After years of decline, the budget gives more money for diplomacy and development capability. What does this mean in practice?

Two weeks ago something extraordinary happened: defence recommended more funding for diplomacy.

The Defence Strategic Review – the key planning document for defence policy – recommended more funding for the Department of Foreign Affairs and Trade (DFAT).

It said that national defence requires “the reversal of a long-term reduction in diplomatic resources, increasing our diplomatic efforts in areas of core national interest. Our diplomatic capability must be resourced, directed and focused”.

This is part of an increasing understanding in policy circles that defence needs diplomacy and development. This forms part of an approach known as using “all tools of statecraft” or “all elements of national power” – the various instruments and levers through which Australia can exercise influence internationally to its advantage.

In Tuesdays’s federal budget, some steps were taken towards this with an increase to DFAT funding of $457 million.

After years of decrying the lack of investment in Australia’s diplomacy and development, it’s a positive to see some improvement.

The increase in funding will be used for measures like “maintaining support for an effective foreign service” (code for keeping the department running) and increased diplomatic engagement with Southeast Asia. There’s also a special measure for “enhanced strategic capability” in line with DFAT’s Capability Review.

The Capability Review was motivated by a sense that DFAT’s instruments of foreign policy had been “underfunded and, at times, marginalised” by successive governments over decades, according to one of the experts leading the review, Allan Gyngell, who sadly passed away last week.

While leading the Lowy Institute, he worked with colleagues to chart Australia’s diplomatic deficit and disrepair. One of his legacies is a focus on the importance of diplomacy and development as key parts of Australia’s engagement with the world through helping establish the Asia-Pacific Development, Diplomacy and Defence Dialogue (AP4D). Another is the DFAT Capability Review.

Reports suggest the review includes recommendations to improve DFAT’s skills, expertise and tradecraft – including specialist knowledge of emerging areas and the ability to anticipate and prepare for future risks. The aim is to “build the high-performing and influential foreign service that Australia needs for the future”, that can “make Australia’s case and seek to avert shocks or conflict”.

The review seems to have led directly to the budget investment in lifting DFAT’s strategic communications capability and improving communications networks. I like to think Allan would be pleased to see growing recognition turning into some improved investment.

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The budget has also made a specific investment in development capability - the ability to plan, manage and evaluate international development programs. Concerns remain that the amalgamation of Australia’s independent aid agency AusAID with DFAT in 2013 led to a significant loss of experience. Consultations by the Development Intelligence Lab think tank identified development capability as a major hindrance to Australia’s development program.

This capability gap will be addressed by funding of $36.8m over four years for an “Australian Development Program Fit for Our Times” to strengthen areas such as program design, implementation, evaluation and accountability. It will be used to invest in people, skills and expertise to ensure Australia’s development program can meet the needs of priorities of partner countries. This was apparently a key point from consultations for Australia’s new international development policy. Further details will be available when the policy is released shortly.

This balances the news that overseas development assistance – after a boost in the October budget – only got a small increase in this budget. With a bigger economy, that means Australia’s aid will be at a historic low as a percentage of national income. Australia has now slid to near the bottom of the rankings of developed countries.

This suggests development should be next in line for some love. Australian Council for International Development chief executive Marc Purcell has called for “the government to demonstrate they will rebalance resources in development and diplomacy, in order to create the prosperous and stable region that they speak of wanting to see”.

Read more: Steadying foreign aid budget signals the government takes development seriously

If the budget were $100, Australia would be spending $7 on defence, 7 cents on development, and a copper coin on diplomacy. So a focus on increasing diplomatic and development capability is welcome.

In a joint statement on Tuesday, Minister for Foreign Affairs Penny Wong said “the Albanese government’s approach in the budget will make Australia more influential in the world, by investing in all elements of our statecraft including diplomatic power, trade and development”.

The hope is that this budget is a step towards putting reality to the rhetoric of respecting and resourcing the different tools of statecraft.