Generosity not so good for Aust

By CAMERON HILL and HUIYUAN LIU
ON April 11, 2024, the Organisation for Economic Cooperation and Development (OECD) released its preliminary data on official development assistance (ODA) spending by the 31 country members of its Development Assistance Committee (DAC) in the 2023 calendar year.
Once again, total aid from these donors has increased (by 1.8 per cent in real terms, to US$224 billion) year-on-year. And, once again, Australia languishes near the bottom of the rankings when it comes to aid generosity (just in front of Portugal, at 26 out of 31 bilateral donors), despite a real increase in aid spending of 7.8 per cent relative to 2022 “due to new bilateral funding for (its) development programme in 2023 and its financial year reporting cycle”.
But there are well-known limitations to this data and the accompanying comparisons.
One limitation is the aforementioned difference between the DAC’s calendar year reporting cycle and the financial year cycle of donors such as Australia.
A more significant limitation is that some countries count as ODA the cost of providing “temporary sustenance” to recognised refugees from developing countries during their first year in donor countries – an “in-donor” cost which is allowable under DAC rules – while others do not.
Australia falls into the latter category, having only claimed, and only sometimes, costs associated with asylum seekers rather than recognised refugees (such costs are ODA-eligible under the same DAC rules).
This difference has become particularly pronounced in the wake of Russia’s invasion of Ukraine in February 2022.
Since the invasion, many newer DAC donors – particularly those in eastern Europe that are bearing the brunt of the region’s biggest refugee crisis since the end of World War Two – have counted large amounts of in-donor refugee assistance as ODA.
In the case of Estonia, 31 per cent of its reported ODA was spent on such support in 2023.
In the case of Czechia, the proportion was even greater, 53 per cent.
Even traditional DAC members such as Ireland (52 per cent), the UK (28 per cent) and Germany (19 per cent) continued to count a significant proportion of first-year refugee sustenance towards their ODA spend in 2023. However, as a share of total DAC ODA, in-donor refugee support declined by 6.2 per cent relative to 2022 levels.
So, what happens to Australia’s ranking when we discount other donors’ in-donor refugee aid?
As shown in Figure 2, it does make a difference – Australia moves from 26/31 to 24/31 (it’s not possible to do the comparison the other way around by adding in Australia’s in-donor refugee costs as we don’t have the data).
Even with this adjustment, there is still a big disparity between Australia’s economic size – the ninth largest economy in the OECD – and its ranking on aid generosity. And the decline is not just a relative one; we are a much less generous nation when compared to ourselves over time.

Global aid 2023: Comparing apples with apples

In the last Cold War, Australian aid peaked at 0.48 per cent of GNI (1967-68) as Australia sought to extend our influence amid great power competition and proxy wars in Southeast Asia.
In the last full year of John Howard’s tenure as prime minister (2006-07), it reached 0.28 per cent as his government committed to double aid spending by 2010 in response to heightened security and fragility concerns after 9/11 and on the back of the resources boom. And, during the Rudd/Gillard years, it peaked at 0.33 per cent (2011-12) as part of Labor’s last big aid scale-up.
By contrast, on current projections, Australia’s aid generosity could fall as low as 0.13 per cent by 2036-37. This is despite the Albanese government’s characterisation of development as “at the heart of statecraft” and its promise, via an annual 2.5 per cent nominal increase from 2026-27 to 2036-37, to undertake “a long-term rebuild of Australia’s international development programme” following the successive and severe cuts inflicted by the Coalition prior to Covid-19.
So, what options are open to Australia if it wants to improve its ranking?
In our view, there are three.
The first is that Australia could argue in the DAC for a change to the rules to disallow the counting of in-donor refugee assistance. But this would be hard given that Australia, as a long-standing member of the DAC, helped create these rules.
Given the number of donors that count this support as part of their ODA, Australia’s OECD representatives would likely face stiff resistance.
Ultimately, as shown, this could be a lot of diplomatic effort for a change that would do little to improve our ranking. Indeed, we would argue that if Australia really wants ODA reform, it would be better to focus on the more recent and more dubious aid accounting practices that have been documented by former DAC officials and experts.
A second option is that Australia joins other donors and counts first-year, in-donor refugee assistance as aid.
Given that this assistance is dispersed across multiple parts of the budget, it is not clear to us what the current quantum of this support is and, therefore, how it might affect Australia’s relative position.
When Australia last counted first-year asylum seeker costs (not refugee costs) in 2013-14, at a time of high boat arrivals, these were worth A$375 million (around 7.5 per cent of total aid) per annum. Even if counting first-year refugee costs were to add this much to Australia’s ODA volume, which is unlikely, it would have very little effect on its overall ODA/GNI ranking.
The government would also experience pressure to demonstrate this support was not coming at the expense of bilateral and multilateral aid. This was the criticism levelled at Labor when it briefly adopted the practice of counting asylum-seeker costs at the end of its last period in office – the costs were entirely absorbed within the existing aid budget.
Nevertheless, if it was done transparently and in accordance with the DAC rules, then it would be a perfectly legitimate policy decision. But it wouldn’t change the fact that Australia is becoming a less generous donor over time.
A third (and preferred) option is that the government produces a strategy to arrest the structural decline in Australia’s aid generosity, either through either a medium-term ODA/GNI target or year-on-year ODA/GNI increases.
Labor has supported a target before, as has the Coalition.
The Albanese government is not averse to spending targets when it comes to other components of “statecraft” – it has invited the Coalition to support a 2.4 per cent defence funding target to be achieved over the next decade (roughly the same timeframe over which aid is projected to fall to 0.14 per cent). And the 2023 Labor party platform, while not binding on the government, does call for “a plan and a pathway” to achieve the previously bipartisan target of 0.5 per cent ODA/GNI.
The government should adopt, and invite the Coalition to support, such a plan and pathway.

Disclosure:

This research was undertaken with the support of the Bill & Melinda Gates Foundation. The views are those of the authors only.