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AU: Live Below the Line - Why $2?

 

As our Live Below the Line campaign gains momentum and groups at schools, workplaces, universities and community groups around the country sign up to take the challenge – the Live Below the Line team wanted to explore the reason behind the $2 a day Line we’ve set for the challenge this May.

Live Below the Line is a challenge designed to provide Australians with a small insight into the challenges faced by the 1.4 billion people in our world trapped in the cycle of extreme poverty, and to raise funds for crucial anti-poverty initiatives creating change for those who need it most.

The challenge is set at $2 a day, because this is the current Australian purchasing power equivalent of the World Bank’s International Extreme Poverty Line – the US$1.25 on which the world’s poorest people survive on every day – for all their food, health, transport, education and general living costs.

As Australians we could never begin to understand the lack of opportunity and constraint in living on this tiny amount, but by just trying to feed ourselves with the same amount, we can start to get a small understanding of the lack of choice and opportunity available to those trapped in the cycle of extreme poverty.

So – how do we figure out what the Australian equivalent of the International US$1.25 a day figure is?

There are a few steps involved:

1. Understanding how the World Bank arrives at the US$1.25 a day figure.

The International Extreme Poverty Line was last set by the World Bank in 2005. They came up with the number by finding the purchasing power adjusted average national poverty line of the world’s 10 – 20 poorest countries.

That is, they created the line by analysing of what it means to live in poverty in the poorest nations of our world (as opposed to what it means to live in poverty across all nations).

International Extreme Poverty Line = Average of national poverty lines in world’s poorest nations.

The national poverty lines of the poorest countries are typically set using some version of the ‘cost of basic needs’ method. This generally involves:

  • Setting a ‘Food Poverty Line’ - established by pricing a food bundle that provides a minimum calorie intake required to survive,
  • Adding an allowance for non-food spending (typically obtained from data on the non-food spending of people near the food poverty line),
  • Then setting an ‘absolute’ Poverty Line – determined using the minimum value of consumption needed to be deemed ‘not poor’ in the world’s poorest countries.

National Poverty Lines = Cost of minimum calorie intake + equivalent non-food allowance

These National Poverty Lines try to establish a level of relative deprivation that defines what it means to be poor in the world’s poorest countries. The World Ban then averages and standardises these National Poverty Lines – using a method called ‘Purchasing Power Parity’ (PPP).

This is a method used to compare the value of products across countries, by taking into account the difference in domestic prices for the same goods. That is - how much of a country’s currency is needed in that country to buy what $1 would buy in the United States. Using this method, the World Bank was able to set an international Extreme Poverty Line taking into account the comparative welfare of the world’s poor in ‘real terms’, rather than exchange rate terms, which wouldn’t reflect the different cost of basic goods in relevant countries.

International figure = National figure, adjusted to reflect comparative cost of goods (PPP)

To learn more about Purchasing Power Parity and why it’s the best measure for comparative cost of living, see this World Bank document. Or, if you’d like to find out more about how the World Bank arrives at their US$1.25 a day figure, read this World Bank document, or the full report here.

2. Translating the international figure for the Australian context.

To figure out the Australian equivalent of this figure, the first thing we need to do is translate it for the Australian context.

Using the same method as the World Bank used to translate its domestic poverty figures to an International Extreme Poverty Line, we use Purchasing Power Parity to convert the International Extreme Poverty Line back to a domestic line.

Australian equivalent = US$1.25 x Purchasing Power Parity for Australia

World Bank figures tell us that in 2005 (When the World Bank’s International Extreme Poverty Line was set), for every US$1 spent, Australians needed to spend $1.39AUD to buy the equivalent things. This means that the Australian equivalent of the US$1.25 figure is $1.74AUD.

3. Factoring in inflation since this figure was set

As the World Bank’s figure was set in 2005, we need to bring it up to current figures, accounting for inflation and changes in the value of goods – such as food.

Using Australian Bureau of Statistics figures, we can see that since 2005 the price of goods has increased by 14.8% to 2010 (when we last got updated figures), which means we need 14.8% more money to buy the same things as we could buy for $1.74AUD in 2005 – or $2.00AUD.

Current figure = 2005 World Bank figure x Inflation

Therefore the Australian equivalent of the International Extreme Poverty Line of US$1.25 is $2.00AUD.

This means that someone living in extreme poverty survives on the equivalent of a $2AUD, in Australia, buying Australian goods.

Join the international Live Below the Line movement - sign up to live on $2 a day (of food and drink) from May 16th - 20th.

