Julie Bishop caps foreign aid at $5bn, blaming 'far worse' budget situation

Australia’s foreign aid spending has been capped at $5 billion, with Foreign Minister Julie Bishop warning a “far worse” federal budget position than already revealed will constrain any future rise.

Ms Bishop has also flagged new benchmarks will soon be announced to ensure “value for money” in aid spending, with the World Bank to tick off on Australia’s performance.

But some aid groups have expressed alarm at the government’s push to align “aid with trade” and a pledge to heavily involve the private sector in development assistance.

Asked about an Oxfam report this week that Australia’s major banks have funded land grabs in the developing world, enabling illegal logging and other abuses, Ms Bishop defended the involvement of the private sector in development work as a “force for good”.

She said many countries had failed to meet United Nations development targets over the past 15 years and some had actually gone backwards, despite global aid spending each year in excess of $130 billion.

Ms Bishop set out what she described as a ‘’new paradigm in development assistance’’ at an event in Melbourne to mark the 799th anniversary of the Magna Carta - a British charter to limit the power of the King that is seen as the foundation of many modern rights.

She said the flows of global remittance payments and foreign investment well and truly dwarfed the amounts spent on foreign aid, and development priorities had to harness private capital.

She criticised the previous Labor government for setting a target to boost aid spending by 2015 to 0.5 per cent of national income, only to repeatedly defer the target.

“In the last 15 months of Labor, $5.7 billion was withdrawn from the [aid] money that had been announced,’’ Ms Bishop said.

‘’Now that kind of instability and uncertainty is devastating for development partners and countries that are expecting certain amounts but don’t get it.’’

The Coalition had also supported the 0.5 per cent target in opposition, but after Labor again cut aid spending in 2013 said achieving the goal was impossible.

Before the election, the Coalition said that it would cut aid growth by $4.5 billion and would peg any increase to the consumer price index.

That left a projected aid budget of $4 billion for this year, rising to $4.2 billion in 2016-17.

Ms Bishop said the Coalition’s aim was to stabilise the aid budget at $5 billion but did not commit to a target as a percentage of national income.

‘’The budget is in a far worse position than has been previously made public, so of course I will be constrained with what we can do in the future,’’ Ms Bishop said.

She did not provide much detail on the likely benchmarks for aid spending, other than to say they would be released soon after the federal budget on May 13 and included a “strong focus on results” and value for money.

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