Weak on quantity, strong on quality: the 2012 Australian aid budget

Written by Stephen Howes

Are we serious about 0.5?

The 2012-13 Australian aid budget, delivered last night, pressed the pause button on the ascent of Australian aid as a percentage of our economy (GNI) towards the previously bipartisan target of 0.5% by 2015. That ratio was at 0.35% in 2011-12, and was meant to increase to 0.38% in 2012-13, but instead will stay at 0.35% for another year. This means an increase in aid not of $700 million as originally planned, but only $300 million. After inflation that is about a 4% increase. It is one of the lower growth rates we’ve seen in the Australian aid budget since it began its dramatic expansion in 2001-02. In the 12 years since, on average the aid budget has grown (after inflation) by 6% a year.

Back in 2000-01, just before the scale up began, the aid budget was just (in today’s prices) $2.4 billion. In 2011-12, it was $4.8 billion and in 2012-13 it will be $5.1 billion rather than the $5.5 billion originally planned.

Because of the small increase in this budget, the government felt compelled to push the 0.5% target back by a year from 2015-16 to 2016-17. You can see how the scale up has been pushed back between the last budget and this budget in the graphs below, first in terms of dollars (our estimates), and then in terms of the aid/GNI ratio (official figures).

Aid dollar comparisons ($ billion)

ODA/GNI comparisons (%)

Even with a year’s delay, it will be a steep climb to get to 0.5, requiring, on average, increases of about $1 billion for each of the next four years from 2013-14 to 2016-17. The aid program has never had an annual increase of anything close to $1 billion. The biggest increase was $626 million in 2008-09, the second biggest $500 million in 2005-06. Even with looser fiscal constraints, it will not be easy to sustain support for a single $1 billion increase, let alone for four such increases consecutively. Yet this is what it will take to get to 0.5% under the new timetable.

Are we serious about 0.5%? Not if this or recent past budgets is a guide. True, the government only delayed the target by a year. But if we are serious about it, we have to shift from modest aid increases of half a billion or less to large, one-billion-dollar increases. Whether a bipartisan consensus can be re-established around a delayed 0.5 target, and whether governments then have the courage to translate that target into large increases year after year remains to be seen. There will certainly be plenty for supporters of aid to campaign about.

Are we serious about quality?

Not all aid spending is equal, and aid quality is just as important as aid quantity. Though it will probably go little noticed, the budget did contain a number of aid reforms which push forward the aid effectiveness agenda. These require careful study before anything definitive can be said, but overall the budget seems to be several steps in the right direction on the effectiveness front.

Some of the details are explored in the two companion budget blogs by my colleagues, Matt Dornan (on geographical allocations) and Dinuk Jayasuria (on accountability reforms). Here’s my brief checklist, with six positives, and two negatives: see my pre-budget blog for the background and the Independent Review of Aid Effectiveness (disclaimer: in which I participated) for many of the details.

First, the six positives:

  • The Comprehensive Aid Policy Framework: a four-year strategy recommended by the Aid Review to provide the road-map for the scale up that has been missing so far; perhaps light on detail and numbers, and heavily skewed to a 2015-16 scale up that we might never achieve, but no doubt a major breakthrough.
  • The Results Framework: Dinuk covers this in more detail, but this new statement of targets includes important and monitorable commitments to reduce staff churn, and improve the management of aid projects.
  • Independent Evaluation Committee: ditto an important reform  – again see Dinuk’s post.
  • Major expansion of global programs: Another positive, and consistent with the Independent Review’s recommendations. Most (60%) of the 2012-13 (admittedly modest) total aid expansion is through global programs: some core funding to NGOs, but mainly core funding to multilateral organizations.
  • Humanitarian aid: Disaster aid is up about $50 million in the budget to about $500 million, with significant funding increases for future years. This is an effective form of aid, with strong public support. 
  • Research: Increased funding for agricultural research, though nothing on new funding for medical research.

And now the two negatives:

  • Continued scaling up through New Policy Programs (NPPs). The Aid Review recommended discontinuation of the practice of scaling up through NPPs, but this has clearly been rejected, and the budget has some 8 NPPs worth $1.5 billion. NPPs might work for other parts of government, but they don’t for aid, where the distinction between new and ongoing projects makes little sense, as projects are always turning over, and priorities and approaches changing.
  • Continuation of the Latin America program, and continued expansion of the Africa program. The Aid Review recommended the Latin America aid program be scrapped and the Africa program be capped at $200 million. Instead the former is held constant at $50 million, and the latter is now at $350 million and growing. This suggests inadequate attention to the need for greater selectivity and consolidation.

In summary, I come away from the budget not that convinced that we will get to 0.5%, but reassured that aid effectiveness should improve. Perhaps lifting effectiveness will help generate more support for more aid. I live in hope.

Stephen Howes is Director of the Development Policy CentreThis is part of our series on the 2012 aid budget. The other two parts are available here and here.

Details of the Australian aid budget can be found here on the AusAID website.

Stephen Howes

Stephen Howes is the Director of the Development Policy Centre and a Professor of Economics at the Crawford School. Stephen served in senior economic positions for a decade at the World Bank before becoming AusAID’s first Chief Economist. In 2011 he was a member of Australia’s Independent Review of Aid Effectiveness.

4 Comments

  • In reply to Joel’s comment about saving lives, World Vision estimates that the delay could result in at least 250,000 lives not being saved over 4 years. This assumes an average cost of $2,000 per life saved (based on Global Fund figures – http://bit.ly/JeiHqL) and 18-20% of the aid budget going to health. The cut in planned ODA is $2.9 billion over four years.

    It is often possible to save lives for much less, for instance the most cited figure to prevent people dying of TB is $250 and even less for malaria and some vaccine preventable children’s diseases (see http://www.dcp2.org/pubs/PIH) .

    There are established effective health strategies to prevent deaths from AIDS, TB, malaria, maternal and infant health and early and poorly spaced births. There are also significant unmet needs for additional funding in all of these areas.

  • Hi Stephen,
    Thanks for this balanced set of rapid reviews. Lots to digest. Not sure if Tim Costello’s claim that this budget will lead to 200,000 deaths is sound science but the anger over the broken commitment is understandable.
    On the Africa increase, page 18 of the CAPF states that of the $1.5b going to Africa in 2015-16, $1b of that will be from global programs and $500m from country programs. So, as you note, still an increase from the suggested $200m cap but the emphasis certainly does seem to be on using multilateral partners.
    From a public health perspective, interesting to note lots of emphasis on water and sanitation – an area that is often neglected by aid programs (toilets just aren’t such an easy aid image to sell!).
    Thanks again for your reviews and look forward to more discussion on this…
    Joel

  • Hi Stephen,
    I agree with your assertion about New Policy Proposals (NPPs) leading to fragmentation and confusion in the aid program, but not sure how you arrived at the figure of $1.5 billion. Could you please clarify?
    Many thanks

    • Megan,

      We got the figure from adding together the NPP’s outlined on page 5 (‘budget highlights’) of the blue book (which you can find by following the link at the bottom of Stephen’s post), which actually comes to $1.47 billion. Although these figures do cover different time commitments (1, 2 and 4 years) I think the point was to highlight that the NPP culture is still very alive and well even though the review recommended it be cut completely.

      Jonathan

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