Corruption: not Top Secret, or extensive

 

 

Today, headlines around the country loudly declared "Australia's foreign aid program hit by massive fraud", as News Ltd reporter Steve Lewis drew attention to the 175 cases of fraud currently under investigation by Australia’s foreign aid agency AusAID.

This media investigation drew attention to the very real problem of corruption in many countries that receive funding as part of Australia’s overseas aid program. However, the piece quickly dismissed the fact that AusAID has detected these incidences of corruption and is currently investigating them - a tribute to the robust fraud detection systems that they currently have in place. 

The director of AusAID Peter Baxter notes that, “To claim that the AusAid program is riddled with fraud or that the vast majority of the aid program doesn’t actually reach its target is factually incorrect. We work in some of the most difficult environments on the planet, including in countries where corruption is endemic and of course there is a correlation between countries that have problem with corruption and poor government and poverty. Investigating fraud in those environments is difficult but we do that.”

While  today’s article rightly noted that corruption is a real issue in delivering our foreign aid, it failed to highlight three important points: 

1. AusAID has effective systems in place

AusAID has checks and balances in place to prevent, detect and investigate fraudulent behaviour. These mechanisms include the recent creation of the roles of Chief Auditor and the Director of Fraud Control within the department; risk and fraud management plans at overseas posts; transparent public tendering; promotion of the United Nations Convention Against Corruption, and sponsorship of the Extractive Industries Transparency Initiative(EITI). 

It is because of these checks and balances that we know of the aforementioned cases of fraud. 

2. The reported incidence of fraud is less than 0.1% of the entire budget 
 
Lewis alleges that the cases of fraud under investigation demonstrate that Australia’s aid program is wrought with corruption. In actual fact, of the $20 billion allocated to foreign aid since 2004-05, there are estimated to be potential losses of $3.4 million.  This represents only 0.017 per cent of the budget.

When compared with Australia’s Centrelink program, which has an anti-fraud success rate of 96.5 per cent (considered a successful result against their target of 95 per cent), Australia’s foreign aid program is 206 times less fraudulent.

3. Corruption is real. We need to fight it, not run from it

In the fight against extreme poverty, corruption is a significant issue. But it's important to ground our analysis in the reality that if we want to reduce its impacts on our developing neighbours, we need to continue to support foreign aid.
 
This isn’t to say that we shouldn’t monitor the spending of aid very closely, nor that we shouldn’t  continue to urge the government to improve the effectiveness of its aid program, in fact, aid effectiveness is crucial to tackling corruption - because it allows us to maximise our impact tackling the systemic issues that exacerbate issues related to corruption.
 
But we shouldn't use corruption as an excuse to reduce our efforts to provide opportunities to the poorest people on our planet.

 

Important improvement to Australia's Aid Program

 

Here at the Global Poverty Project we’re often asked challenging questions about the effectiveness of Australia’s aid program. Many of our supporters are concerned that sending expatriates to developing countries to work on projects undermines the experience of local communities and fosters dependency.

In the past, AusAid’s tendency to use Australian consultants in development projects has led to criticism of Australia’s foreign aid programme in research and the media, and even to the coining of the term ‘boomerang aid’ – referring to aid money provided to developing countries that ends up back in Australia because it is paid to the Australian consultants and companies contracted to provide services.

It’s for this reason that we welcome the announcement made early last week that the Australian government has accepted recommendations to reduce the number of technical adviser positions in the Australian aid program.

The decision was the result of a review of adviser positions that began in May 2010. It reviewed 952 positions across 20 country programs and suggested that 257 positions – a quarter of all advisers – would be phased out with the next two years, and a cap placed on maximum salaries paid to consultants. The funds previously spent on these expensive consultant services will now be reassigned to higher-priority programs, such as basic education and health service delivery and training.

While we recognise that advisers play an important role in development, particularly in fragile and conflict-affected countries, we welcome this decision as a positive step towards focusing aid on enhancing the capacity of local organisations and staff. In the past, the use of expatriate advisers in aid programs has often been considered the ‘default option’- even when other alternatives have been available.

We believe utilising and building the skills and expertise of local people is one of the most effective ways to reduce poverty. It’s encouraging to see that Australia’s aid program is looking at alternative ways to build the capacity of developing communities and reducing its reliance on in-country advisers. It’s also an encouraging sign that the government hears the public’s calls for our aid program to be focused on achieving development outcomes, rather than the service of Australia’s national interest.

