The new budget cuts to Australia’s aid portfolio are the big story for the region, especially because so much of AusAID’s spending is already planned into country strategies and multilateral contracts. Where and how these cuts will be made is anyone’s guess, but there will be fall-out. What about Australia’s recent promises to Indonesia, where Australia is the largest bilateral grant-based donor; or its status as a key donor to Myanmar during a period of potential democratisation; the long-term funding of the PNG and Nauru asylum-processing centres; and its need to manage the military-to-civilian transition in Afghanistan? Something has got to give, and Australia’s Asian century neighbours must be wondering whether it will be them.

It took a lot of effort to have development issues and poverty recognised in the Asian Century White Paper at all, in contrast to the ‘them there hills are paved with gold’ tone in most of the document. But these issues are real and important, and Australia will not deepen its relationships in the region without displaying a sense of solidarity in dealing with inequality and poverty, as well as the opportunities presented by Asia’s rise.

So, the cuts are paramount; but what of the internal bureaucratic changes? The shift to an economic frame for aid is not an issue per se, and neither is the focus on trade and investment. Australia’s new foreign minister, Julie Bishop, spoke recently in New York of trade liberalisation, a focus on the Indo-Pacific region and humanitarian assistance as priorities. She has outlined a stronger economic focus, similar to conservative governments in New Zealand and Canada, nominating ‘Aid for Trade’ as a flagship strategy, an expansion of free trade agreements, and a renewed commitment to expanding the Pacific Seasonal Workers Scheme and coming to an agreement on PACER (Pacific Agreement on Closer Economic Relations) Plus.

The question is whether these development issues will be considered at the strategic level in the ministry, or whether the aid program is to be used as a slush fund for short-term foreign policy wins. This doesn’t mean that official development assistance should be run as a charity. It means seeing aid as part of Australia’s smart power; but to do that, development interventions need integrity.

Despite this, the new government has approached the aid portfolio in a way that feels undercooked and ideological. So what should the government do to signal the importance of development within its foreign policy, run an effective aid program and achieve its soft power goals? It needs to invest much more in the ‘beyond aid’ agenda, and see the aid program as catalytic, a lever to achieve these goals.

The world is facing a global reckoning point in 2015 on many crucial international development issues, including climate change finance, aid effectiveness, transparency reforms and the end of the Millennium Development Goals, which provide the current global framework and targets for development. Diplomatic impasses have resulted in a range of international forums between rising powers. Development debates themselves have fundamentally changed — away from a focus on low-income countries, towards rising income inequality and ‘pockets of poverty’ in middle-income countries and entrenched poverty cycles in fragile states. Where does Australia sit in this context, and what is its plan for progress? And in this context, what is meant by the beyond aid agenda (also known by the OECD as ‘Policy Coherence for Development’)?

Generally, many factors will affect the development outcomes of peoples, including the domestic political organisation of a state. External factors can include trade, migration, investment, environmental issues, security and technology. For example, the St Petersburg Development Outlook in the G20 has identified several priorities, including infrastructure, private investment and job creation, human resource development, financial inclusion, remittances, food security, and domestic resource mobilisation. In other words, some of Australia’s domestic policies will impact its developing neighbours more than its (diminishing) aid program.

The OECD’s latest peer review found that ‘Australia does not have a published, explicit strategy for considering the impact of domestic policies on developing countries’. But as a result of the independent aid review in 2011, AusAID did have a ‘whole-of-government’ branch and the OECD found that Australia’s wider development policies are stronger in the areas of trade, agriculture, investment and remittances, which should contribute to reducing poverty in developing countries. Australia was commended for examining how its aid can help raise other forms of private investment to support development through its work in the G20, and through its Mining for Development Initiative.

But Australia still has a long way to go, and a very immature political and policy debate in this space. There has been very little attention paid in any strategic sense to what Australia should be doing at a domestic level to be a better development actor. Perhaps the AusAID integration can focus on this, and all may not be lost.

Susan Harris Rimmer is Director of Studies at the Asia-Pacific College of Diplomacy, Australian National University.