Aid & development, explained.
Australian Foreign Minister Penny Wong and Fijian counterpart Pio Tikoduadua visit the Blackrock Peacekeeping and Humanitarian Assistance and Disaster Relief Camp in Nadi, Fiji, on 23 February 2023. (Leon Lord/Getty)
Weighed down by multiple objectives, Australia risks diluting the strengths of its development policy.
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Australian development policy is losing its focusAustralian development policy is losing its focus
Earlier this year Mark Carney said it was time for the world to start “calling out the gaps between rhetoric and reality” regarding the rules-based order and community of nations. Development policy has arrived at a similar juncture: is development assistance a self-interested transaction or is it a values-based helping hand for neighbours?
Across the contested Indo-Pacific, major powers combine development assistance, finance, trade and security instruments to promote their national interests. China’s Belt and Road Initiative integrates infrastructure finance, commercial expansion and geopolitical influence at scale. Japan combines development finance with industrial policy and investment. The United States has now gone a step further by explicitly linking development support with its own strategic priorities.
Australia’s development policy has also adopted a statecraft framing. Australia’s 2023 International Development Policy positions development assistance alongside diplomacy, trade, investment and security to generate economic value for Australia, as well as to contribute to strategic, commercial and diplomatic objectives as part of an effort to “advance a peaceful, stable and prosperous Indo-Pacific.” The Australian Government’s Moore Review correctly linked Australia’s prosperity to that of the Indo-Pacific. Subsequent policy statements extended this logic by framing development assistance as contributing to Australia’s economic interests and broader strategic objectives.
Australian development policy is overloaded with strategic, security and economic objectives, undermining its effectiveness.
This framing should strengthen coherence between the many tools of Australian statecraft, but instead it has triggered ambiguity. The OECD said recently that Australian development policy is overloaded with strategic, security and economic objectives, undermining its effectiveness. The OECD is right; the effectiveness of Australia’s development policy can be enhanced by preserving the distinctive contribution that development assistance makes within a broader statecraft framework.
Strategic partnerships, including with development partners,depend on breadth and depth. Breadth spans economic engagement, political coordination, security dialogue, people-to-people links and emerging areas such as climate, digital and energy transition. Depth is reflected in institutional trust, implementation relationships, sustained engagement and shared long-term objectives.
Development assistance is uniquely positioned to build deep, trust-based and enduring relationships. Australia is well placed to sustain these ties through regional location, contextual knowledge, and non-threatening middle-power status. Development is a specialised discipline requiring integrated analytical, institutional, relational and delivery capabilities that underpin long-term engagement and institutional trust.
Australia cannot replicate the scale of larger powers. Its influence depends on trusted relationships.
Long-term development engagement with the beneficiaries of development assistance builds familiarity with their political systems, implementation constraints and decision-making processes. It creates trusted channels for policy dialogue and coordination during periods of political or economic stress.
The trust accumulated through long-term development engagement is strategic capital that cannot be re-created through transactional or short-term initiatives. Once lost, it is not easily replaced and cannot be sustained when development policy is tasked with delivering multiple objectives.
The instruments of statecraft are not interchangeable; each has distinct areas of advantage. Diplomacy broadens relationships across multiple domains, providing political legitimacy as well as enabling coordination and agreement. Trade and investment deepen economic interdependence but remain transactional, generating direct commercial gains. Security cooperation contributes to stability and deterrence, particularly in fragile environments.
Assigning development assistance with commercial, security or diplomatic ambition sacrifices “depth” of partnerships. Development involves “sitting on the same side of the table” with the government partner to deliver its development priorities, whereas commercial interest requires “sitting across the table” to find mutually beneficial transactions.
The lesson is not that development policy should be isolated from wider statecraft, it is about the complementarity of statecraft instruments. Effective statecraft depends on making the whole greater than the sum of the parts through preserving the advantages of each instrument. Development assistance should complement Australia’s diplomatic and strategic objectives without becoming transactional.
This logic is particularly important for middle powers such as Australia. Development effectiveness is central to Australia’s strategic interests. It carries greater value because Australia cannot replicate the scale of larger powers. Its influence depends on trusted relationships, technical credibility and long-term engagement.
Large powers have alternative forms of leverage through market size, finance, military capability and technology ecosystems. The risk of compromising development partnerships is therefore lower because the scale of their other instruments mitigates the costs of shallower relationships.
Returning to Carney, he argues that countries should aim to be both “principled and pragmatic.” Australia’s development policy says that its assistance is aligned with Australia’s values: supporting neighbours facing hardship while respecting partner sovereignty over its development priorities. These values sit uneasily with Australia’s policy that tasks development assistance with also delivering Australia’s strategic, commercial and diplomatic objectives.
In a contested Indo-Pacific, deep, trusted and effective development partnerships strengthen relationships in ways that transactional engagement cannot replicate. For middle powers such as Australia, sustaining that depth is central to effective statecraft. As Mark Carney says, “middle powers can compete but they must use other ways.”
About the author
David Nellor
David Nellor is a Senior Fellow at the Lowy Institute. He is a PhD economist with extensive international experience across economic policy, development, financial markets, and the climate and energy transition. His work combines applied economic expertise with advanced data analytics to support policy design, market analysis, and strategic decision-making.
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