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Budget estimates - Lee questions Carr and AusAID about diverting $375 million from the aid budget

Estimates & Committees
Lee Rhiannon 14 Feb 2013

Senator Lee Rhiannon questions Minister Carr and AusAID about diverting $375 million from aid programs to pay for domestic costs of housing refugees and how this impacts the government's goal of reaching 0.5% of GNI going to aid.

Senate Estimates - Thursday 14 February 2013

FOREIGN AFFAIRS DEFENCE AND TRADE COMMITTEE

Senator RHIANNON: How was the decision made to reallocate up to $375 million of Australia's aid budget towards domestic refugee support costs, without clearly identifying which programs would be affected by this decision, consistent with our commitments under the Paris Declaration on Aid Effectiveness, and reaffirmed and strengthened in Accra and Busan to provide:
… reliable indicative commitments of aid over a multi-year framework and disburse aid in a timely and predictable fashion according to agreed schedules …
Senator Bob Carr: As I said in the Senate, I think in answer to a question from Senator Rhiannon, everything we do in our ODA budget is within the OECD guidelines. We prioritised $375.1 million of official development assistance in 2012-13 towards funding some of the costs of supporting refugees in Australia. That represents seven per cent of Australia's total ODA budget of around $5.2 billion 2012-13. The Papua New Guinea and Nauru country programs and payments already made were excluded from the reprioritisation. Other important exclusions included loans, promissory notes and assessed contributions to which Australia is subject.
We are minimising the impact of this reprioritisation by ensuring that, wherever possible, commitments are delayed rather than reduced and that the reprioritisation is distributed broadly, equally across regions. The bottom line is that one cannot spend money one has not got. It is inconceivable that we would borrow money for ODA. With a contraction in government revenues it has been necessary to reprioritise, but our aid budget has grown and it represents one of the most generous aid programs in the world. All Australians can be very proud that that $5.2 billion is being spent with maximum effect.
Senator RHIANNON: Thank you, Minister. What impact assessments were done about possible impacts of this increased unpredictability on bilateral and multilateral aid partners before making this decision?
Senator Bob Carr: There was a lot of discussion about the impact of the decision and the government was very careful to see that, for example, the Papua New Guinea or Nauru programs were cauterised, excluded from the reprioritisation. We have delayed rather than reduced expenditure. In the context of the increase in Australian aid we believe that the end result of the reprioritisation is very respectable.
Senator RHIANNON: Which programs will have expected funding reduced or have payments delayed in 2012-13 as a result of the decision?
Senator Bob Carr: We can very shortly provide details of aid expenditure across all countries. I should have that within a week or so.
Senator RHIANNON: Are we talking about the same thing? I was after programs that will have expected funding reduced or have payments delayed.
Senator Bob Carr: Both categories.
Mr Baxter: In our portfolio additional estimates statement that was tabled in parliament last Thursday there is detail of which programs have been reduced and the amounts they have been reduced by.
Senator KROGER: Indeed, I think they are on the website which the minister, with his penchant for websites, might want to go to—he may find them listed there.
Senator RHIANNON: Can this include which of these programs are expected never to proceed as a result of your decision?
Mr Baxter: As the minister has said, the cuts to programs are set out in the portfolio additional estimates statement, and we will be releasing further details on the precise programs over the next week or so.
Senator RHIANNON: Can that include which ones will not proceed?
Mr Baxter: That is right. As the minister has said, wherever possible we have sought to defer and delay programs rather than cancel them.
Senator RHIANNON: Were those responsible for implementing the programs informed before the decision was taken?
Mr Baxter: Who are you referring to?
Senator RHIANNON: The people who run programs who now find that the funding has gone or has been reduced. Were they informed before you made the public announcement about the $375 million.
Mr Baxter: Most of the programs are administered by AusAID, so we were part of the government's decision making process and consideration of the re-prioritisation. It is important to recognise that the overall ODA budget has not changed at all as a result of the re-prioritisation; it is just a reallocation within the existing program. We have spoken to our partner countries and to partner organisations that have been affected by the re-prioritisation, and we have gone through that process.
