Fact check: Has the foreign aid budget been cut five years in a row?
Updated
The claim
In a blistering response to the 2018 federal budget, charity group World Vision slammed the Federal Government for "continuing Australia's darkest era of aid cuts and further letting down the world's most vulnerable".
"Not content with having cut lifesaving aid in its previous four budgets, this government has singled out cuts to aid yet again", the media release said.
On May 8, the organisation's policy and advocacy director, Susan Anderson, tweeted: "This year's budget is the fifth year in a row that the Australian Government has cut Australian aid."
Has the foreign aid budget been cut in each of the past five years?
RMIT ABC Fact Check investigates.
The verdict
Ms Anderson's claim is correct.
Across the five financial years from 2014-15 to 2018-19, the aid budget has been cut twice in nominal terms.
And while data from the Department of Foreign Affairs and Trade shows that nominal aid spending increased marginally in the other three budget years, these gains disappear after inflation is taken into account.
This equates to a real cut in all five budget years.
Experts told Fact Check that the Consumer Price Index was a reasonable way to measure inflation in the context of Australian aid spending.
Based on this, Fact Check calculates that, from year to year, aid spending was cut in real terms by as little as 0.2 per cent and by as much as 17.7 per cent.
According to ANU's Development Policy Centre, which publishes the aid figures in 2018 dollars, this equates to an $8 million cut in 2018-19 and a $953 million cut in 2015-16.
What is foreign aid?
For OECD members like Australia, the rules for what counts as foreign aid, or official development assistance, are set by the OECD's Development Assistance Committee.
Foreign aid covers funding "administered with the promotion of the economic development and welfare of developing countries as its main objective".
It includes, for example, reducing poverty and empowering women and girls.
How is foreign aid reported in the Australian federal budget?
The Department of Foreign Affairs and Trade is responsible for the bulk of Australia's foreign aid budget, but other government agencies also contribute to aid spending. These contributions are included in the budget summary published by the department.
There have been some changes to what the federal government reports as aid spending, which may affect comparisons from year to year.
Director of ANU's Development Policy Centre Professor Stephen Howes told Fact Check that while the OECD guidelines allow donor countries to classify some onshore refugee settlement costs as foreign aid, the Australian government has generally not done this.
But there were exceptions in 2012-13 and 2013-14. Since then, the government has not reported refugee costs as aid.
Jonathan Pryke, Director of the Lowy Institute's Pacific Islands Program, told Fact Check the OECD had also clarified its reporting rules recently, allowing Australia to classify 85 per cent of its funding contributions to the Asian Infrastructure Investment Bank as official development assistance.
The government has been paying down $930 million in funding commitments to the bank since 2015. The clarification means money already being spent by the government can now be counted in the aid budget.
"So we've actually seen a retroactive increase of our aid program over the last three years to account for that," he said.
The period of the claim
Ms Anderson referred to a period covering the five financial years 2014-15 to 2018-19.
All five budgets were delivered by the Coalition, who came to power in 2013 with a last-minute pre-election promise to cut the growth of foreign aid spending.
The Abbott government used its first budget, for 2014-15, to freeze aid expenditure for two years at the level set by Labor in its final budget, for 2013-14.
From 2016-17, funding would rise according to the Consumer Price Index, or CPI.
But neither the two-year freeze nor the later CPI increase eventuated. Instead, the Abbott government's second budget, for 2015-16, reduced foreign aid spending below the level inherited from Labor. The Turnbull Government's first budget, for 2016-17, reduced it further.
The last two years of the claim period relate to the 2017-18 and 2018-19 budget years, which include a continuation of the freeze on CPI indexation. Outcomes for the 2017-18 year are yet to be finalised, and spending for 2018-19 is yet to take place.
Year-to-year comparisons
In her press release, Ms Anderson cited $303 million and $141 million of cuts. These figures refer to anticipated savings announced at the time of the budget.
However, in assessing the claim, Fact Check has relied on "actual" spending figures where available. These show what spending took place.
Actual expenditure figures for 2014-15, 2015-16 and 2016-17 are available on the Department of Foreign Affairs and Trade website in a time series published on May 3, 2018.
The department has also published a detailed summary of the 2018 budget, with the estimated outcome for 2017-18 and budgeted expenditure for 2018-19.
According to the department, its historical data has been adjusted to include the Asian Infrastructure Investment Bank payments.
The figures show that Australia's aid budget was cut twice over the last five years: by $845 million in 2015-16 and by another $176 million in 2016-17.
That's in nominal terms. The cuts are larger when rising costs are factored in. And more cuts become evident on that basis.
