Australian Budget delays foreign aid boost

Australian Budget delays foreign aid boost

Australian Budget delays foreign aid boost

Updated 8 May 2012, 23:10 AEST

The Australian Government will defer its foreign aid commitment target by a full year, in an effort to return the budget to surplus next financial year.

Australia's overall foreign aid budget for the 2012-13 financial year will rise by 4 per cent from the previous year, but won't reach its target of 0.38 per cent of gross national income.

The delay is expected to save the government $2.9 billion over four years.

Australia's Foreign Minister Bob Carr says Australia's Official Development Assistance (ODA) allocation will increase by $300 million in 2012-13, and maintain a level of 0.35 per cent.

"In a tight fiscal environment, the government has decided to defer the achievement of providing 0.5 per cent of GNI to official development assistance by one year," he said.

"Funding for ODA will continue to grow each year. It will, however, grow at a slightly slower rate so that 0.5 per cent of GNI is reached in 2016-17."

Aid groups have slammed the delay, with Oxfam Australia's executive director Andrew Hewett says he's bitterly disappointed.

"The casualties of the government's broken promise are some of the poorest people in the world, they're people who lack access to clean water to sanitation to health care, to education," he said.

"The aid program was an investment in them and an investment in a more stable and prosperous region."

The aid budget is predicted to go from $4.8 billion in 2011-12 to around $7.7 billion by 2015-16.

Around 70 per cent of Australia's foreign aid is spent in the Asia-Pacific region.

While overall funding to the Asia-Pacific region will rise slightly, there will be moderate cuts for Solomon Islands, Papua New Guinea, China and India.

Meanwhile, Immigration Minister Chris Bowen says the government will designate 13,750 places under its humanitarian program next financial year.

"Our main resettlement focus will continue to be on refugees from the three key regions of Africa, Asia and the Middle East," he said.

Around $52 million will also be spent over the next five years to increase Australia's diplomatic presence overseas, creating two new mission posts in China and Senegal.

Company tax cuts

The government is scrapping billions of dollars worth of company tax cuts, instead redirecting the money to welfare payments as it reaches for a budget surplus.

The company tax cuts were promised as part of the mining tax but were unlikely to pass the Parliament because of opposition from the Greens and the Coalition.

Treasurer Wayne Swan says he will not allow the "parliamentary gridlock" to get in the way of sharing the benefits of the mining boom.

"These new measures are good for low- and middle-income families because they will help them make ends meet and get ahead," he said.

"It's a Labor budget to its bootstraps."

As expected, the government has announced billions of dollars in savings to return the budget to a modest surplus of $1.5 billion in 2012-13.

Path to surplus

The government is predicting a further $7 billion blowout in this year's budget deficit to $44.4 billion, largely because of a further write-down in company tax receipts and bringing forward some support payments.

But it is forecasting a return to surplus in 2012-13 on the back of significant cuts, which the Treasurer says will give the Reserve Bank more flexibilty to cut interest rates.

"Tonight we make a forceful statement that ours is one of the world's strongest economies and fairest communities," he said.

"The deficit years of the global recession are behind us. The surplus years are here."

The government has announced net savings of $17 billion over the next four years - including $5.4 billion from Defence. The civilian workforce at the Defence Department will be cut by a further 1,000 positions while some major projects have either been cancelled or deferred.

The government has also scrapped plans to introduce a 'standard deduction' in tax returns - which would have made filing a tax return simpler. The move will save just over $2 billion.

It is also decided to delay the timeframe for reaching Australia's commitment to international development aid by a year to save $2.9 billion.

Spreading the benefits of the boom

A key element of the budget is a new plan to redistribute the revenue from the mining tax.

Those on Family Tax Benefit - Part A will receive an increase to their payments from July 2013.

The Government estimates around 1.1 million families will get an increase of at least $300 per year.

However, there will be new eligibility criteria so that families will no longer receive the payment if their child is over 18 and not in full-time study.

There is also $1.1 billion to fund a new Supplementary Allowance for those on welfare support.

"We understand the pressures Australians face, paying for electricity, housing, groceries, petrol or even a simple family outing," he said.

"That's why we've gone into bat for working families."

The extra payments will be funded by scrapping the proposed company tax cut that was designed to help those sectors of the economy struggling from the high Australian dollar.

Budget 2012

The major spending initiatives are:

- $1 billion to start the National Disability Insurance Scheme

- $1.1 billion for a new Supplementary Allowance for welfare recipients

- $1.8 billion to increase Family Tax Benefit - Part A

- $513 million to improve dental services

Major budget savings:

- $4.7 billion by scrapping company tax cuts

- $5.4 billion from Defence (including cutting 1,000 staff)

- $2.9 billion by delaying Australia's foreign aid commitments

- $2 billion by cancelling plans for simpler tax returns