Plenty has been said about the Government's National Commission of Audit's recommendations on domestic policy. But what are the potential ramifications for the agencies responsible for Australia's international functions of defence, diplomacy and aid? (Though following the subsuming of AusAID into the Department of Foreign Affairs and Trade late last year, aid is these days a 'program' rather than an 'agency', and we await the renaming of DFAT. Will it be DFAAT? DFATA?)

The incoming Coalition Government made promising noises about defence funding and Australia's global diplomatic representation both in its pre-election policy statements and in its first months in government. It also telegraphed a scaling-back of the rate of increase in Australia's official aid funding, pegging it to the consumer price index (CPI) rather than the ambitious target set by the former Labor government of reaching 0.5% of GNI by 2017-18.

On aid, there are no surprises (and nothing original) from the Audit Commission. CPI it is. Then again, after the massive disruption to the aid function (and foreign affairs infrastructure) caused by AusAID's 'integration'  into DFAT ('enabling the aid and diplomatic arms of Australia's international policy agenda to be more closely aligned'), the Australian aid program must be becoming habituated to shock.

But the recommendations on defence funding and DFAT create a sense of foreboding as the Coalition prepares to hand down its first budget next week.

In opposition, now Defence Minister David Johnston attacked the Labor Government's cuts to Defence (over 10% in 2012) here at the Lowy Institute, going on to say: 'Our aspiration is that as soon as we have come to terms and corrected the current fiscal situation we will return to the aspiration of 2% of GDP and 3% real growth in the Defence Budget. My mantra is to under promise and over deliver!'

The sense of déjà vu, and concern that bland promises of increased funding avoid the tough decisions on the strategic direction and capability of Australia's defence forces, were expressed by James Brown when the Coalition released its pre-election defence policy. On cue, the Minister's commitment to 'under promise and over deliver' looked increasingly like a commitment to 'under promise, and under deliver as well' by the time he spoke at ASPI in December. The Audit Commission's report gives the Defence Minister every excuse he needs to do just that:

  • It draws on former Deputy Secretary of Defence Paul Dibb's argument about a bloated Defence bureaucracy, recommending the reintegration of Defence Materiel into the Department.
  • It questions the magic '2% of GDP' commitment, calling for the Government to 'assess the balance of strategic and fiscal priorities and how this compares with the commitment to increase Defence expenditure to 2 per cent of GDP within a decade'.
  • It calls for a reduction of Canberra Defence staffing to 1998 levels. 1998! Before 9/11, Bali, and in the very year that China has announced a significant increase to its already formidable defence budget.

Now to foreign affairs and what the Coalition has called Australia's 'global diplomatic network'.

Shortly after the election, Foreign Minister Julie Bishop echoed the argument we've made at the Lowy Institute that Australia's diplomatic capabilities have eroded from decades of resource starvation and political inattention. She said in October that 'the pendulum has swung too far', and 'it's time for DFAT to reassert its position as the primary source of advice on foreign policy.' Over time, she said, she intended to pursue a plan to 'expand our diplomatic footprint overseas'.

The mid-year economic forecast added $100 million over five years for Ms Bishop's signature New Colombo Plan. But that looks about as far as the pendulum is set to swing, for the short term at least. The Government has scrapped the establishment of the new post in Senegal announced by then Foreign Minister Bob Carr in 2012, saving about $20 million. This post was intended to provide a diplomatic service in Francophone Africa after a parliamentary inquiry found Australia was unrepresented in an area where Australian resource companies were making serious investments.

The Audit Commission's coverage of DFAT is disappointingly low on detail and makes some unsupported claims about what we've argued is the chronic under-resourcing of Australia's diplomacy since our first report into this issue, Australia's Diplomatic Deficit, in 2009. The Commission concludes: 'the Commission does not consider that the case for a significant increase in resources is compelling'. It does not contest, and indeed confirms, our argument that DFAT funding 'has been largely constant in real terms since 1995-1996, while peer comparison agencies have been growing rapidly' (indeed the entire public service grew by over 60% between 1997 and 2013). It notes that DFAT staffing levels are lower than in 1996, and particularly in the number of Australia-based staff posted overseas. It acknowledges that DFAT (actually, Australia) has a smaller diplomatic footprint than any similar-sized G20 or OECD country (while querying whether the comparative G20 data presented in DFAT's chart inflated the size of other G20/OECD diplomatic network by including honorary consuls. The Commission could have asked us: it doesn't).

The Commission goes on to assert that DFAT 'delivers essentially the same function as it did twenty years ago (and it is therefore unsurprising it) should have essentially the same funding in real terms'.

This sweeping assertion ignores the massive transformations in Australia's international environment in the last twenty years, which includes the end of the Cold War, the shifting of global economic power to Asia, 9/11, the global financial crisis, the increasingly complex threats of international terrorism (including close to home in Bali), climate change, cyber threats, the Arab Spring, the Syrian crisis, a doubling in the numbers of Australians traveling overseas in the last decade, natural disasters with global consequences...the list goes on.

And with the new Government's emphasis on economic diplomacy and the Australian economy's reliance on exports, the Abbott Government's energetic efforts to achieve free trade agreements with our major Asian trading partners and its early initiatives in sending major business delegations to deepen trade ties in the region, surely Australia's international environment is becoming more, not less, demanding.

Putting this into a bit of fiscal context, DFAT's annual operating budget of around $1 billion (excluding the now-merged aid function) is about 0.35% of total government expenditure. So when the Commission says that 'DFAT resourcing is an important issue for the Commission as additional funding for diplomacy makes the task of achieving a longer-term surplus more difficult', it all sounds a bit silly.

Of course, the audit commission issued recommendations, and the Government is not bound by them. However, by hitting so many small targets, they will no doubt supply whatever hooks the Government requires to make its budget cuts next Tuesday. As I have argued before, 'money for diplomats' is never a big winner at budget time. For the future of Australia's international engagement, I wish it were not so.

Photo by Flickr user Cyril Bosselut.