Study Shows Foreign Aid Spending is Good for Australian Exports
23 October 2017 at 4:26 pm
New economic modelling from The Australian National University (ANU) has found that every additional $1 spent on Australian foreign aid in Asia has resulted in $7.10 in Australian exports.
The study, described as the first of its kind in Australia, also found the results were consistent, irrespective of whether Australian aid was “tied” to Australian contractors or not.
Co-author of the research Dr Matthew Dornan, the deputy director of the ANU Development Policy Centre, said the modelling clearly showed that foreign aid had resulted in economic benefits for Australia, in addition to its already established impacts on poverty alleviation.
“They’re impressive numbers,” Dornan said.
“It’s clear Australian aid is serving our national interests through growing economies in our neighbourhood, which then provides benefits to Australian exporters.
“We conclude that calls to ‘tie’ aid [to Australian contractors] are, at best, a distraction, with aid increasing exports more significantly through other (non-tying) channels.”
The study looked at Australian export data in relation to foreign aid spending between 1980 and 2013. Australia untied its aid program in 2006, allowing the researchers to examine the impact of that policy change.
“We wanted to see whether the shift away from tied aid has had any impact on Australian exporters,” Dornan said.
“The results showed the shift away from tied aid has had no impact on exports.
“In a context where the national interest has been given greater emphasis by the Australian government, our results show that the tying debate is at best a ‘distraction’.”
In a speech at the ANU in February this year, Minister for Foreign Affairs Julie Bishop highlighted the need for the Australian international aid sector to better explain why it was in the national interest to support developing countries.
The senior economic development policy advisor at World Vision Australia Dane Moores told Pro Bono News this research strengthened the case for the Australian government to increase the aid budget.
“[The research] shows that Australian aid has had positive and significant impacts on Australian exports, in this case in Asia,” Moores said.
“There are commercial co-benefits for Australia from increasing aid to developing countries. In addition to empowering communities and helping families lift themselves out of poverty, Australian aid can strengthen the enabling environment for business and trade to thrive.
“Australian aid makes economic sense. The study confirms that Australian aid is highly effective and generates a large return on its investment, although we should not forget that the most important return is reducing poverty and empowering local communities.”