President Trump’s second term in office has been tumultuous. The global disruptor in-chief, abetted by Elon Musk, has commenced what could only be described as a chaotic shake-up of international alliances and established institutions. The nature and pace of the changes make it difficult to predict how all this will end.
However, certain decisions, including the shutdown of USAID, the United States’ international aid agency, and the obsession with imposing country and product specific tariffs should have us all worried.
The absorption of USAID into the State Department is at best unfortunate. But the issue of rehoming USAID pales in comparison to the damage done to the reputation of the US in the way they went about it and the hyperbole used by Trump and Musk to justify their decision. Characterising USAID as a ‘criminal organisation’ and “a viper’s nest of radical left-Marxists who hate America” was designed to inflict maximum reputational damage on an important American institution.
Reputational damage aside, the decision to shut down USAID has heaped misery on millions of people around the world who relied on their now-defunct programs. If that wasn’t enough, a number of European nations, including the United Kingdom, have also decided to reduce aid funding, shifting resources instead to increased defence spending. The combined impact of the reduction in global aid will simply create further despair in affected developing nations.
What is telling about this action by the Europeans is that in the desperation to manage the economic and security fallout from the Trump administration’s agenda, they are inviting other players to step in and fill the shortfall in aid. As we have witnessed elsewhere in the world, this could create longer-term economic and national security threats as these developing nations secure new alliances which run counter to the interests of the very Western democracies that have turned their backs on them.
As a middle power, Australia is uniquely placed to provide leadership within our sphere of influence to bring some semblance of order to the global chaos. Any suggestion that Australia could broker some global economic peace deal between the US and the rest of the world would be naïve. But it can use its influence within Asia and the Pacific to develop a unifying economic strategy which softens some of the international fallout from Trump’s policies.
This strategy will need to include multiple elements but central to it will be a renewed focus on aid and development. Now more than ever Australia and other developed countries in the region need to focus on ramping up their investment in international aid. While the current fiscal position of the Australian Government budget may be suboptimal, focusing only on internal issues such as cost of living to the exclusion of the wellbeing of our neighbours may cause longer-term damage to Australia.
'In this environment of global uncertainty, leadership matters. And the test for both the major parties is to provide the electorate with their plans to help us navigate these challenges, including robust support for our regional neighbours.'
Increasing our aid and development commitments is an important mechanism to ward off potential threats to Australia’s economic and national security. But to view aid in only this light is to misunderstand its importance as a tool to provide collective support and security to regional neighbours in times of global uncertainty.
The Australian government’s official aid budget is $5.1 billion. Around half of that will be bilateral aid, government-to-government support. Approximately 40 per cent of Australia’s aid budget goes to global programs including contributions to multilateral development banks as well as to the Australian NGO Cooperation Program (ANCP) which accounts for around 3 per cent of the total aid budget.
While an annual aid budget of around $5.1 billion may sound significant, it is not enough. Australia is the ninth-largest economy within the OECD and yet Australia ranks 26th in terms of aid generosity. For decades Australia has steadily reduced its commitment to aid as a percentage of total federal government spending. In FY 1970/71 aid as a percentage of total federal government spending was at a high-water mark of 2.5 per cent. In this budget it is 0.65 per cent and trending lower.
Lifting direct bilateral support to our Asia Pacific partners, especially the most vulnerable such as Timor-Leste must be a priority of all future budgets, for at least the next decade. There must also be an increase to the ANCP budget, which is currently around $150 million. An increase in the value of the ANCP fund must be significant and accompanied by the reduction and removal of the administrative and regulatory barriers, which make accessing this money complex and costly for NGOs.
Realising the full potential of the ANCP would allow more Australian NGOs and their in-country partners to increase vital on-the-ground support to communities in desperate need. A strategy focused on expanding grassroots initiatives under the remit of Australian aid, alongside increased bilateral support, will significantly enhance levels of goodwill shown towards Australia.
The anticipated global economic headwinds will hurt Australia and severely harm many regional economies, as the titans of global trade clash with the Trump administration. And in what is likely to be a disastrous global trade war, Australia is not in a position to secure a global truce. It can, however, still assert some moral authority by using soft diplomacy to galvanise the region, signalling to our Asia Pacific neighbours that we are in this together, and together we will get through it.
We are now into an election, during a time when Australia's political and economic systems will be tested by issues outside of our control. In this environment of global uncertainty, leadership matters. And the test for both the major parties is to provide the electorate with their plans to help us navigate these challenges, including robust support for our regional neighbours. Failing to do so will hurt Australia and its longer-term economic and national security interests — something which could prove more costly than the Trump administration’s war on the world.
Joe Zabar is the Chair of Mercy Works Ltd and a Visiting Fellow with the Tax and Transfer Policy Institute, ANU