Senator RHIANNON: When you went through that process, was that done before the announcement was made or after?
Mr Baxter: The announcement that was made on 17 December announced the re-prioritisation of $375.1 million within the existing ODA budget. It did not go into details announcing which particular countries or programs had been cut because the government took the view that we needed to talk to those countries, organisations and non-government organisations that would be impacted by the re-prioritisation, and we did that.
Senator RHIANNON: Do I take from that that the public announcement was made about the $375.1 million, then you started talking to partners, bilaterals, NGOs et cetera, and then you announced the details.
Mr Baxter: That is right.
Senator RHIANNON: What have been the responses from those partners, bilaterals, NGOs and multilaterals?
Mr Baxter: We have very strong relationships with all of our development partners. The governments that we work with are very familiar with new priorities emerging and the need for governments to respond to those new priorities by altering their budget strategies, whether it is within a program, as has happened with the ODA program, or in other circumstances. There was a lot of understanding that the Australian government had made a decision based on the priority to fund some activities within the ODA program that had not previously been funded. They were reassured by the efforts we have made to delay or defer where possible rather than cancel. The minister has just been to three of our very strong partners in the Pacific and I understand it was not raised in the discussions.
If you look at the size of the cuts to most of the programs you will see they are very small, and they come on top of five years of consistent growth in most of the programs. Whether it is the Indonesia program or the program in Vietnam, these programs are now at historically high levels for Australia's aid program. Yes, there have very small reductions across a large number of programs, but we deliberately took that approach so we would minimise the impact that the re-prioritisation would have on our programs.
Senator RHIANNON: You said that you worked to minimise the impact but, clearly, it would have been a big challenge for AusAID when you were told that you had to find $375.1 million to move somewhere else. Was an assessment made of the likely impacts on program goals and outcomes when you are making that assessment? Do you get down to that level of detail?
Mr Baxter: Of course, we looked at the impact of the re-prioritisation and, as I said a number of times, that is why we looked to defer and delay. Maybe a four-year program would become a five-year program or a three-year program would become a four-year program. We certainly started with the intent—and I think we were successful—of minimising the impact that this would have on programs. Clearly, if there is less money in the program then there will be an impact but, as I have said, across the board the cuts are relatively small and come after years of very strong growth.
Senator RHIANNON: The announcement was made just before Christmas. I am sure you appreciate that that often adds to people's concern and suspicion about how it has been managed. Minister, when was the decision made to make these cuts?
Senator Bob Carr: I cannot tell you offhand. I would need to go back and look at the diary.
Senator RHIANNON: Mr Baxter, when were you first informed of these cuts? I assume from your earlier answer that it starts for you when you are asked to find $375.1 million from existing programs, because that money is needed for something else.
Mr Baxter: I cannot comment on confidential government decision-making processes. The fact is that the government announced the re-prioritisation on 17 December. We then talked to our partner governments and organisations with whom we work in delivering the aid program, and we have gone through that process.
Senator RHIANNON: Minister, how is this $375.1 million arrived at? Was that something that you were asked by the Department of Immigration and Citizenship? Was that the amount you were given to find that amount of money?
Senator Bob Carr: It emerged from a lot of discussion about the budget pressures on the government. I do not think anything is to be gained by trying to overanalyse that. I am just looking at Australia's total ODA by partner country and region, and the increase in aid from 2006-07 to 2012-13 is altogether striking. When you ask about the attitudes of our partners, both nations and NGOs, they are very aware that Australia's credibility is derived from the steep increase in aid that this government has delivered. I can quote three examples and I am happy to quote more: Papua New Guinea, in 2006-07 received $345 million; the current revised estimate puts aid to Papua New Guinea at $493 million. It has gone from 345 to 493. Another example—South and West Asia—it has gone from $143.6 million in 2006-07 to the current revised estimate of $475 million this year. In East Asia, the increase has been from $787 million to $1.207 billion. This is a steep trajectory—a big increase—and we are entitled, given the contraction of revenues, to say some projects in the context of this overall increase will be postponed and some reduced.
