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Australian foreign aid

By Pooya Karambakhsh - posted Friday, 28 April 2017


The recent OECD report on net official development assistance (ODA) reveals that Australia fell to the 17th spot among the 29 member countries of the Development Assistance Committee (DAC). In 2016, Australia donated 0.25% of its Gross National Income (GNI) to development goals, which is significantly less than its 2015 level of 0.29%. While at the first glance, this trend of cutting foreign aid seems to be in the interest of Australians, this article argues why committing to the Sustainable Development Goals (SDGs) would better serve Australia in the long run.

Where does Australia stand economically?

Based on the economic data published by the World Bank, Australia is one of the wealthiest countries in the world. Its Gross Domestic Product (GDP), in terms of purchasing power parity (PPP), is ranked 19th in the world with $1,101bn. This translates to $46,271 per capita or the 21st country. In terms of Gross National Income (GNI), the country's condition is even better. With $1,429bn Australia ranks the 12th and if viewed per capita, it again stands at the 21st place ($45,320).

Where does Australia stand when it comes to aid?

It is true that Australia is one of the more generous donors in the world. However, when the level of the foreign aid is compared to Australia's economic status, it appears that Australia is lagging behind many other countries. According to the OECD website, as of 2016, Australia donated only 0.25% of its GNI, or about USD 3 bn. This demonstrates more than 12% cut to the volume of donation compared to 2015, when Australia donated about 29% of its GNI to SDGs.

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The percentage of GNI that Australia allocates to foreign aid (0.25%) is far below the UN target of 0.7%. This threshold was first agreed upon in 1970 and has been repeatedly re-endorsed ever since.

In terms of the percentage of GNI in 2016, the Australian foreign aid ranks 19 in the world and 17 among the OECD countries. The current percentage is far less than that of other donors such as Sweden, with 1.4% of its GNI devoted to the aid. It is also much less than the assistance by non-OECD countries such as the United Arab Emirates and Turkey that, respectively, donate 1.12% and 0.79% of their GNI to the sustainable development goals.

The domestic argument for cutting foreign aid is normally to save resources for other, seemingly more urgent, government expenditures. However, many arguments can be provided in support of the idea that spending on foreign aid now will save much more in the future. In other words, it can be viewed as an investment with a high rate of return. In the following, three brief arguments of this sort are provided.

Effect on Immigration

Many asylum seekers leave their countries for Australia due to economic reasons. These reasons are either direct, eg lack of access to employment, housing, and social security, or indirect, e.g. persecution based on their religion or political views. The indirect reasons lead to restrictions on the access to economic rights, opportunities, and benefits.

The difficulties and disasters due to climate change are also among the reasons that drive or will drive people out of their home country and direct them to Australia. The impact of climate change means the ratio of these migrants with respect the entire migrant population increases.

The costs of preventing asylum seekers reaching Australia, including border protection, detention, and vetting process, are of the order of billions of dollars. To this, we must add the emotional distress and the political costs that occur as the side effects of the process. All these costs can be reduced significantly by devoting a small portion to eradicate the hardships in the home country of the asylum seekers.

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Effect on the risk of terrorism

There are many research studies (for example, the works of Alan B. Krueger or James A. Piazza) that suggest the motivation for terrorism is not religious beliefs but inequalities in the access to economic and political resources. The foreign aid can be designed to address the grievances in the countries with high risk of terrorism. It can target economic disadvantages and inequalities and reduce the risk of radicalisation.

The foreign aid can also help improve the global image of Australia as a generous country that does not discriminate based on religion or political attitudes. The new image will not only deepen Australia's depth of influence but also will reduce the risk of terrorist attacks by undermining the propaganda against the West and in particular, Australia.

All these can be achieved with a small proportion of the current cost of counter-terrorism measures, policing and surveillance.

Generating new markets

The reasons for more foreign aid are not limited to the two above. You can also argue that by boosting the economy of developing countries, Australia creates new markets and empowers its future customers. The argument is similar to the one for empowering the middle and lower classes in a domestic economy. By broadening the access of these classes, they are enabled to spend more on goods and services. Consequently, the upper classes, owners and producers of goods and services will benefit because they can sell more and thus, earn more.

Despite the complexities and some differences, the same argument can be applied to the international community. By empowering the developing world, the developed countries, such as Australia, can expand the size of the market for their products and thus, gain more by exporting goods and services. In this sense, investing in those economies now, in the form of foreign aid, will yield a high rate of return in the future.

In short, Australia should follow other OECD countries such as the UK, Sweden and Norway in increasing the foreign aid closer to the 0.7% of GNI goal. This does not have to rely on the altruistic measures. The argument, as presented above, can be constructed on strong economic and security points. These points demonstrate how donating to the sustainable development goals can benefit Australian population in the mid-long run. This line of argument would be helpful in persuading cynical constituents who, understandably and correctly, view Australia as the first priority of the government.

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About the Author

Pooya Karmbakhsh is a volunteer with RESULTS Australia's Sydney branch. He is also a project officer at All Together Now and a postgraduate student of Political Economy at the University of Sydney. Email: pooya@dianoetic.com.au

Creative Commons LicenseThis work is licensed under a Creative Commons License.

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