008. Speaking at the National Press Club a day after last month's budget, Mr Morrison said it "grieves" him to preside over Australia's least generous foreign aid spending.
"We will continue to build our budget back up and I hope to one day be able to achieve what I said in my maiden speech, that we can once again be strong and prosperous and also generous," he said.
A fortnight ago the ALP's deputy leader and shadow foreign minister, Tanya Plibersek, said a Labor government would increase foreign aid spending a little. But the timidity of the pledge underscored to how difficult it will be for any future government to haul foreign aid spending out of the doldrums.
It's a far cry from a decade ago when both major parties pledged to lift Australia's aid to 0.5 per cent of gross national income. Those commitments were made when Australia had a big budget surplus, no net debt and no interest costs. Now there's a sizeable deficit and the Commonwealth's annual interest bill alone is more than the aid budget.
The sheer scale of recent cuts means the damage is very long-term.
Analysis by Garth Luke, a consultant researcher on aid and development policy, shows that Australian governments have never increased aid as a share of gross national income when net Commonwealth debt has been above 10 per cent of GDP. That ratio is now 17 per cent and rising.
"In other words, it is very hard, perhaps impossible, to achieve growth in the aid program when the Commonwealth is seen to have significant debt," writes Luke.
The budget papers predict the Commonwealth net debt will peak at close to 20 per cent of GDP in 2017-18 and not to fall back below 10 per cent of GDP until at least 2026-27.
Government's will also be seeking to fund major commitments including defence projects, the full implementation of the National Disability Insurance Scheme and growing health costs driven by the ageing population.
Will foreign aid ever get a look in? Australia's recent stinginess is set to last.