The Australian Federal Government is quietly adjusting its overseas development assistance program, reducing funding to multilateral institutions and reallocating funds to Pacific and Southeast Asian countries affected by the Trump administration's significant aid cuts.
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03-26, 2025While the Labor Party had pledged to invest AUD 5.097 billion in foreign aid in the upcoming fiscal year, tonight's budget will see a modest increase of AUD 135 million in development spending. However, this increase barely keeps pace with inflation, and the proportion of development assistance to overall spending continues to decline, accounting for only 0.18% of gross national income.
Matthew Maury, interim CEO of the Australian Council for International Development (ACFID), said that against the backdrop of global aid cuts, Australia is sending a "clear signal that we will not retreat from the region," which is commendable. However, he also pointed out that the proportion of aid to the budget will still fall to a "historic low."
"While maintaining the status quo is commendable, and we welcome the initial steps taken in this budget to fill the gaps, ACFID looks forward to further commitments to meet escalating global needs," Mr. Maury said.
The government is also making some significant adjustments to funding flows, delaying or suspending AUD 119 million in payments to global funds aimed at eradicating poverty and disease, including the United Nations Development Programme, the Global Fund to Fight AIDS, Tuberculosis and Malaria, and the Global Partnership for Education. This funding will instead be channeled into Australian-funded projects in the Pacific and Southeast Asia, designed to help these countries cope with impending US cuts to health, education, climate, and refugee programs.
Foreign Minister Penny Wong stated that in "uncertain times," the government is "ensuring that more of Australia's development assistance flows to the Pacific and Southeast Asia because Australia's interests are inextricably linked to these regions." She added, "We have had to make tough strategic decisions and focus on where our development assistance can have the greatest impact."
Minister for International Development Pat Conroy said that while Australia remains "strongly committed to the multilateral system... flexibility is needed in this year's budget to protect the stability and prosperity of our region and to strengthen Australia's role as a trusted and reliable partner for our neighbors."
US Secretary of State Marco Rubio has announced that over 80% of United States Agency for International Development (USAID) projects, worth over USD 50 billion (AUD 79 billion), will be cut. It remains unclear which projects will survive and which will continue, but the Trump administration has already indicated that it will cut aid to climate, refugee, and sexual health programs. The projects that the Australian government will increase funding to will help fill some of these gaps.
For example, the Federal Government has already committed AUD 5 million to help sustain HIV programs in Papua New Guinea, Fiji, and the Philippines that have been affected by USAID cuts, and is providing a broader AUD 81 million package to provide family planning, sexual health, HIV and tuberculosis programs, and maternal health care across the Pacific and Southeast Asia.
In addition, Australia has committed AUD 370 million over three years to respond to the Myanmar crisis and support Rohingya refugees in Bangladesh, where USAID cuts have already caused disruption. Simultaneously, Australia has also pledged AUD 355 million over four years to provide climate change solutions in the region.
Australia's development budget is also more closely focused on the region—approximately 75% of aid funding will be directed to the Indo-Pacific, the highest proportion in forty years. Meanwhile, a coalition of aid groups is urging the government to increase development funding, releasing data showing that Australia now spends 10 times more on defense than on foreign aid.
Reverend Tim Costello, Executive Director of Micah Australia, said that while the budget sends a "timely and much-needed signal of regional commitment," further effort is needed from both parties, with a commitment to allocating 1% of the federal budget to development assistance. "This is not just about numbers, it's about what kind of middle power leader Australia chooses to be," Mr. Costello said.
"We cannot talk about the stability of our region if we only invest in one part of the equation," Mr. Costello said. "True security means helping our neighbors prevent crises—by building resilience before disaster or instability strikes."
