Economic Growth

Australia works to maximise the economic growth of developing countries.

Technical assistance, capacity building and policy dialogue in trade, investment and information communication technologies are important in promoting active participation in the global community.

Openess to free trade and investment flows is a key factor in stimulating the long-term economic growth that is essential to poverty reduction.

The role of growth, trade and aid

Economic growth has been the main driver of poverty reduction. In East Asia, progress in reducing poverty correlates strongly with its impressive growth performance, compared to that of Sub-Saharan Africa for example.

Countries that have opened themselves up to trade and investment have grown much faster than those which have not.

The World Bank estimates that further trade liberalisation in the Doha Round of trade negotiations could increase real income in developing countries by as much as $US350 billion by 2015 and lift an additional 140 million people out of poverty.

Agricultural trade liberalisation is particularly important. Growth in agriculture has a disproportionate effect on reducing poverty because 70 per cent of the poor in developing countries live in rural areas. Australia, in its leadership role of the Cairns Group, has long championed the reduction of trade barriers for agricultural products as one of the most important actions that could reduce poverty in developing countries.

Growth and trade liberalisation by themselves, however, are not always sufficient to reduce poverty. While Pakistan had per capita economic growth of 2.2 per cent from 1950 to 1990 and tripled its per capita income over that time, basic social indicators still remain some of the worst in the world. Resource rich countries that have not translated revenue windfalls into broad-based development include Zambia, Sierra Leone, Nauru and PNG.

There are many reasons for this. Poor governance, corruption, weak capacity, civil war and instability have allowed revenue windfalls to be squandered and have impeded growth, particularly in Sub-Saharan Africa. The poorest 20 per cent of humanity endures 80 per cent of the world's civil wars.

Institutions that provide dependable property rights, manage conflict, maintain law and order and align economic incentives with social benefits are an important foundation for long-term growth.

Aid can and does have an impact when provided within a framework that acknowledges the drivers for broad based growth. Well targeted aid increases the ability of developing countries to maximise the benefits of trade liberalisation, improve the environment for investment and ensure that the poor have the ability to contribute in achieving growth.

The benefits of trade liberalisation accrue in different countries and sectors at different times. Aid can help accelerate these benefits.

Australia's approach

Generating broadly spread and sustainable economic growth is the single most important objective for Australia's region over the next ten years.

Growth-promoting reforms need to be combined with the right policies to ensure that the poor are included in the benefits and opportunities provided by growth.

In order to increase economic growth in partner countries Australia is:

improving the policy and regulatory environment for private sector growth. The aid program promotes environments conducive to private sector development, including by promoting competition and cutting red tape.
promoting trade through assistance for trade analysis, trade policy and trade facilitation, such as more efficient customs and quarantine services
supporting the drivers of growth by:
- investing in infrastructure. Poor infrastructure is a binding constraint to growth in Asia, while in the Pacific access to infrastructure in rural environments - where 80 per cent of the population lives, is a priority.
- building skilled workforces in PNG and the Pacific, focusing on technical and vocational programs
- strengthening support for private sector-led rural and business development.
addressing environmental challenges to growth through focusing on climate change and adaptation, water, and strengthening environmental regulatory regimes.

Anti-corruption for growth

Corruption has a substantial negative impact on economic growth and development and weakens institutions. The costs of corruption fall disproportionately on poor people.

Australia's anti-corruption for development policy provides a framework for planning, resourcing, and reviewing anti corruption activities on a country and regional basis. AusAID developed the policy in collaboration with a wide range of Australian government agencies and external stakeholders.

For further information see Australia's policy framework Tackling Corruption for Growth and Development

Aid stories and people

Examples of Australia's aid program in action:

Useful links (external)

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