Re-shaping Australia's aid program

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Today at the National Press Club I am launching a new development policy and performance framework that will drive important reforms in Australia’s aid program. 

In recent years the world has changed in fundamental ways and we must change with it.  Aid flows into developing countries are now dwarfed by foreign direct investment, equity flows and remittances. Developing countries have growing domestic tax revenues. Traditional aid approaches are no longer good enough. We need a fresh approach which will be the new aid paradigm. 

As the Government must put the Commonwealth Budget on a more sustainable footing, we have stabilised our aid spending at around $5 billion a year, which will increase in the future with inflation. This is a generous aid program that puts us among the top 10 donors in the OECD.

While remaining generous, we need to be clear that the aid program is not charity; it represents an investment in the future of our region. Australians want to help others but they expect the Government to impose the same rigours and tests of value for money on our aid program, as we do on areas of domestic spending.

We will put in place rigorous performance benchmarks to ensure that Australia’s aid program is effective, accountable and delivers results. And we will strengthen our focus on the Indo-Pacific region, particularly the Pacific and South-East Asia and our neighbourhood is where we can make the most difference.

Poverty reduction remains a core objective for the aid program, but we will not pretend that aid alone is a panacea for poverty. The most effective and proven way to reduce poverty is to promote sustainable economic growth. Under this Government the aid program will have a much stronger focus on promoting economic growth to lift standards of living. We will use more of Australia’s aid funding to create jobs, boost incomes and reduce economic insecurity in our region.  

This strategic shift is important. It recognises that economic growth delivers prosperity and stability and is the primary driver of poverty reduction. People can escape poverty when they get a job, or a better paying job. Nine out of ten jobs are created by the private sector. 

I also recognise the role trade plays in development, needing to look no further than the extraordinary success of Singapore, Hong Kong, Taiwan, South Korea, Thailand, Malaysia, and more recently, China and India, to understand the importance of trade to economic growth. So we will use our aid to strengthen the private sector in ways that grow the economies in our region. 

Recognising the links between human development and economic growth, the aid program will also invest in education, health, reducing disaster risks and responding to humanitarian crises. Improving education and health outcomes is essential to laying a foundation for economic development. We will give increased attention to empowering women and girls so they can forge their own destinies and contribute to the well-being of their countries. Everyone benefits from women’s full participation in economic, political and social life. 

We will also change how we deliver aid. The Government has aligned our diplomatic, trade and development efforts under one department with the integration of the former AusAID with the Department of Foreign Affairs and Trade. This supports the Government’s commitment to put economic diplomacy at the heart of Australia’s engagement with the world. Through innovative partnerships with the private sector to fund development we will leverage finance and ideas from a wide range of sources. 

Innovation will drive the way we deliver aid. I will establish an innovation Hub within DFAT and engage bright and innovative thinkers outside the department in solving development challenges.  We will find more creative ways to achieve better innovations and we will be more entrepreneurial. Innovation will be intrinsic to our thinking.

The Government has put in place a new performance framework which will bring greater rigour to funding decisions at all levels of the aid program. This is critical to give Australian taxpayers greater value for money. High level performance targets have been set to reshape the aid program and ensure that it is effectively delivered. Progress at the country level will be assessed against performance benchmarks and mutual obligations agreed with partner governments. Aid by itself will achieve little if our partners are not committed to economic reform, job creation, and better governance. Where individual aid projects don’t deliver the results we expect, we will cut our losses. Successful approaches will be rewarded. 

The new aid paradigm represents a significant and positive policy shift that reflects our commitment to economic growth, poverty reduction and increased standards of living. We will make a positive difference in our region and the world.

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