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Imagine the federal budget was $100. More than a third of that, about $37, would be spent on social security and welfare including the aged pension, assistance for families and support for the disabled.
Health would take up another $16 – most of it allocated to Medicare and the federal government’s contribution to public hospitals.
Other big-ticket items are federal education funding at $7 and defence on $6.60. The remaining $33 is spent on a host of other purposes. But one item stands out for its stinginess: overseas aid, just 65 cents.
Labor came to power promising to “rebuild” Australia’s aid program following deep cuts made by the previous Coalition government. But the share of federal spending devoted to assisting poorer nations keeps shrinking.
When the Howard government left office in 2007, overseas aid accounted for $1.12 of every $100 spent by the federal government. By the time the Albanese government took office in 2022, that share had been slashed to 75 cents, and it is forecast to be just 60 cents by the end of the decade.
A telling illustration of the extent of the downgrade is to contrast overseas aid and defence spending, which speaks volumes about national priorities.
Between 1960 and 2015, defence spending was between five to eight times greater than overseas aid; in that period, Australia confronted the uncertainty of the Cold War and funded several major military deployments including Vietnam, Afghanistan and Iraq.
But over past decade the gap between arms and alms has grown to a chasm.
This year Australia will spend 11 times more on defence than on overseas aid, the biggest disparity to date, analysis by Australian National University’s Development Policy Centre shows. Budget forward estimates indicate that will exceed 13 times by 2029-30.
The gulf between defence and aid spending is likely to widen even further as the government funds the hugely expensive AUKUS submarine program.
Australia’s defence spending is currently about 2 per cent of gross domestic product, but if that is lifted to 3 per cent – as some are calling for – and foreign aid remains on its current trajectory, the multiple would be 19 times or more.
An international comparison in 2023 showed Australia’s spending gap between defence and foreign aid (10.1 times that year) was already way bigger than that of many comparable countries, including Canada (3.4 times), the UK (3.9), and France (4.1).
Most voters vastly overestimate how much the Australian government spends assisting developing countries. A recent opinion poll found one in four assumed 3 per cent or more of the federal budget was allocated to overseas aid and one in 12 thought the proportion was more than 10 per cent. (This year’s figure, see above, is 0.65 per cent.)
It would probably surprise many voters that the federal government spends four times more funding private schools than it does on overseas aid, and six times more servicing its own debt.
Australia has not always been so stingy.
Thirty years ago, we were the world’s ninth most generous aid donor when measured by the share of national income devoted to assisting poorer nations. But the latest international rankings show Australia is among the West’s least generous donors.
Australia is languishing in 29th place among 32 countries that provide overseas aid, according to figures published in 2024 by the Organisation for Economic Co-operation and Development (when foreign aid is compared with national income).
As Australia has become less generous, other nations have become far more open-handed. South Korea during the 1970s was a recipient of foreign aid, including from Australia. But after decades of rapid economic progress, the country became an aid donor in 2010 (and has also emerged as one of Australia’s biggest trading partners).
In the past decade, South Korea has ramped up the assistance it provides to lower-income nations. In 2024, its overseas aid spending was higher than Australia’s (measured in US dollars), even though both economies are comparable in size. South Korea has chosen to lift foreign aid spending despite the perennial military threat posed by ultra-hostile neighbour North Korea.
This should be an example to Australia. As one of the world’s wealthiest nations, we can afford to do far more to assist poorer nations, especially those in our region.
Aid isn’t charity – it’s a smart strategic investment. Australia confronts growing security threats and our region is increasingly contested. Given those challenges, it is not surprising defence spending is growing as a share of GDP. Yet simply lifting defence spending is an insufficient response.
If we want a safer world – one that is better for our neighbours and Australians – we must address risks before they become crises, and prevent crises from becoming catastrophes.
Effective aid strengthens communities in neighbouring countries and can help prevent problems that might threaten Australia’s interests before they escalate. It is also a powerful demonstration of our commitment to developing countries in our region that are grappling with complex challenges.
The upshot? Overseas aid is a cost-effective response to the growing security challenges and strategic competition in South-East Asia and the Pacific.
Treasurer Jim Chalmers will deliver his fifth budget in a few weeks amid global uncertainty and economic turmoil. That is all the more reason for Labor to deliver on its promise to rebuild Australia’s overseas aid program.
Advocacy group Micah Australia is calling on the Albanese government to lift spending on overseas aid to 1 per cent of federal spending, up from the current paltry 0.65 per cent.
That would be a good start.
Matt Wade is a senior economics writer at The Sydney Morning Herald and The Age.
Matt Wade is a senior economics writer at The Sydney Morning Herald.Connect via X or email.From our partners
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