Budget 2025 - what on earth happened to New Zealand aid?
Budget 2025 had a surprise in store for New Zealand aid. Read more to find out what happened.
Hi and welcome to an NZADDs update,
It was mid-afternoon on an otherwise pleasant Wellington day when the emails started to arrive. “What’s happening to the aid budget?” “The aid budget’s collapsing!” “Is climate finance going up or down, or both?” “Look out! Fiscal cliff!!!”.
Luckily, I had prepared. Bracing myself for a vexing afternoon of trawling through budget documents, I had already drunken several stout camomile teas and had put an Enya CD on. I was frustrated, but calm.
So, what’s going to happen to New Zealand government aid?
There’s good news and bad news.
The good news is that someone, somewhere in MFAT, or perhaps Winston Peters himself, has won a small victory: New Zealand aid is going to fall in coming years, but it isn’t going to fall as rapidly as had been projected in last year’s budget.
You can see the difference in this chart. The lighter line is projected aid spending from last year’s budget. The darker line plots this year’s projections. The vertical red lines mark the end of the three year periods across which New Zealand nominally budgets its aid. (All numbers come from Treasury spreadsheets and PDFs. For caveats and data challenges see the footnote below.)
It’s not a huge win, but in a world where some countries are slashing aid simply for the sake of being mean, while other countries are cutting aid because they want tanks and stuff, the fact that New Zealand aid spending is set to fall less rapidly is something. Good news I guess.
The bad news is that New Zealand aid is still falling. The next chart plots a longer time series and shows changes in nominal and inflation-adjusted aid spending.
When inflation is taken into account, by 2026/27 New Zealand aid will have fallen to 2019 levels, and it will have done so over a period where — thanks to climate change, illness and war — the need for aid has been rising fast.
And, to complete the grim tale, here’s what’s happening to New Zealand aid generosity as plotted by the standard aid/GNI metric.
Things could have been worse on budget night but it’s hard not to look at the aid/GNI chart and conclude that things could have been, should have been, a lot better too.
Footnotes:
Some of you will have heard Nicola Willis breathlessly fretting about a fiscal cliff and complaining that the last Labour government hadn’t budgeted money for future climate aid. This is sophistry: past governments don’t pass budgets for future governments. If Ms Willis wanted money for climate aid, she shouldn’t have cut taxes in her first budget.
My aid numbers include aid spending in Cook Islands, even though the country is no longer eligible for Official Development Assistance in the eyes of the OECD. I do this because there is no way to separate Cook Islands spending from other aid in budget day data. Also, I have had to estimate aid overheads for next financial yet. Happily neither aid to the Cooks, nor alternate approaches to estimation, will lead to any material changes in the charts above though.
As always, I’ve had to divine these numbers from spreadsheets and PDFs in a hurry. In a better world, or in Australia even, these numbers would simply be given out. This would be transparent. It would also reduce the risk of academics making errors. If you think you’ve spotted something wrong in my calculations, please let me know.