Fact check: Comparing Labor and the Coalition's records on foreign aid

Updated

The Coalition went to the last election promising cuts to the growth in Australia's foreign aid budget.

The claim: Opposition foreign affairs spokeswoman Tanya Plibersek says that Labor doubled the foreign aid budget when it was in government, and that "this Government has cut $11.3 billion, it's now about 22 cents in every $100 we spend, it's going down to 17 cents".

Opposition foreign affairs spokeswoman Tanya Plibersek says that Labor doubled the foreign aid budget when it was in government, and that "this Government has cut $11.3 billion, it's now about 22 cents in every $100 we spend, it's going down to 17 cents". The verdict: While Labor did substantially increase foreign aid spending during six years of government, it was by 80 per cent, not 100 per cent, or double. The Coalition's actual cuts, where foreign aid spending has fallen below the level Labor funded, are around $1.1 billion to date. Australia's foreign aid will fall to 17 cents per $100, but not for nearly 10 years, assuming the current policy is maintained. Ms Plibersek's claim is overblown.

Opposition foreign affairs spokeswoman Tanya Plibersek announced in October that Labor would restore $40 million to Australia's aid budget if re-elected and denied that Labor had also cut the aid budget when in government.

"We actually doubled the aid budget when we were in government," she told the ABC's AM program.

"This Government has cut $11.3 billion, it's now about 22 cents in every $100 we spend, it's going down to 17 cents."

How do Labor and the Coalition's records compare on foreign aid? ABC Fact Check investigates.

Australia's foreign aid

Australia gives foreign aid to developing countries to help them reduce poverty by funding things like humanitarian assistance and education.

The largest recipients of Australian foreign aid are Indonesia, who received $551 million in aid in 2014-15, and Papua New Guinea, who received around $450 million in aid in 2014-15.

Foreign aid is measured as a percentage of gross national income (GNI) for international comparisons and both Labor and the Coalition are committed to raising Australia's aid to 0.5 per cent of GNI, which means giving 50 cents for every $100 earned by Australia in overseas aid.

An OECD review of Australia's aid program in 2013 found that Australia was the eighth largest aid donor in the OECD, delivering 0.36 per cent of GNI in assistance.

It noted that achieving the 0.5 per cent of GNI target would require a "significant scaling up of aid by billions of Australian dollars".

The graph below shows how Australia's aid budget as a percentage of national wealth has changed over the last 30 years.

The basis for the claim

A spokesman for Ms Plibersek's office told Fact Check the opposition spokeswoman's claim about Labor's foreign aid spending while in government was based on historical foreign aid spending from the 2013-14 budget.

"The former Labor government took the aid budget from $2.9 billion in 2006-07 to $5.6 billion in 2013, an increase of 93.1 per cent or so, an effective doubling," he said.

For the claim that the Coalition had cut $11.3 billion from foreign aid, Ms Plibersek's spokesman pointed Fact Check to the 2014-15 budget delivered by the Coalition, its first after taking office, and the Mid-Year Economic and Fiscal Outlook (MYEFO) delivered in December 2014.

In using these numbers, Ms Plibersek is comparing two different concepts.

Labor's "doubling" of the aid budget refers to actual changes in the foreign aid spending while Labor were in government.

In contrast, the claim about Coalition "cuts" refers to the changes the Government have made to foreign aid spending forecasts they inherited from Labor.

There is a distinction between reductions in actual spending and in projected growth, as has been discussed in a previous fact check.

Did Labor double foreign aid spending?

Ms Plibersek has compared foreign aid spending in 2006-07, the last year of the Howard Coalition government, to 2013-14, the last budget forecast of the former Labor government.

Garth Luke, a foreign aid and development consultant and former aid policy adviser for World Vision, told Fact Check that if Labor wanted to include its budgeted 2013-14 aid, rather than the actual outcome after leaving government, this should be compared with the last Coalition budgeted aid in 2007-08.

That year, the Coalition increased the foreign aid allocation to $3.155 billion and actual spending on foreign aid was $3.173 billion, indicating that Labor essentially maintained the Coalition's last budgeted spend.

By the time Labor delivered its final budget in the middle of 2013, it had pledged $5.666 billion in foreign aid in 2013-14.

This represents an almost 80 per cent increase in foreign aid from 2007-08 when Labor's term of office started.

However, looking at "real" foreign aid spending (which accounts for inflation) Labor's last budget shows that foreign aid (based on 2011-12 prices) increased from $3.571 billion in 2007-08 to a forecast of $5.546 billion in 2013-14, an increase of 55 per cent.

Foreign aid forecasts under Labor

Labor came to government in late 2007 promising to fulfil an election commitment to increase Australia's foreign aid to 0.5 per cent of GNI by 2015-16.

In her interview on AM, Ms Plibersek said: "We were going to get to our 0.5 per cent target slightly slower because of this little thing we had called the global financial crisis."