We hope that further improvements in the delivery of Australia’s aid will introduced as a result of the Government’s independent review of aid effectiveness, which will be completed in April 2011. The Global Poverty Project recently submitted a submission to this review, calling for improvements to the structure and coordination of the Aid Program. You can find out more by reading our submission here.

Posted by Nina Collins - GPP Research Team in Aid for column GPP - Australia on Feb 23rd 2011, 09:58

The Coalition's proposed budget cuts explained

 

At 1 o'clock this afternoon Tony Abbott announced the Coalition's proposed budget cuts, including a deferral of funding for Australia’s Aid program.

The proposal did not include cuts to Africa's Foreign Aid funding that had been previously suggested by some within the Coalition – which is an important victory, and evidence that messages from concerned Australians had an impact.

Shadow Foreign Minister Julie Bishop played an important role in the omission of this suggested cut, please join us in thanking her for standing up for Africa’s Foreign Aid!

However, the Coalition did propose the deferral of $448 million of funding for an Education Partnership between Australian and Indonesia.

About the Indonesia Education Partnership
The Education Partnership will give 300,000 more Indonesian children

  • Assisting Indonesia to improve education quality and school management,
  • Fund the construction or expansion of up to 2,000 junior secondary, and
  • Deliver training to all 293,000 of Indonesia's school principals, school supervisors and district education officials.

The program is designed to give more Indonesian children a good education, and improve literacy and numeracy. Right now, the quality of education in Indonesia is still poor: 46% of year nine graduates are not fully literate, and around one-third of Indonesia’s 13 – 15 year olds don’t currently attend junior secondary school as they are too remote, expensive and teaching quality is poor.1

About education as a tool for development
Education plays a crucial role in fighting extreme poverty. It provides the platform from which an individual can take advantage of opportunities and overcome challenges in their lives. Improvements in education across countries has been the foundation of broad-based economic growth around the world.

We know that education is one of the best investments to help people climb out of poverty. Studies show that improved education leads to:

  • Healthier families: with children who attend school becoming adults who make more informed health choices, live longer, and have healthier children,
  • Smaller families: as educated people tend to marry later and have fewer children,
  • Disease prevention: young people who have completed primary education are less than half as likely to contract HIV than those who miss out on education, and
  • Increase income: for every additional year of education, girls can earn 10% more, and boys 5%.

Australia is in a good position to foster improved education in Indonesia, with the Education Partnership’s focus on improving the quality and management of education offering the chance to ensure that children not only have physical access to schools, but also have quality education outcomes.

Australia and Indonesia
Australia and Indonesia have a long history of working together to provide better education for Indonesian children. This Education Partnership is part of a broader program of support to Indonesian education which also involves the European Union and Government of Indonesia.

Indonesia has made the provision of basic education a national priority and currently spends 20% of its budget on education.2 But it still needs international assistance to meet its goal of providing nine years of quality education for all its children by 2015.

Amongst Indonesia’s population of 240 million, around 110 million live under the poverty line of $US2 a day, and millions live on just US75c a day. Right now, these people can’t access food or clean water, can’t afford basic healthcare, and are unable to educate their children.

Australia’s previous work with Indonesia’s education sector has been successful, with the 2005-2010 Education Program providing improved access to basic education through the construction of 2,000 junior secondary schools and the creation of around 330,000 new school places across the 20 poorest provinces in Indonesia.

--

[1] AusAid: Education questions and answers http://www.ausaid.gov.au/country/indonesia/educationqanda.cfm

[2] AusAid: Education questions and answers http://www.ausaid.gov.au/country/indonesia/educationqanda.cfm

Cutting $200 million of Africa's Aid

 

 Early this morning the GPP Australia  team received some disturbing news: that Opposition members would be meeting this afternoon to discuss $200 million in cuts to Australia’s Aid budget for Africa.

The Opposition’s proposed reduction to Foreign Aid would see cuts to Australia’s development work in a continent where we are positioned to have huge positive impact, and where child and maternal mortality rates are amongst the highest in the world.

This proposed funding cut would eliminate projects that would provide:
  • Midwife training, obstetric care and family planning in Ethiopia, Tanzania and Southern Sudan,
  • Increased agricultural productivity in Africa (an area where Australia’s experience in tropical and dryland farming is crucial), and
  • Access to clean water and sanitation in Malawi and Mozambique - helping to combat preventable water borne disease (building on successful programs AusAID has conducted in Asia and the Pacific over many years).
 
We’ll be providing updates on discussions and announcements made during the day on our Facebook page - so follow us to keep up to date. 
 
Thanks for your support,
Global Poverty Project Australia Team