It is no surprise that Australia has become known as ‘the lucky country’. Australia appears set to records, enjoying its 24th consecutive year of economic growth, unprecedented among OECD nations. Given the RBA’s latest median growth forecast of 2.25% for 2016, released in their latest monetary policy statement, that record seems set to stretch to a quarter of a century of uninterrupted GDP growth.
Meanwhile, income inequality remains relatively low by OECD standards. Australia’s minimum wage of $17.29/hr, measured in real terms, ranks only behind Luxembourg, the Netherlands and Belgium among OECD nations. Indeed, a recent OECD report noted that Australia was one of just three nations where income inequality actually improved over the seven years since the global financial crisis began. ABS statistics supports this claim, showing the Gini coefficient for Australia has fallen from a high of 0.34 in 2008 to just 0.31 in 2015.
The success or ‘luck’ of this country is perhaps best reflected in the latest release of the United Nation’s Human Development Index, which scores nations based upon a multitude of data including literacy, incomes, equality and so forth. Incredibly, Australia ranks as the second most liveable country in the world.
It is against this backdrop that Australia has initiated substantial cuts to its foreign aid budget. How substantial? The 2014 Federal Budget slashed $7.6 billion in foreign aid over the next five years.
In an article for the Sydney Morning Herald, senior correspondent Daniel Flitton noted that: “Australia will soon devote a paltry 22 cents in every $100 of national income to foreign aid - less than half the amount spent by the Coalition government more than 40 years ago.”
Even comedians have begun to weigh-in on the budget, an area not well known for its comedic value. In a segment for ‘The Weekly’, host Charlie Pickering discussed just how far the average Australian’s perception of foreign aid is removed from reality, citing a 2011 Lowy Institute Survey. This survey found that of 1000 Australians, on average we believed that the Government dedicated ‘16% of its total budget to foreign aid’.
Figure: Australia’s Foreign Aid Expenditure as a Percentage of GDP
Source: Sydney Morning Herald
It further found that, at a time when Australia was spending just 0.35% of its GDP on foreign aid, Australians believed the Government should 'cut' foreign aid spending to 12% of GDP. This is 54 times the current value of our foreign aid spending. In other words, if Australia’s current foreign aid spending was to be represented by the weight of the average Australian male, the survey shows we should ‘lose weight’ until we weighed slightly more than an average full-grown African elephant.
This bizarre cognitive dissonance means the 2014 cuts to foreign aid had large popular support.
We are now further than ever away from reaching the UN Millennium Development Goal for nations to spend at least 0.7% of GNI on aid by 2020. This is in breach of our international obligations.
The 2015 Budget has not cut foreign aid further in absolute terms. However, foreign aid to African nations has been cut by a staggering 70%. In contrast, The Indo-Pacific region is set to increase its share to receive 90% of our spending.
This is because of a policy of redirecting Australian foreign aid funding to areas of political interest to Australia. This is not a hidden concept. Indeed, the first line of DFAT’s policy summary of foreign aid is that: “The purpose of the aid program is to promote Australia’s national interests”.
Compare this to the Lowy Institute’s 2014 poll which asked Australians whether "promoting Australia’s foreign policy objectives" or "helping reduce poverty in poor countries" was the most important objective of Australian foreign aid. A significant majority of Australians (75%) answered that "helping reduce poverty in poor countries" is the priority. Our cognitive dissonance on foreign aid is again clear when you compare this to how DFAT approaches foreign aid.
But what does this all mean? Well, according to Tim Costello of World Vision Australia, “those living in extreme poverty will bear the brunt of these budget savings.”
Ms Agnes Kalibata, former Minister of Agriculture and Animal Resources of Rwanda, recently described Africa as having an agricultural sector experiencing a substantial boom. However, the infrastructure networks and, more importantly, the capital needed to sustain this boom are lacking.
She noted that: “I wished I could merge two important meetings taking place this week – the European Development Days in Brussels and the World Economic Forum (WEF) on Africa in Cape Town. The Brussels gathering will include a heavy focus on how development assistance can help improve food production and food security in Africa. In Cape Town, the focus is on attracting private investment to Africa’s rapidly growing economies.”
She went on to say it is “abundantly clear that if we link development assistance with market opportunities – if we combine the spirit of the European Development Days with that of the World Economic Forum – we can accomplish great things.”
With such great marginal returns to investment with respect to alleviating poverty, one would imagine the so-called ‘lucky country’ dedicated to ‘a fair go’ would provide significant capital investments to agricultural programs and food security in the region.
Instead, Oxfam spokeswoman Joy Kyriacou said of the cuts in the 2015 Budget that: "In sub-Saharan Africa, the poorest region in the world, our aid from Australia is now next to nothing”.
As Australians, we need to readdress our views on foreign aid.
From the day I was born, Australia has never since experienced a year without economic growth. It is difficult to see how this is reconciled with progressive cuts to our aid budget, putting us amongst the lowest of OECD nations as well as constituting the lowest figure we have provided in more than 50 years. Is that the ‘fair go’ we stand for in Australia?
Andrew Buchhorn is a graduate with Distinction in Business Economics and now works in Commercial Litigation.
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Image credit: Department of Foreign Affairs and Trade (Flickr: Creative Commons)