The target of foreign aid at 0.5 per cent of GNI by 2015-16 remained in place for Labor's first four budgets, but by the 2012-13 budget, Labor had deferred the target by one year, to 2016-17 to assist with returning the budget to surplus.

This resulted in savings of $2.9 billion over four years.

A second delay to 2017-18 detailed in Labor's last budget in 2013-14, saved $1.9 billion over four years.

Finally, in its pre-election economic statement in August 2013, Labor saved another $966 million in foreign aid spending over four years, bringing their total savings to foreign aid in government to $5.8 billion.

Foreign aid forecasts under the Coalition

The Coalition went into the 2013 election promising to cut the growth in foreign aid and allocate it to infrastructure projects.

"It is unsustainable to continue massive projected growth in foreign aid funding whilst the Australian economy continues at below trend growth," the policy document said.

Thus they effectively promised to save money by slowing the increase in foreign aid over time that Labor had promised to spend, rather than actually decreasing the amount Australia was spending on foreign aid year on year.

The budget papers for 2014-15, showed that $7.6 billion would be saved over five years from the foreign aid budget.

That kept projected aid at its nominal 2013-14 level of $5 billion in 2014-15 and 2015-16, and then increased it in line with the consumer price index (CPI).

Foreign aid spending would therefore be around $5 billion each year 2013-14 to 2017-18.

Coalition 'cuts' to foreign aid

However, the MYEFO statement released in December 2014 contained more significant slowing of the foreign aid budget.

It shows savings of a further $3.7 billion by reducing foreign aid spending in real terms to the levels that applied when it was "last funded from budget surpluses rather than debt", and then continuing to grow in line with the CPI.

These changes resulted in the foreign aid budget actually dipping lower than it had been when Labor left office and the change became apparent when a document relating to the 2015-16 budget was released under freedom of information.

It showed foreign aid would be $5.032 billion in 2014-15, $4.052 billion in 2015-16, $3.828 billion in 2016-17, $3.912 billion in 2017-18 and $4.010 billion in 2018-19.

These forecasts do represent "cuts" rather than savings because they take the foreign aid budget below that the Coalition inherited from Labor.

To date, around $1.1 billion in foreign aid cuts have been made by the Coalition, nearly all in 2015-16.

The chart below shows what has happened to foreign aid growth during the Labor and Coalition terms in government.

Foreign aid as a proportion of wealth

Ms Plibersek's final claim relates to foreign aid spending as a measure of national wealth.

She claimed that Australian foreign aid spending is now at 22 cents in every $100 and will fall to 17 cents.

Her spokesman told Fact Check the basis for this claim was a calculation based on GNI projections by the Parliamentary Budget Office, foreign aid from forward estimates in the 2015-16 budget and projected CPI increases of 2.5 per cent, as shown on the table below.

Year GNI ($ million) Foreign aid funding projection* ($ million) % of GNI 2016-17 1,718,305 3,828 0.22 2017-18 1,808,421 3,912 0.22 2018-19 1,905,833 4,010 0.21 2019-20 2,012,364 4,110 0.20 2020-21 2,128,469 4,213 0.20 2021-22 2,255,186 4,318 0.19 2022-23 2,383,592 4,426 0.19 2023-24 2,514,177 4,537 0.18 2024-25 2,651,048 4,650 0.18 2025-26 2,794,848 4,767 0.17 *2016-17 to 2018-19 from 2014-15 budget (FOI request); 2019-20 to 2025-26 calculated by increasing by 2.5 per cent CPI.

Professor Howes said the GNI estimate of 0.22 per cent for 2016-17 was the same as his own calculation, which shows 0.25 per cent for 2015-16.

"The basic point is that if aid only grows with CPI, which is the Coalition's stand, and GDP grows in real terms, which we'd expect except in recession, then the official development aid to GNI ratio will continue to fall," he said.

Foreign aid as a percentage of GNI was forecast to be 0.28 per cent in 2007-08, the last year of the Howard government, and it was forecast to be 0.37 per cent in 2013-14, the last year of the former Labor government.

The verdict

Ms Plibersek claimed that Labor doubled foreign aid when they were in government, compared with $11.3 billion in cuts made by the Coalition Government.

While Labor did substantially increase foreign aid spending during six years of government, it was by 80 per cent in nominal terms and 55 per cent in real terms – not 100 per cent.

The $11.3 billion represents savings the Coalition will make to the growth in foreign aid promised by Labor in future years.

The Coalition's actual cuts, where foreign aid spending has fallen below the level Labor funded, are around $1.1 billion to date.

Australia's foreign aid will fall to 17 cents per $100, but not for nearly 10 years, assuming the current policy is maintained.

Ms Plibersek's claim is overblown.

Sources

Topics: foreign-affairs, budget, government-and-politics, alp, australia

First posted