JULIE BISHOP: It is vital that the Australian Government place our foreign aid budget on a sustainable footing after the financial disarray left by Labor where we are facing a $47 billion deficit this financial year and a projected gross government debt of some $667 billion. It's essential that our aid budget be sustainable into the future.

Today I confirm that the Australian Government is delivering on its election promise to deliver a significant and sustainable aid budget that delivers effective outcomes. We will refocus our priorities on our region, the Indian Ocean Asia-Pacific.

We will ensure that there are in place rigorous benchmarks so that we can develop an accountable performance culture in our aid community and we will direct funding to high performing organisations and programs.

The aid budget will be over $5 billion this year and hereafter it will increase year on year according to the Consumer Price Index. We believe that this refocus of our aid budget will deliver effective outcomes. We are focussing on alleviating poverty. We're focussing on economic growth and empowering women and girls, better educational outcomes, better health outcomes in our region and we also want to ensure that we can leverage private sector involvement.

In this way we will have an aid budget that the Australian people can be proud of - that will be consistent, will be coherent and there will be an end to the haphazard, fragmented, wasteful, ineffective approach to aid delivery that we saw under the Labor Government.

This will provide certainty, year on year, a $5 billion aid budget that will grow according to the Consumer Price Index, give certainty, consistency, it's reasonable, it's measured and we can deliver it.

Under Labor's approach, in the last 15 months, Labor removed $5.7 billion from the forward estimates of the aid budget so they would announce aid funding and then remove $5.7 billion from the forward estimates of the aid budget. Those days are over. It is time for us to deliver a sustainable, significant and effective aid budget.

JOURNALIST: Minister there are cuts of $107 million. Where will they be coming from?

JULIE BISHOP: We have set out in some detail on our website where we have been able to take some funding away, but overall there will be a significant aid budget of $5 billion. The non-government organisations, for example, will have an increase on the funding they received in 2012-13. In fact, the NGOs will be receiving four times the level of funding they received in 2007-08.

So while there has been a slight reduction over what was delivered in 2012-13 because of the state of the budget, what we are doing is increasing the budget year on year according to the Consumer Price Index and that will be sustainable.

JOURNALIST: [inaudible]

JULIE BISHOP: What the Australian Government is seeking to do is refocus our aid priorities on our region. It is where we can make the biggest difference. Labor's approach was handouts across the world, it was fragmented, it was haphazard.

We are focussing on the Indian Ocean Asia-Pacific. We are also focussing on economic development, economic growth because that is the best way to alleviate poverty. So we want to work with the private sector, we want to work with high performing aid organisations to get away from that handout culture and develop an accountable performance culture that delivers the most effective outcomes for people the most in need.

JOURNALIST: [inaudible]

JULIE BISHOP: Our aid budget will be focussed on countries and people in need across the Indian Ocean Asia-Pacific. We have significant investments in Indonesia, Papua New Guinea, Solomon Islands, Nauru, the Philippines.

For example, because of the recent typhoon in the Philippines we were able to provide $40 million for humanitarian relief and we also have a significant aid budget to the Philippines. So we save lifes and alleviate poverty where we can, promote economic empowerment of women where we can better, health and education outcomes and [inaudible] in those places.

JOURNALIST: You say the aid program will be tied to rigorous benchmarks. What exactly does that mean?

JULIE BISHOP: We will be working with the NGO sector, we will be working with the aid community and stakeholders generally to develop benchmarks against which the programs will be judged. In the past there has been far too much waste, it has been too haphazard, it has been ineffective. There was an independent review into our aid effectiveness that recommended that the aid budget should be subjected to rigorous benchmarks. Labor did not put them in place, we intend to do that in close consultation with stakeholders.

JOURNALIST: Oxfam has already come out and said that it's going to have to tell some people in extreme poverty it can't support them anymore. Surely that's not a good thing?

JULIE BISHOP: Oxfam is judging against the promise under Labor rather than what was actually delivered in the 2012-13 budget. Our budget of 2013-14 actually represents an increase for all NGOs.

Under Labor's last budget they were to receive 2.5 per cent Overseas Development Assistance, under this revised budget they will receive 2.7 per cent of ODA and that is four times what these non-governmental organisations received in 2007-08.

This is an ideal opportunity for organisations such as Oxfam to work with the Government to develop these rigorous benchmarks because we will be directing funding to high performing organisations that deliver the best and most effective outcome for the people in those communities. It is an opportunity for these organisations, in fact a remarkable opportunity for them to prove their work to the Australian aid community.

JOURNALIST: Can I ask you on another matter, what is your response to Indonesia coming out saying it deplores the violation of its sovereignty by Australian ships?

JULIE BISHOP: The Australian Government has made an unreserved apology to Indonesia for inadvertent breaches of its territorial waters. It is Australian Government policy to respect Indonesia's territorial sovereignty, just as it is the Indonesian Government's policy to respect Australia's territorial waters. They are inadvertent breaches, we apologised as soon as we learned of it, and we will work very closely with Indonesia to ensure that it doesn't happen again. We have in place steps to ensure it won't happen again.