Senator RHIANNON: Are there any cancelled?
Senator Bob Carr: As I said, some reduced—I think you referred to some being cancelled.
Mr Baxter: Some cancelled.
Senator RHIANNON: And that is what will be on your list?
Mr Baxter: Yes.
Senator RHIANNON: How does the $375.1 million figure, as well as the process for deciding it, align with the comprehensive aid policy framework for the cabinet approved aid strategy and the tier 2 strategic goals, with indicative targets set for saving lives, opportunities for all, sustainable economic development, effective governance and humanitarian response and preparation?
Senator Bob Carr: If there is a contraction in government revenues, then governments have to spend less. The sharp drop in government revenues has mandated that we take the actions I have described, that we take it in the context of very big increases, and we are doing no more than what other countries are doing. The practice—that is, of finding money from an ODA budget to sustain refugee costs on our soil—is practised by the United States, with $895 million; France, $435 million; Sweden, $397 million; the Netherlands, $339 million: Norway, $335 million; and Canada, $284 million. These are all countries doing what we are doing: consistent with OECD practice, sustaining refugees on their soil as a matter of ODA as much as sustaining them in refugee camps offshore.
Senator RHIANNON: Do you mean by that answer that what has happened with the shift in the $375 million is not in keeping with those indicative targets around saving lives, ecological development et cetera?
Senator Bob Carr: No, I did not say that. All our aid is compatible with that. All our aid fulfils—
Senator RHIANNON: Including this spending on refugees—so it is compatible with those indicative targets?
Senator Bob Carr: That is how the OECD defines ODA.
Senator RHIANNON: Can you rule out more than 7.3 per cent of the aid budget going to the basic subsistence of refugees into the forward estimates?
Senator Bob Carr: I cannot speculate about future budgets.
Senator RHIANNON: So you cannot rule out further cuts to the foreign aid budget in the May budget?
Senator Bob Carr: It is not a cut in the aid budget; it is looking after refugees on Australian soil in a way that is precisely compatible with the OECD definition of aid. But I cannot speculate about future budgets—no minister can. As one minister said to me, 'Turn up on the night if you want to talk about what is in the budget.'
Senator RHIANNON: Is progress towards any of the comprehensive aid policy frameworks in the 2015 to 2016 targets likely to be adversely affected because of this reallocation?
Mr Baxter: No. We still believe that the indicative regional allocations in the comprehensive aid policy framework are achievable and we think that the CAPF is still relevant and important. It indicates on what and where we will focus our aid efforts. So, by 2015-16, the Asia Pacific region will continue to be our highest priority. Our 12 largest bilateral aid recipients will all be in the Asia Pacific region. The World Bank, the Asian Development Bank, the World Food Program and UNICEF will be our most significant multilateral partners. It is important to recognise the comprehensive aid policy framework states very clearly that these are indicative estimates of what the government will spend by region over the next four years and that they are subject to confirmation, as all budgets are during the annual budget process.
Senator RHIANNON: Minister, you just provided the committee with some interesting figures in making comparisons with other countries on ODA spending on refugees. I was wondering whether you are aware that this one-year allocation of $375.1 million outstrips the reporting of ODA for refugee support across the entire life of the Howard government, which spent $333.6 million from 1996 to 2006, the highest annual total being $98.83 million in 2005. Do you make that comparison?
Senator Bob Carr: I rest on another comparison, and that is that in the last year of the Howard government, 2006 to 2007, ODA was $2.9 billion. This year, the current revised estimates place it at $5.1 billion.
Senator RHIANNON: After the 12-month use of ODA for domestic asylum-seeker costs expires under the OECD guidelines, which I understand will be at the end of this year, what types of costs, if any, for asylum seekers can be charged for ODA?
