Australia’s aid budget has effectively shrunk in real terms despite a modest increase in support for the Pacific in the 2026–27 federal budget.
According to a report from Canberra, the Australian government raised Official Development Assistance (ODA) for the Pacific by three percent to AU$2.2 billion. However, the World Bank expects Pacific wide inflation to rise to 4.6 percent over the same period, reducing the value of the increase.
Pacific aid now makes up around 42 percent of Australia’s total AU$5.2 billion aid programme.
Professor Stephen Howes, director of the Development Policy Centre at the Australian National University said the overall aid budget was effectively falling.
“We’ve had a lot of inflation in Australia and the aid programme wasn’t adjusted for that,” he told RNZ Pacific, estimating the overall budget had declined by about four percent in real terms compared with last year.
Foreign Minister Penny Wong defended the budget, describing aid as a strategic investment in regional stability and security. She said around three quarters of Australia’s aid spending is directed to the Indo-Pacific.
“At a time of global uncertainty, Australia will remain a reliable partner our region can count on,” Wong said in a statement.
“We are building the region we want, one that is peaceful, stable and prosperous, where sovereignty is respected and countries can determine their own futures.”
The budget increases aid to South-East Asia by 5.7 percent to AU$1.3 billion, while assistance to the Middle East and Africa falls by 5.6 percent to AU$144 million. Funding has also been reduced for several international organisations including the United Nations Development Programme, UNAIDS, the Global Partnership for Education and the Pandemic Fund.
The OECD recently reported that bilateral aid spending by western countries dropped by more than 29 percent in the 2025 calendar year, reflecting wider global cuts to development assistance.
Howes said Australia’s aid programme had increasingly become a geopolitical tool, with the share directed to Asia and the Pacific rising from 74 percent to 76 percent. He also described the budget as largely “business as usual” despite growing global instability and conflict in the Middle East.
He pointed to a AU$75.5 million regional allocation by the Department of Foreign Affairs and Trade (DFAT), saying it could provide flexible support for Pacific countries, including emergency budget assistance and fuel security measures.
“The extra regional spend includes funding for potential budget support, along the lines of the AU$30 million just announced for Fiji,” Howes said.
DFAT said Australia was continuing to implement landmark agreements with Tuvalu and Nauru, as well as a new partnership agreement with Papua New Guinea.
