From the industry reaction to Australia's overseas aid budget, one might have thought Canberra's cruel bean-counters are intentionally starving Third World orphans. The budget announcement of keeping foreign aid at around 0.35% of gross national income, or almost $5.6 billion, reflects a stepping down from a forecast increase in aid to 0.38%, but still represents an overall 4% increase in available funds.

In an era of broad budgetary restraint, this not unreasonable outcome reflects commitments given by Australia in order to secure its seat on the UN Security Council last October. It also reflects a shift away from the "hard power" of Defence, with the Iraq war drifting into history, Timor-Leste no longer active, Solomons concluding and Afghanistan looking to an end. The security emphasis now is on "soft" and "secret" power, with diplomacy drifting.

In order not to further alienate Labor's Left, the government has capped aid funds allocated to housing asylum seekers at 7% of the aid budget, at $375 million. Australia's commitment to the UN's millennium development goal of 0.5% of gross national income by 2015 has now been "deferred" to 2016-17. This target will now require an extra -- and improbable -- $1 billion a year for the next four years.

Of the more aspirational commitment to the OECD's 2002 Monterey Agreement to allocate 0.7% of GDP to foreign aid by 2015, only Sweden, Norway, Denmark and the Netherlands have met that goal. Australia is outside the top 10 OECD aid providers by GDP. There is, however, some small comfort in still being well ahead of Japan and the United States.

Australia's aid recipients are unlikely to protest about the deferral of intended aid increases. Indonesia -- Australia's largest aid recipient -- does not care too much about Australian aid in any case. For some in Indonesia, Australian aid is viewed through a paranoid lens as a mechanism for some vague ulterior agenda. From Australia's perspective, aid s... Read more