Photo:
Nominal expenditure ($m) on foreign aid (Sources: DFAT Australia's ODA Standard Time Series & Australian Aid Budget Summary (2018-19) )
| Year | Nominal expenditure ($m) | Change ($m) |
|---|---|---|
| 2013-14 | 5,052 | - |
| 2014-15 | 5,054 | 2.5 |
| 2015-16 | 4,210 | -844.5 |
| 2016-17 | 4,034 | -176.0 |
| 2017-18* | 4,077 | 43.1 |
| 2018-19^ | 4,161 | 84.4 |
Sources: DFAT Australia's ODA Standard Time Series & Australian Aid Budget Summary (2018-19)
Notes: * estimated outcome (Table 5) ^ forecast (Table 1)
Real cuts
Professor Simon Feeny, who leads RMIT's International Development and Trade Research Group, told Fact Check he would assess the question of cuts in real terms. This means considering the effect of inflation, or the rising cost of services.
"By accounting for inflation, it better reflects its [the aid's] purchasing power," he said.
And the head of Deakin University's School of International and Political Studies, Professor Matthew Clarke, said that because the dollar amount of the aid budget remained the same in some years, "in real terms it's actually decreased".
"So [if] you take into account inflation, the real value of that aid program has actually fallen over the last five years, year on year," he said.
| Year | Aid funding - Nominal Change (%) | Inflation - CPI (%) | Aid funding - Real change (%) |
|---|---|---|---|
| 2014-15 | 0.05% | 1.5% | -1.5% |
| 2015-16 | -16.7% | 1.0% | -17.7% |
| 2016-17 | -4.2% | 1.9% | -6.1% |
| 2017-18 | 1.1% | 2.0% | -0.9% |
| 2018-19 | 2.1% | 2.3% | -0.2% |
Credit: RMIT ABC Fact Check (CPI figures from Budget Paper 1, 2016-17 to 2018-19)
Mr Pryke said that there had been two significant nominal cuts: "And when you add inflation into that, and just the fact that there has been no increase since, the gap between what it [the budget] was before and what it is now is even wider."
Professor Howes agreed that the effect of inflation meant there were real cuts in all five years, even if the one in 2018-19 is very small.
"It is a tiny cut, but when you work it out, it's still a cut. And then there are another three that are factored into the forward estimates as well.
"Some years there are nominal cuts, but there's a real cut every year."
The Development Policy Centre, led by Professor Howes, has published an inflation-adjusted time series on its Aid Tracker website that shows Australian aid spending in 2018 dollars. According to its figures, the government's cuts range from between $953 and $8 million.
| Year | Aid budget ($m) - 2018 dollars | Change ($m) |
|---|---|---|
| 2013-14 | 5507 | n/a |
| 2014-15 | 5428 | -79 |
| 2015-16 | 4475 | -953 |
| 2016-17 | 4207 | -268 |
| 2017-18 (est) | 4169 | -38 |
| 2018-19 (est) | 4161 | -8 |
Source: Australian Aid Tracker (Devpolicy.org)
Measuring inflation
The Aid Tracker figures have been deflated using the Consumer Price Index, which Professor Howe and Professor Clarke both said was an appropriate way to measure inflation in the context of Australian aid.
Professor Clarke told Fact Check that although there was more than one way to measure inflation in the context of aid, "If you're looking at the Australian aid program in Australian dollars, then that [the Consumer Price Index] is the appropriate measure."
Professor Howes agreed, adding that while Australia's aid is directed to foreign countries, the bulk of the money is spent on goods and services originating in Australia.
"Most of the companies are Australian companies, most of the NGOs are Australian NGOs. So I think it's legitimate to use that, and it's certainly the standard technique."
Principal researcher: David Campbell
Sources
- World Vision, Media release, May 8, 2018
- World Vision (Susan Anderson), Tweet, May 8, 2018
- OECD, What is ODA?, April 2018
- Joe Hockey, 2013 pre-election costings, September 5, 2013
- 2014-15 Federal Budget, Expense measures (Budget Paper No. 2), May 2014
- 2014-15 Mid-Year Economic and Fiscal Outlook, December 2014
- 2017-18 Federal Budget, Expense measures (Budget Paper No. 2), May 2017
- 2018-19 Federal Budget, Expense measures (Budget Paper No. 2), May 2018
- Julie Bishop, Interview with ABC's The World, May 9, 2018
- Joe Hockey, Media release, June 24, 2015
- OECD, Methodological note on refugee costs, April 2016
- DFAT, Australia's ODA Standard Time Series, May 3, 2018
- DFAT, Australian Aid Budget Summary (2018-19), May 2018
- Australian Aid Tracker: Trends, May 2018
- OECD Peer Reviews: Australia 2018, March 30, 2018
Topics: government-and-politics, budget, foreign-affairs, foreign-aid, australia
First posted
