Methodology: finding the numbers on Australia’s foreign aid spending over time

As the author of this FactCheck, I was asked to review the facts on Australia’s foreign aid spending from the Menzies era to 2016-17. Sir Robert Menzies was prime minister from 1949 to 1966, which is the Menzies era for present purposes. (Menzies also served as prime minister from 1939 to 1941.)

I examined the evidence for and against this statement:

Aid was at its highest under Menzies, at 0.5% … when per capita income was much lower. – World Vision Australia Chief Advocate Tim Costello, quoted in The Sydney Morning Herald, December 28, 2016.

I found the statement to be incorrect, strictly interpreted, though Costello’s broader point is valid. The ratio of Australia’s aid to its gross national income has never exceeded 0.48%, and that level was achieved slightly after the conclusion of the Menzies era, in the financial year 1967-68.

Below, I explain how I arrived at this conclusion, providing more detail than could be accommodated in the FactCheck itself.

OECD data

In making his statement about foreign aid spending, Costello relied on data published by the Organisation for Economic Co-operation and Development (OECD).

The OECD’s aid database contains figures for Australian aid spending, and for the ratio of that spending to gross national income, for each calendar year back to 1960. This saved query generates the relevant figures.

Given the difficulty of obtaining data from Australian government sources on aid spending during the Menzies era, it is understandable that Costello would rely on OECD statistics.

However, it’s not safe to rely on OECD aid statistics in this instance.

My own review of statistics published by relevant Australian government agencies, including statistics contained in publications of the Australian Bureau of Statistics (ABS) from the early 1970s, indicates that the OECD’s aid to gross national income ratios for Australia are in fact quite inflated over the three decades or so from the early 1960s to the mid-1990s.

On average, the ratios published by the OECD are inflated by about 20% for the years up to 1995. For some individual years, including 1975, they are inflated by over 40%.

The inflation results mainly from large differences in the gross national income denominators used. It is likely that the gross national income figures originally reported to the OECD by the Australian government, at least for the early decades of Australian aid, were subsequently revised upward by the ABS but not by the OECD.

There is evidence for the above supposition. The 1973 ABS Year Book said:

Australia has consistently been among the first three or four of the major aid donors, with a figure for direct government aid averaging 0.56% of gross national product over the last four financial years.

That statement, even allowing for the minor difference between gross national product and gross national income, is broadly consistent with the ratios reported by the OECD for the same period, which implies that contemporary estimates of national income were lower than today’s.

In short, it appears that the OECD’s gross national income estimates for Australia up to about the mid-1990s were made obsolete by ABS data revisions, rather than being entirely wrong.

Accessible Australian government data sources

The Development Policy Centre’s Aid Tracker brings together the most readily accessible Australian government statistics on Australian aid flows over time, which come from the former Australian Agency for International Development (AusAID), the Treasury and, more recently, the Australian Department of Foreign Affairs and Trade (DFAT).

The Aid Tracker provides an interactive view of Australia’s aid spending and generosity going as far back as the financial year 1971-72. Over that 45-year period, according to Australia’s own statistics, the highest aid to gross national income ratio was 0.47% in the financial year 1974-75. (For comparision, OECD statistics put the ratio at 0.55% in the calendar year 1974 and 0.65% in the calendar year 1975.)

Less accessible Australian government sources

But what about the Menzies era? Here, some detective work is required.

The now-defunct AusAID always published a handy table at the back of its annual budget publication, the so-called “Blue Book”, which detailed past spending on aid in current and constant prices, and gave aid to gross national income ratios.

However, that table never extended further back than 1971-72, just before Whitlam took office, and is no longer published.

DFAT has continued the publication of historical aid statistics in the long-running “Green Book” series but, again, the Green Books have never reported on flows prior to 1971-72.

Fortunately, it happens that the ABS used to report on aid flows in its series (discontinued after 2012) of annual Year Books, which can be found — though not particularly easily — on its web site.

The “International Relations” chapters of the 1970, 1971, 1972 and 1974 Year Books contain information on annual aid expenditure for all but one of the 10 years from 1961-62 to 1970-71, a period that includes the last five years of the Menzies era.

The missing year is 1962-63. As expenditures were increasing in quite a steady fashion during the era in question, it is reasonably safe to assume that expenditure in 1962-63 was at about the average of the expenditures reported for the two adjacent years. That means it would have been about $75 million.

Synthesis of Australian data

On the basis of the ABS Year Book aid statistics, together with AusAID/DFAT statistics on flows since 1971-72, Treasury budget papers and the most recent ABS time-series data on Australia’s gross national income, it was possible to construct the chart presented at Figure 1 of the FactCheck, comparing Australia’s actual aid to gross national income ratios (blue line) with those asserted in OECD statistics (orange line).

For convenience, the chart is reproduced below.

ABS Annual Year Books, 1970-72; AusAID Blue Book 2012-13; DFAT Green Book 2013-14; Federal Government Budget Papers 2014-15 to 2016-17; OECD Development Assistance Committee Official Development Assistance database.

To construct this chart, I used:

  • statistics contained in several issues from the early 1970s of the (now discontinued) ABS Year Book,
  • statistics from the (now defunct) AusAID’s Blue Book series,
  • statistics from DFAT’s Green Book series,
  • aid expenditure figures and projections from Treasury budget papers for the past several years, and
  • the most recent (October 2016) ABS time-series data on Australia’s gross national income.

Comparison of Australian and OECD data

While OECD aid data are organised on a calendar year basis and Australian data on a July-June financial year basis, that is not a significant factor in the marked variations between the blue and green lines above. The variations are mostly due to the use of very different gross national income denominators up to the mid-1990s (see here for the data on which the above chart is based).

For example, the OECD puts Australia’s gross national income at $121 billion in the calendar year 1980, whereas the average of the ABS figures for the two relevant financial years, 1979-80 and 1980-81, is $143 billion.

For the period 1965 to 1995, the OECD understates Australia’s gross national income by an average of 14% each year. By contrast, for the period 1996 to 2015, the magnitude of the understatement averages less than 4% and is probably, like variations in reported aid levels, explained by the difference between fiscal and calendar year reporting.

Please note: Readers who follow the above link to the Development Policy Centre’s Aid Tracker web site (here it is again) after about mid-February 2017 will find that it has been updated to incorporate the data on aid flows in the period 1964-65 to 1970-71 that are shown above.