Mr Baxter: The OECD guidelines only provide for that sustenance to be claimable as ODA for 12 months. After that it is not ODA.
Senator RHIANNON: That was my question: after that what happens? How are you going to manage those costs?
Mr Baxter: That is an issue for the Department of Immigration and Citizenship.
Senator RHIANNON: Minister, can you comment on that?
Senator Bob Carr: I cannot add to that answer.
Senator RHIANNON: What policy guidelines are in place for determining how the money, this $375 million, should be spent now it is being allocated to refugees? What is the input from AusAID on this?
Mr Baxter: To clarify, the Department of Immigration and Citizenship have appropriated that $375.1 million, so it is in their budget and they are responsible for ensuring that the expenditure meets the ODA guidelines. AusAID offers advice to other organisations in the government that are spending ODA funding on what is ODA eligible and what is not, but on a day-to-day basis it is the responsibility of the Department of Immigration and Citizenship to comply with those guidelines.
Senator RHIANNON: Have you given any advice yet? Have you offered it or have you been asked for it?
Mr Baxter: As the reprioritisation has taken place relatively recently, no—not at this stage. But the OECD guidelines are very clear in terms of what is in and what is out. Colleagues in the Department of Immigration and Citizenship will comply with those rules. The Department of Immigration and Citizenship has spent ODA funds for many years for different purposes, whether it is regional capacity building or working with Indonesia on the rehabilitation of detention centres and the like. There is a reasonably high level of familiarity within the Department of Immigration and Citizenship on the ODA rules.
Senator RHIANNON: Do you plan to offer any advice?
Mr Baxter: We will certainly provide advice if they ask us.
Senator RHIANNON: As I understand the process, assessments still need to be made. Against what criteria will the effectiveness of this money for refugees support be measured? Are we still talking about what the OECD sets out, or do you have some other process that builds on that?
Mr Baxter: The first thing is that the expenditure of that reprioritised funding will have to comply with the OECD guidelines or it will not be counted as ODA when we report on behalf of the whole of government to OECD on a 12-month basis, and that is reflected in the OECD statistics which are issued regularly. The Department of Immigration and Citizenship will need to comply with those ODA rules. We are ready, willing and able to provide them advise if they need it, but as I mentioned they have received ODA funding for a long time under successive governments and they are quite familiar with the rules.
Senator RHIANNON: So those are the criteria?
Mr Baxter: Yes.
Senator RHIANNON: Minister, does the government remain committed to 0.5 per cent of GNI for ODA by 2016-17?
Senator Bob Carr: Yes.
Senator RHIANNON: So we are on track? What impact will the diversion or cut, depending on how you describe it, in December 2012 make to the government's commitment to scale up ODA to 0.5 per cent of GNI by 2016-17?
Senator Bob Carr: None.
Senator RHIANNON: I understand that it is claimed there will be no impact. What approximate order of dollar increase will the government need to make in ODA in May this year to maintain a viable trajectory to 0.5 per cent of GNI by 2016-17? I am after a dollar figure preferably.
Senator Bob Carr: It would be 0.37 as a goal.
Senator RHIANNON: Of GNI?
Senator Bob Carr: Yes.
Senator RHIANNON: Can you give a dollar figure?
Senator Bob Carr: That depends on GNI.
Senator RHIANNON: We are currently at 0.35?
Mr Baxter: Yes, that is right.
Senator RHIANNON: I appreciate the issue of the dollar amount, but what approximate order of annual dollar increases will the government need to make over the forward estimates to meet its commitment to 0.5 per cent of GNI by 2016-17?
Senator Bob Carr: Again it depends on GNI growth.
Senator RHIANNON: Can you not give us an approximate dollar amount?
Senator Bob Carr: I do not think so.
Senator RHIANNON: Can you take it on notice?
Mr Baxter: The GNI figures have a major impact on the size of the program and GNI goes up and down. Most recently GNI has been revised downwards. It really depends on what the trend line is over a number of years. It can make hundreds of millions of dollars worth of difference.

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