The politics behind the ‘cuts’ to foreign aid

Much of the media commentary surrounding the budget has seized upon so-called “cuts” to Australia’s aid program. AAP

Reporting on the federal budget has been replete with commentary about “cuts” to foreign aid. But the fact is that the aid program was not cut in any meaningful sense of the word.

In nominal terms, aid spending will grow by 6% during the next financial year—from $4.8 billion to $5.2 billion. Given the low level of inflation in Australia at present, this means that it will also grow in real terms. As a proportion of gross national income (GNI), aid spending will be maintained at 0.35%.

The aid program has only been “cut” to the extent that the government has not delivered on promises to ramp up aid spending so that it reaches 0.5% of GNI by 2015-16. The government has maintained its commitment to increase aid to 0.5% of GNI but pushed back the target date to 2016-2017. Sticking to the 2015-16 target would have meant aid spending in 2012-13 of around 0.38%of GNI.

Some commentators have lamented these “cuts” to the aid program, claiming they will cost thousands of lives. It is possible that they will. But the reality is that given the prevailing political context, this is not such a bad result for the aid program and those who have a stake in it.

When Australian governments have wanted to slash spending in the past, aid has been one of the first areas to be cut, reflecting the political weakness of the domestic aid lobby. Development NGOs, church groups, aid contractors, and universities — the key members of this lobby — have weak links to the major political parties (compared to, say, trade unions and business groups), little capacity or inclination to organise large public protests, and no economic clout. And the size of aid budget is not an issue that weighs heavily on voters’ minds come election time. As one former Foreign Minister said to me a while ago: “There are no votes in aid.”

Throw into the mix Kevin Rudd’s move to the backbench (Rudd has been a key champion of the aid program since Labor was elected in 2007), and the fact that several OECD countries have recently cut their aid budgets substantially - reflecting the economic fallout of the global financial crisis and the budgetary problems now plaguing Europe - and one could easily reach the conclusion that substantial cuts to the aid program were inevitable.

But the government did not cut deeply into the aid program nor walk away from the 0.5% of GNI target, as some had feared. Why?

Broadly, I think there were three main reasons, the first two of which augur well for the aid program looking forward, even if there is a change of government later this year or next year.

First, the advent of the Asian Century means that Australia will face new competition for influence within the Asia-Pacific region, reflecting the economic rise of China and India and their respective attempts to cultivate closer relationships with countries within the region. In this context, winding back Australia’s aid program would have been a geo-political misstep.

While Australia’s aid program has, for many years, been justified publically in terms of its contribution to global poverty reduction, it has also been a key tool of foreign policy. To cut aid substantially would have weakened the effectiveness of this tool at a moment when Australia is looking to enhance important foreign relationships and China and India are both making extensive use of aid in promoting their own foreign policy agendas.

Second, there remains a broad in-principle commitment at the international level to increase aid to help achieve the Millennium Development Goals (MDGs). While several OECD countries have cut their aid budgets, others have maintained or even increased aid spending in the face of severe budget constraints. The British government, for instance, has effectively ring-fenced its aid program from cuts to the public sector while Germany, Switzerland, South Korea, and New Zealand all substantially increased their aid spending in 2011. Given Australia’s relatively strong budgetary position compared to other OECD countries, making deep cuts to the aid program in this context would have reflected poorly on the Australian government and undermined its reputation as a good international citizen.

Finally, at this particular moment and for this particular government, it is possible that there are in fact some votes in aid. One of the key reasons for Labor’s poor poll results in recent times and in particular, the drop in its primary vote, has been a loss of support to the Greens: a party that has expressed strong support for substantial increases in aid spending. By maintaining rather than cutting the aid program, Labor may be hoping to lure some of these voters back into the fold or at least stem further loss of support to the Greens.

These factors have “saved” the aid program from severe cuts this time around. If the Coalition wins the next election, it will probably want to cut government spending overall. It is possible that it will take an axe to the aid program to help achieve this, even though it has also signed up to allocating 0.5% of GNI target. However, the first two of these factors will give it some pause for thought. I hope it will be enough to dissuade the Coalition from making cuts but, should it choose to do so, one hopes they will be modest rather than severe.