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Australian aid spending on hold in tight budget

Australia's Foreign Minister, Bob Carr, pictured in Sydney, on May 2, 2013
Australia's Foreign Minister, Bob Carr, pictured during a press conference in Sydney, on May 2, 2013. Australia will delay its foreign aid spending targets and close its embassy in Budapest as the government scrambles to rein in costs to meet revenue shor

Australia will delay its foreign aid spending targets and close its embassy in Budapest as the government scrambles to rein in costs to meet revenue shortfalls, Foreign Minister Bob Carr said on Monday.

The ruling Labor government is preparing to hand down its final budget on Tuesday before it goes to the polls on September 14, admitting a slump in tax revenue means a promised surplus will not be achieved.

Part of the cutbacks will hit foreign aid, particularly a commitment to meet the so-called "millennium goal" of having the aid budget equal 0.5 percent of gross national income.

Canberra originally pledged to meet this goal by 2014/2015, but Carr said this would now be pushed out to the 2017/18 financial year, having already been delayed last year.

"While that's disappointing, it simply reflects the reality that you can't borrow money to spend on aid," he told ABC radio.

"And what you spend on aid has got to be sustainable and the fact is these are the most significant write-downs in revenue we could possibly have imagined. And in that context there's a one-year delay in reaching that goal."

Despite this, Carr said aid spending would still be increased by around Aus$500 million (US$500 million) in 2013/14. About 70 percent of Australia's foreign aid is spent in the Asia-Pacific region.

World Vision Australia chief Tim Costello said the delayed spending targets were "deeply disappointing".

"The World Bank estimates the costs are holistically $2,000 to save a life," he told ABC.

"Australian aid has saved 200,000 lives in the last year. If we had kept our promise, not pushed it out by another year, that's another million lives over the next four years we would save."

The broadcaster reported that another casualty of the budget cuts would be Australia's embassy in Budapest, which will shut, while plans to open a diplomatic post in Dakar, Senegal, have reportedly been shelved.

Australia first announced a backdown on its budget surplus pledge in December, and Treasurer Wayne Swan has since confirmed revenue writedowns of at least Aus$17 billion for the 2012-13 financial year.

A stubbornly high Australian dollar, which has squeezed domestic industries at a time when fluctuating commodity prices due to cooling Chinese growth have seen export earnings slide, is starting to hurt the economy.

The central bank last week slashed interest rates to a record low 2.75 percent to stimulate activity.

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