The Albanese government has earmarked more than $200m for additional help for Ukraine and $500m to support Australian veterans and their families, while largely sparing defence from major funding cuts.
But a massive boost in aid to the Pacific and the expansion of Pacific worker schemes announced in Tuesday’s budget will be partly offset by a $213m cut to the previous Morrison government’s programs in the foreign affairs portfolio.
That includes axing the Coalition’s funding for the ill-fated Australian agriculture visa and also cutting an international freight assistance program that was rolled out at the height of the pandemic and is considered to no longer be required.
Tuesday’s budget shows overall defence spending will increase by 8% this financial year, largely due to a continuation of the former government’s policies.
Despite the defence minister, Richard Marles, warning his department that it would have to justify every dollar spent, Labor appears to have held off making tough decisions until next year’s budget when it will be armed with the findings of two major reviews.
Australia has yet to conclude talks with the US and the UK on how to acquire nuclear-powered submarines under Aukus, an expensive project that has yet to be added to the budget.
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Labor promised to spend at least 2% of Australia’s economic output on defence, and Tuesday’s budget generally meets that pledge – although that depends on rounding up this year’s ratio of 1.96% to 2%.
Defence spending as a share of GDP is expected to be 2.12% next financial year, followed by 2.11% in 2024-25 and 2.1% in 2025-26, based on the latest economic forecasts.
Newly budgeted defence measures include an extra $213m over five years to deliver help to Ukraine. This amount covers funding added since the Coalition’s final budget in March.
It includes $186m in military assistance, such as Bushmaster vehicles and armoured personnel carriers. It also covers extra humanitarian visas for Ukrainians, along with funding to help Ukraine’s border guard service improve its cybersecurity.
Total newly budgeted funding to support Australian veterans and their families is $538m over four years – a combination of election promises and the response to the royal commission into veteran suicide.
About $234m will be spent hiring 500 frontline staff at the Department of Veterans’ Affairs to try to clear the backlog in compensation claims, and $87m to modernise IT systems.
Labor has sought to put its stamp on the Department of Foreign Affairs and Trade after warnings from the foreign affairs minister, Penny Wong, that it needs to upgrade its capability to confront increasingly challenging strategic times.
The biggest new funding measure is $1.4bn in additional foreign aid, spread over four years and mostly concentrated on the Pacific ($900m) and south-east Asia ($470m).
Although this boost was foreshadowed last week, the total size of Australia’s official development assistance program can now be revealed: $4.65bn in 2022-23, about $100m more than expected in the Coalition’s final budget.
That increase means ODA will be about 0.2% of gross national income. Australia’s ODA is expected to rise to $4.77bn next financial year, $4.78bn the year after, and $4.87bn in 2025-26.
The government has allocated $68m over four years to expand the Pacific Australia labour mobility scheme, including to allow long-term visa holders to bring partners and children to Australia and increasing compliance to stop worker exploitation.
Australia will also offer 3,000 permanent migration places a year for nationals of Pacific island countries and Timor-Leste under the new $175m Pacific engagement visa.
But these measures are offset by $90.4m over five years in savings gained from scrapping the Coalition’s funding for the now defunct agriculture visa.
The treasurer, Jim Chalmers, said Australia was restoring its role “as a diligent and dependable partner and friend to our Pacific neighbours” after what he labelled “nearly a decade of neglect and disrespect”.
He told parliament the funding was in Australia’s national interest because it would help deliver “a stable, peaceful and more prosperous region”.
The budget reveals it will cost Australia $23m to host the Quad leaders’ summit next year, when the US president, Joe Biden, the Japanese prime minister, Fumio Kishida, and the Indian prime minister, Narendra Modi, are due to visit. That includes nearly $5m for the Australian federal police to help secure the event.