More than stability: Australia’s aid program needs hard decisions now

Everything cannot be a priority.

Geordie Fung

8 May 20254 min read

The Albanese government now faces a choice on Australian development cooperation: stick with the current trajectory or use this mandate to pursue ambitious change. During Labor’s first term, there was an unspoken consensus in Canberra on Labor’s approach. Stabilise the aid program now, reform it later. We’re running out of time for reform.

The government has committed to keeping Official Development Assistance (ODA, or aid) roughly stable at around $5 billion. It’s midway through rolling out its 2023 International Development Policy implemented by country and regional development partnership plans.

But the world has already shifted since those policies were locked in. Two forces in particular demand fresh thinking. The first – global aid cuts and geopolitical volatility – is well recognised. The second, the profound and accelerating impact of AI, remains largely overlooked in the development sector.

Global aid cuts should force innovation

While Australia’s aid budget is steady, the global aid trend is downward. The United States is cutting back hard and European donors are retreating. Even in a more optimistic world, tough choices loom.

Over the last decade, agendas have been stacked: aid-for-trade, infrastructure, gender, disability, social inclusion, climate, disaster resilience, youth, Indigenous groups, and locally-led development. Each is important.

But we ought to face the reality that everything cannot be a priority. As decades of reviews have shown, we have both a policy and individual programs that are unfocused. We struggle to cut through to necessary strategic trade-offs.

This is the time for radical reform of how we do development cooperation.

Carrying water buckets back from a standpipe near Sekong, Laos (Jim Holmes/DFAT)

The Centre for Global Development makes the case for “radical simplification”. With this strategy, Australia would choose to do more of what works, less of what doesn’t and dramatically simplify aid management. It would mean bigger projects in fewer countries.

Another option is to pivot from project-based models to policy-first partnerships in specific regions, as Richard Moore has proposed. This would mean doing away with cumbersome project designs and monitoring systems, and instead directly resourcing expert organisations and individuals to work on shared challenges.

Both approaches have merit and could make aid delivery both more effective and efficient. But neither alone will be sufficient to address what lies ahead.

We’re not ready for what AI means for development

At the risk of being labelled a booster, I believe this is our biggest blind spot.

We’re all behind in thinking through the global and regional implications of AI, let alone how we will need to reform development cooperation.

AI is clearly a potential force for both good (it will transform the delivery of health and other services) and for bad (it will reinforce inequality and displace jobs). AI-enabled automation of advisory roles could soon obviate the demand for traditional technical assistance altogether.

But more importantly, it is quickly becoming the defining force of global development itself.

Countries that can harness AI safely will surge ahead. Those that can’t will fall behind. The same goes for individual actors, regardless of whether they have their country’s interests at heart or not.

Some credible forecasts – like those from AI 2027 – predict that coding agents will be capable of accelerating their own development within just a few years, potentially triggering an intelligence explosion by 2027–28. That shift would redefine public service delivery, policymaking, production, labour markets – in short, everything. And potentially before the end of Labor’s current term.

We’re all behind in thinking through the global and regional implications, let alone how we will need to reform development cooperation. Or for that matter diplomacy or defence policy.

Make hard choices – or be forced to them

These forces – shrinking aid and accelerating AI – will shape the operating environment for Australia in the region during this term of government. If Australia wants to remain the “partner of choice”, the approach will have to change. The international system was already in flux. Trump’s second term will only deepen this process of change, following the dismantling of USAID, erratic tariffs, and disturbing signals on alliances. Climate change will also demand more from governments, with increased pressures from extreme weather events, energy transition and climate migration.

I won’t try to predict what comes next. But it’s clear that both Australian strategy and development outcomes across the region will be shaped by geopolitical, environmental, technological and financial shocks. These shocks may also expose real tensions between Australia’s alignment with the United States and its ambition to be the “partner of choice” for regional neighbours.

All of this means making hard decisions quickly. It means building systems that reward long-term forecasting and proactive action, not just reacting to crises. Like any reform, this will upset those invested in the status quo.

So much has already changed since Labor’s policy choices were set in motion. And I get it, policy fatigue is real. But with a decisive Labor majority, the government can choose to make the hard choices now or be forced to them while we’re still playing catch up.

About the author

Geordie Fung

Geordie Fung is the Director of Analysis & Advising at the Development Intelligence Lab, a Canberra-based think tank focused on international development policy and Australia’s role in the world.

Topics

Aid & development Australia