Australia announces no significant increase in its aid budget for 2024/2025

By Sam Ursu

Australia announces no significant increase in its aid budget for 2024/2025

After much anticipation, the Australian government has finally published in full its 2024-2025 budget, which includes a detailed breakdown of its funding for foreign aid this year as well as projections for the next two years. Unlike most OECD member countries, Australia’s fiscal year starts on 1 July and ends on 30 June.

Examining the numbers, foreign aid was increased by 4% over last year’s projections to reach $4.961 billion AUD (approximately US $3.31 billion) for the 2024-25 budget. Although once those numbers are adjusted for inflation, there is no tangible increase from the 2023-24 year’s foreign aid budget of $4.9 billion AUD.

According to the newly published budget figures, Australia has no plans to increase its foreign aid budget with projections remaining virtually unchanged for the foreseeable future. As such, the foreign aid budget to GNI (Gross National Income) ratio is projected to fall. Currently, Australia’s foreign aid spend is at 0.19% and may sink to as low as 0.14% by 2035/36, making Australia one of the least generous OECD donors (it is currently ranked 26th out of 31 member nations). This is despite the promises made last year by the ruling Labour government to make Australia “more influential in the world” by investing more in foreign trade and development.

Aid beneficiaries

Breaking down the 2024/25 foreign aid budget by geographical focus, the Pacific region continues to account for the lion’s share of Australia’s ODA with 44% of all foreign aid or around $2 billion AUD. This is slightly up from 42% going to the Pacific in the 2023/24 budget and demonstrates Australia’s pivot to focusing more on its nearby neighbors as the region received just 23% of annual ODA spend ten years ago.

Some of the individual nations most benefiting from the 2024/25 foreign aid budget include Papua New Guinea ($637 million AUD), Solomon Islands ($171 million AUD), Tuvalu ($87 million AUD, partly in exchange for the island nation ceding its foreign policy and security to Australia last year), Fiji (up $35 million AUD year-over-year, mostly due to a bulk cargo seaport upgrade project), and Indonesia (up $27 million AUD from last year).

The 2024/25 budget also includes new allocations for the Green Climate Fund and the Pacific Resilience Facility to combat climate change both regionally and on a global scale.

A shift in approach, if not funding

In short, the published 2024/25 foreign aid budget contains no surprises, but the Australian government has implemented some rather significant changes on how that aid will be allocated, including slashing the percentage of this year’s budget for health care. Almost 25% of Australia’s foreign aid budget went to providing healthcare in 2020/21, dipping to just under 19% in 2023/24, but the 2024/25 budget now has just 13% of aid going toward healthcare.

“If this reduction in spending on healthcare because our partners have said they’re not interested in healthcare? I don’t think so,” said Stephen Howes, director of the Australian National University’s Development Policy Center. “We’re going into Fiji and using our aid to help them to expand their port, but that’s just because we don’t want China to do it. As a result, there’s less funding in our budget for providing healthcare.”

The other significant change in approach to how the country is managing its foreign aid comes on the heels of the first report being published after Australia released its new international development policy last year. Prior to 2020, the effectiveness of Australian foreign aid was measured by calculating the proportion of investments that were rated as “satisfactory,” and project managers were responsible for rating their own programs. Unsurprisingly, effectiveness rates remained high at 90% or better.

However, in 2020, changes were made so that other staff at DFAT (Department of Foreign Affairs and Trade) were doing the effectiveness assessments, not the implementing managers themselves. This resulted in what were certainly more reliable and objective assessments, but they also revealed lower scores. Even worse, those scores began to worsen over time.

As a result, DFAT decided to combine the two approaches last year and report both the independent assessment results and the ratings from the implementing managers. This has led to a significant muddling of the government’s ability to understand and accurately evaluate the effectiveness of its foreign aid programs.