Why Does Australia Give Money Away? Australian Spending on Foreign Aid

Joshua Preece | Australian Foreign Policy Fellow

Image credit: Anne Orquiza/DFAT

Australia’s spending on foreign aid, officially referred to as 'Official Development Assistance' or ‘ODA’, is AUD$4.3 billion. So why do we give away Australia’s hard-earned tax dollars to other countries? Australian Senator Pauline Hanson has previously called for the entire Australian foreign aid budget to be scrapped on the basis that the funds should be spent on Australians instead. It's true that every dollar we send abroad is a dollar we're choosing not to spend on Australian schools, hospitals, performing arts, infrastructure, and defence. But while those are all worthy sources of funding, there are two key reasons why Australians should be happy to send a small percentage of our national income abroad. Firstly, fulfilling our moral obligation as a prosperous nation to aid those in our region who have been struck by disaster. Second, supporting states whose success and stability is closely linked to Australia's self-interest.


A Friend in Need


Australia responded to the 2004 Boxing Day Tsunami with our largest ever overseas peacetime operation, giving AUD$60 million in the first week of the disaster, and later announced an AUD$1 billion package for Indonesia's recovery and reconstruction. Former Prime Minister John Howard would reflect a decade later that the scale and magnitude of the aid continues to benefit the Australia-Indonesia relationship.


More recent examples of Australian aid include assistance to Tonga this year after the Hunga Tonga-Hunga Ha'apai volcanic eruption and tsunami, assistance in 2021 to Papua New Guinea and India after COVID-19 outbreaks, helping the Philippines after Typhoon Rai, and assistance in 2019 to Samoa after a measles outbreak.


These are the sorts of things most people think about when discussing Australia's foreign aid program—Australia fulfilling the moral obligation that accompanies our affluence and stability by offering a hand-up to our neighbours who have been knocked off their feet.


A moral dimension should always hold an important place in our aid program as one of the world's leading prosperous societies, particularly in supporting the United Nations Sustainable Development Goals (SDGs) of ending poverty and hunger, or mitigating the harsh effects of natural disasters and man-made terror. But we need to also be more conscious of how strategic planning of Australia's foreign aid program can advance Australia's own interests.


Shifting Toward Strategic Giving


Part of the reason to communicate the purpose of Australia's aid program in strategic terms is to remedy its lack of popularity amongst Australians. 47 per cent of Australians think that we should cut spending on foreign aid with Australians estimating that we spend 14 per cent of the federal budget on foreign aid, and that we should decrease this to 10 per cent. The Australian foreign aid budget has suffered repeated cuts in recent years. It's easy to cut spending on foreign aid given the direct beneficiaries are not Australian citizens and the indirect benefits to Australian citizens are poorly understood. We also have a very poor understanding of how much we actually give-in reality, only 0.74 per cent of the federal government's budget is spent on foreign aid.


Aristotle observed that giving away money is easy but “to decide to whom to give it and how large and when, and for what purpose and how” was less so. This is the challenge confronting Australia in determining allocations of our limited foreign aid budget.

Hugh White argued in 'How to Defend Australia' that Australia's core strategic objectives should include preventing potential adversaries from basing forces in countries close to our shores, and supporting responsible and effective governments in countries close to our shores. If you accept that these are worthy core goals for Australian foreign policy, then it logically follows that the bulk of our foreign aid budget should be invested in countries close to our shores.


We are lucky to be a prosperous nation and, while more money can indeed lead to more problems, it also gives Australia more options in the way we can shape the Indo-Pacific to be a stable environment that is advantageous to (or at least benign towards) our strategic objectives.


Re-Characterising Foreign Aid


We need to better distinguish to the public between Australian aid that serves a purely moral purpose (e.g. disaster relief) and Australian aid that is actually in our self-interest to make (e.g. supporting growth in developing countries to which Australia's own prosperity is closely tied). Given that 54 per cent of Australians think our foreign aid either makes no difference or hurts our national security we need to get better at explaining who our aid money supports and why this actually benefits Australia, especially in the context of an aid budget that has been reduced throughout the life of the current Coalition government. We need to target Indo-Pacific neighbours in Australia's foreign aid efforts and then make the case to the public about how poverty reduction and education supports a nation's stability, and how stable prosperous neighbours make Australians safer.


Politicians recognise that the idea of foreign aid is unpopular and are therefore loathe to defend it or even explain its purpose. The notion that giving money to foreign governments is, when properly targeted, in the interests of Australians, is an argument that requires dexterity from politicians and foreign policy makers, a media environment that is willing to enable complex debates, and an electorate who are willing to hear them out.


Joshua Preece is the Australian Foreign Policy Fellow for Young Australians in International Affairs.