JOURNALIST: [inaudible] put a strain on the relationship between Australian and Indonesia?

JULIE BISHOP: We are determined to continue to work with our counterparts in Indonesia to stop the people smuggling trade that is affecting, not only Australia, but also Indonesia and the region. It is in our common interest to prevent people getting on boats and making the hazardous journey to Australia.

Australia will stop these boats. We are determined to do it. We promised the Australian people that we would do it and we will work with Indonesia as closely as we are able to ensure that the people smuggling trade is dismantled.

JOURNALIST: Have you had a conversation with the Indonesian authorities since?

JULIE BISHOP: We have sent an unreserved written apology. We have been in contact with our counterparts. Our Chief of Navy has spoken to Indonesia's Chief of Navy to apologise for the inadvertent breaches and to assure him that it will not happen again.

JOURNALIST: [inaudible]

JULIE BISHOP: Dr Natalegawa is currently travelling so I contacted him in writing and left a message for him, but I have sent a written apology on behalf of the Australian Government and also personally.

JOURNALIST: Can you tell us what you said?

JULIE BISHOP: Obviously it is a confidential communication between two Foreign Ministers but I apologised on behalf of the Australian Government and I also personally apologised, because it is Australian Government policy to respect Indonesia's territorial waters and that is our intention and that is what we will do. These were inadvertent breaches. We've apologised and it will not happen again.

JOURNALIST: [inaudible]

JULIE BISHOP: I work very closely with my counterpart Dr Natalegawa, we're in regular communication, we are working together for the shared purpose of ensuring the people smuggling trade is dismantled but also that the Australia-Indonesia relationship is strengthened. That is our shared purpose and that is what we are doing.

JOURNALIST: [inaudible]

JULIE BISHOP: We are absolutely committed to stopping the criminal activity and people smuggling. We are absolutely committed to stopping people making that hazardous journey that has already led to over 1000 deaths at sea. We are determined to stop the people smuggling trade, determined to stop the boats and that's what is happening. The Australian Government will deliver on its promise to the Australian people.

JOURNALIST: The Indonesian Foreign Minister made some strong comments about the breach of its territorial waters. What was your reaction to those comments?

JULIE BISHOP: As soon as the Australian Government learned that there had been inadvertent breaches of Indonesia's territorial waters we ensured that our counterparts spoke to their Indonesian counterparts. For example our Chief of Navy contacted Indonesia's Chief of Navy.

The Australian Government has issued an unqualified apology and put in place steps to ensure that it will not happen again. Of course we remain ready to discuss and consult with Indonesia any concerns that they have but it was inadvertent, we have apologised. We've put in place steps to ensure that it won't happen again and we will continue to work hard to stop these boats coming and we will dismantle the people smuggling trade.

JOURNALIST: You talked about how you were obviously wanting to work together with Indonesia to stop the people smuggling. Has this incident made that difficult? Made it difficult for the two countries to work together?

JULIE BISHOP: It was a regrettable incident. We have unreservedly apologised. We have put in place steps to ensure that it won't happen again. The Navy and Border Protection are investigating the matter and we will continue to work hard to prevent people getting on boats, Indonesian flagged boats with Indonesian crews, and making this dangerous journey to Australia.

Before we came to government over 1000 people had died making this dangerous journey to Australia. We must prevent the illicit trade in people and we must dismantle these criminal activities. It's in the interests of the Indonesian Government to dismantle the people smuggling trade, if it's in their waters. It's in the interest of the Australian Government to prevent these deaths at sea and stop those paying people smugglers to come to Australia.

JOURNALIST: [inaudible]

JULIE BISHOP: Not at all, we remain committed to our promise to the Australian people made at the last election that we will stop the boats and that is what we're doing.

JOURNALIST: Are you concerned about the status of Australia's relationship with Indonesia at the moment and could it get worse?

JULIE BISHOP: Our relationship with Indonesia is one of our highest foreign policy priorities. Yes there are challenges but we are deeply committed to working in consultation with Indonesia, working together.

We have many shared and common interests and we intend to pursue them. I'm in regular and close contact with Dr Natalegawa for the shared purpose of strengthening the Australia-Indonesia bilateral relationship.

JOURNALIST: Now, you're trying to directly speak to your Indonesian counterpart. Have you been able to reach him?

JULIE BISHOP: Dr Natalegawa is currently travelling internationally but I have sent him a formal apology, both on behalf of the Australian Government for these inadvertent breaches and also a personal one.

It's deeply regrettable. It was never our intention. Indeed it is our absolute policy and it is our commitment to respect Indonesia's territorial sovereignty, just as it is Indonesia's policy to respect Australia's territorial sovereignty.

JOURNALIST: [inaudible]

JULIE BISHOP: We welcome Indonesian cooperation on patrolling these waters, for we want to work with the Indonesian navy and Indonesian border patrol to prevent people getting on boats and taking this hazardous journey. We look forward to increased cooperation with Indonesia to dismantle the people smuggling trade.

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