Australia's new aid budget seeks to subvert China's Pacific dominance

Australia’s federal government, under the leadership of Anthony Albanese, has remained firm on its commitment to boost Australia’s official development assistance annually by 2.5%, with an increase of 117.3 million Australian dollars ($79.3 million) over the previous budget announced in October, taking the total to AU$4.77 billion for the year. Announced on Tuesday in Canberra, the latest Australian aid budget for the 2023-24 financial year confirms the country’s focus on establishing itself as the partner of choice over China for development and economic opportunities in the Pacific and Southeast Asia regions. The Pacific remains the priority for spending, receiving AU$1.91 billion for the year. Southeast and East Asia will receive AU$1.24 billion, South and West Asia will receive AU$367.5 million and AU$1.26 billion will be contributed through “global and other programs.” As part of new measures and funding announced, the Department of Foreign Affairs and Trade, or DFAT, will be investing AU$114 million over the forward budgets to fund a range of measures supporting enhanced engagement in the Pacific region, including expansion of the Pacific Australia Labour Mobility Scheme, support for the Pacific Islands Forum, growth of cyber capabilities and disaster preparedness and response. Despite this funding, Australia’s generosity remains low. Official development assistance as a percent of gross national income sits at 0.19% for the current financial year and is expected to remain steady at that rate in 2023-24. In the forward estimates, the annual ODA increase is set to be less than 2.5%. It will return to this committed increase in the 2026-27 financial year where annual ODA spend is projected to reach AU$5.05 billion. Approximately AU$25 million will go to support capacity building of ODA-eligible Indo-Pacific Economic Framework member states, and AU$50 million in ODA will be delivered over the next five years to establish the Southeast Asia Government-to-Government Partnerships program allowing Australian agencies to “deepen and sustain partnerships with counterparts in the region.” This program is currently under design, with DFAT hoping implementation can begin next year. Establishing green credentials is also critical for Australia to regain its footing in the Pacific — and the aid budget aims to assist. DFAT will increase support for climate resilience through a range of new and existing programs including an expansion of the Water for Women program which will see an additional AU$36 million invested over the next two years to help “communities access sustainable and climate resilient water, sanitation and hygiene services in the Indo-Pacific.” As part of non-ODA climate-related initiatives, the Emerging Markets Impact Investment Fund will increase its funding cap from AU$40 million to AU$250 million, with priorities for investment in climate and gender projects. This fund aims to boost private sector investment in the Indo-Pacific, with DFAT estimating that each dollar spent mobilizes an additional three dollars from the private sector. To date, Australia has spent just AU$988.9 million of a AU$2 billion commitment to climate finance, leaving room for much more climate investment. Capability and development knowledge has been an ongoing concern of Australia’s development partners following the merger of DFAT and AusAID in 2014, and has been identified as an area for improvement in a new aid policy that will be released later this year. Meanwhile, AU$36.8 million of new ODA will be spent to strengthen internal capability within DFAT. With an end to measures and funding helping Indo-Pacific and Southeast Asia countries respond to the COVID-19 pandemic implemented under the government of former Prime Minister Scott Morrison, there are areas of funding that will see a decline in investment for the next financial year. Australia’s contributions to global health programs are set to increase by AU$13 million, but regional health security initiatives will see a drop of AU$97.7 million for an overall decline in health funding of AU$84.7 million. Contributions supporting global peace and security will drop by AU$11.2 million while debt relief is also set to drop by AU$3.3 million. For most recipient countries, direct country allocations have increased or remained steady, with one exception: Sri Lanka has seen development assistance decline from AU$23 million in 2022-23 to AU$16 million — the only decline in South and West Asia. While the budget may not have delivered dramatic funding changes, the year ahead is expected to make up for that. A review into development finance is still to be delivered with a range of recommendations on how Australia can better work with the private sector to deliver aid outcomes. The new international development policy will identify Australia’s priorities and strengths, including ways to help the Indigenous First Nations people have a greater voice in the delivery of the aid program. Australia’s international aid sector has welcomed the budget. “One year in, these measures place Australia’s aid program on stable footing for the future,” said Marc Purcell, CEO of the Australian Council for International Development. He expects that the budget combined with the new development policy will “form a framework for how overall development can be rebuilt in an appropriate way for the future.”