The face of the Australian aid program is sure to change dramatically over the coming years.

The Coalition has long been clear on its intention to reform the $5 billion international aid program, taking AusAID further down the path of operating primarily in the national interest. Days before the election the Coalition announced it would slash the aid budget by $4.5 billion dollars. On the day the new government was sworn in, it announced that AusAID would be subsumed into the Department of Foreign Affairs and Trade (DFAT) — yielding a chorus of dismay from aid agencies.

What will happen to the budget and the department?

Six hundred million dollars is set to be removed from this year’s aid budget. After that, the budget will only increase by the Consumer Price Index across the next four years of forward estimates, which means forgoing the international commitment to spend 0.7% of Gross National Income on aid. (There had previously been a bipartisan consensus on increasing the aid program to at least 0.5%; currently, aid sits at 0.37% of GNI.)

The Canadian department of aid, CIDA, recently subsumed its aid program into foreign affairs. The Abbott government appears to be following suit, as CIDA has also emphasised private sector development and economic growth, and heavily involves private enterprise in delivering aid.

Despite the sizable cut to Australia’s aid budget, greater ramifications will come from the planned amalgamation with DFAT, “to ensure the alignment of our aid, foreign policy and trade objectives,” which is set to further blur commercial and development interests. This can already be seen in programs which have clearly served Australia’s commercial and strategic interests, such as the Mining for Development Initiative, which promotes mining as a vehicle for “sustainable” development overseas. The diversion of $375 million of aid to cover the cost of funding the asylum seeker policy, as well as money to Sri Lanka and PNG to assist domestic policy objectives, show aid has always operated this way.

What will these changes mean?

There will be a marked ideological shift for the aid program. “DFAT will have a clear focus on promoting the economic interest of the Australian people and Australian businesses,” said Foreign Affairs Minister Julie Bishop. It’s a far cry from poverty eradication for the world’s poor.

AusAID’s objectives have traditionally been to further Australia’s national interest, poverty reduction and economic development. Though these have regularly been in tension, the separation between AusAID and DFAT was generally agreed as necessary for aid to maintain a degree of independence and to de-politicise aid projects.

“NGOs in Australia are set to receive a larger chunk of the pie, though … it will be a scramble for NGOs to quickly fit their programs into new frameworks.”

Critics of the merger are concerned blatant alignment of foreign policy objectives with aid would de-prioritise the goal of poverty alleviation, and reduce the integrity of the work. With a probable refocusing of the objectives of aid to primarily assist foreign policy,  programs and projects likely to be cut will be those which have had a strong development mandate, with programs directly benefiting Australian interests remaining (and potentially increasing).

Prime Minister Tony Abbott said it made little sense for diplomacy to be steering foreign policy in one direction with aid working in another, indicating an understanding that Australia’s foreign policy can be damaging to the world’s poor and contrary to AusAID’s development mandate.

NGOs in Australia are set to receive a larger chunk of the pie, though with a change in performance indicators and ideology for AusAID, it will be a scramble for NGOs to quickly fit their programs into new frameworks.

Bishop has signalled aid to multilateral organisations like the UN, Asian Development Bank (ADB) will be significantly reduced. Multilateral organisations and institutions have long been criticised for being ineffective, costly and lacking in accountability, as evidenced by the AusAID and ADB Cambodian Railways Project. There seems to be a broader policy of preferring a bilateral approach.

Bishop says aid for trade will be a trademark of the aid program. Aggressively pursuing free trade agreements (FTA) appears to be crucial. The Coalition said the Pacific FTA agreement, PACER-Plus wasn’t moving forward quickly enough so a bilateral approach would be taken, with other Pacific nationals able to opt in later. “Foreign policy will be trade policy, and trade policy will be foreign policy,” Bishop said.

Infrastructure projects will gain a larger chunk of aid spending with Bishop determined to ensure that Australia gains greater recognition for assistance — larger billboards, Australian flags. AusAID staff at embassies will be fully integrated into the diplomatic network, as AusAID staff in Canberra will be subsumed into the existing DFAT staff.

This will impact program effectiveness on the ground. This has been demonstrated through militarising aid, such as in Afghanistan, with aid work being rendered ineffective and even dangerous for those involved when the aid is seen as linked with foreign political and military objectives.

What will remain the same?

The Coalition has committed to honouring previous deals made with the PNG government in return for continuing with a regional processing centre for asylum seekers and resettling refugees. Maintaining this hefty payout will require cuts in other areas of the aid budget. Using the aid budget to cover costs of the refugee policy at home isn’t new, though may point to an ongoing commitment to divert aid back to Australia for in-country costs of the policy.

Another initiative that will be maintained or expanded is the seasonal worker program. This allows Australian horticulture businesses to employ people from the Pacific during harvest — construed by the government as a commitment to the economic development of the Pacific through remittances. While remittances are important sources of income for communities, the program is supporting Australian business and industry interests by filling a labour gap, and the sustainability of the work is not guaranteed.

*AID/WATCH is an independent, membership-based monitor of Australia’s aid, trade and investment