13 February 2019
Why foreign aid?
Earlier this week, a grazier affected by the recent floods in Queensland pleaded for support, asserting that the government should assist Australians rather than spend money on foreign aid. This is a familiar refrain, and it was soon echoed in national headlines. But it perpetuates a series of common misperceptions about aid: that it is wasteful, that it produces no return, that Australia is a generous donor, and that it should be the first item in the federal budget to be cut.
Unfortunately, such sentiments are regularly reiterated in Canberra. Finance minister Mathias Cormann, for instance, recently boasted of an $80 billion long-term cut to foreign aid – a “saving” which has already left Australia with its lowest ever level of aid spending as a proportion of the budget.
On the day the grazier made her appeal, the Australian Financial Review revealed that Australia was paying $20.8 million a month to a little-known firm, the Paladin Group, to provide security for 422 refugees on Manus Island. “On a daily basis it now costs the Australian government over $1600 to house each refugee on Manus, not including food and welfare services, more than double the price of a suite at the Shangri-La Hotel in Sydney,” the newspaper reported. Clearly, if Cormann wants to rearrange Australia’s spending priorities to find new funds for Queensland farmers or for a return to surplus, there are other sources of savings than cuts to the aid budget.
Foreign aid, despite its show of goodwill, is not a one-way handout. It delivers Australia some very direct benefits, including avoiding the risk of failed states and enabling increased trade. According to a 2017 study by Australian National University researchers Sabit Amum Otor and Matthew Dornan, every dollar that Australia spends on aid in Asia leads to a long-term increase of $7.10 in exports to the recipient country. Australian aid is also crucial to shoring up its reputation and influence abroad. This was on stark display last year when Canberra began to boost funding for small Pacific nations, despite freezing the overall aid budget. The sudden show of apparent altruism – Pacific aid then went from $1.1 to $1.3 billion this year – was in response to concerns about China’s growing interest in the region.
There is also the most immediate and important role of Australian aid: alleviating suffering and poverty. Earlier this month, I travelled to refugee camps in Jordan and Lebanon, where Australian aid is keeping eleven-year-old Syrian refugees from having to work in factories, and is helping to ensure that families who fled to Lebanon receive their monthly food stipend of US$27 per person. (I was on a trip organised by Save the Children and funded by the Bill & Melinda Gates Foundation) Supporting the estimated 5.6 million refugees from the Syrian war – ensuring that they can live, go to school and envisage a future beyond a UNHCR-issue tent – is a global humanitarian imperative. Australia has a role to play in these efforts, not least because, measured by wealth per person, it is the world’s second-richest country after Switzerland.
For those who need a more hard-headed rationale, it is worth noting that Australia has an interest in ensuring that this volatile region remains as stable as possible. Australia is not immune from the effects of migration crises and outbreaks of extremism that have originated in the Middle East.
Finally, there is the assumption that Australia’s aid program is large. A Lowy Institute poll last year found that Australians on average think 14 per cent of the budget is spent on aid, but that the government should instead spend 10 per cent. Actually, the aid program accounts for 0.9 per cent of budget spending.
As Cormann proclaimed, Australia’s aid spending has declined since 2013 and will fall further over the next three years, leaving it at a new low of about 0.19 per cent of gross national income (the average among developed countries is 0.31 per cent, though some such as Britain give 0.7 per cent or more).
When disasters strike Australia, Canberra ought to support those in need. But this should not be at the expense of the nation’s international and moral priorities. The federal government spends far less on aid than most people think – and a brief flip through the budget papers, or the latest national audit office reports, will quickly reveal that there are much more efficient ways to find savings.