Integrating Aid and Statecraft: Australia’s DFAT Model and the US Approach to Strategic Assistance

On July 1, 2025, the United States Agency for International Development (USAID) officially ceased independent operations. Secretary of State Marco Rubio announced that foreign assistance programs aligned with the administration’s foreign policy priorities would be administered by the Department of State, completing an absorption that would initially rely on 700 positions to implement remaining US foreign assistance. Other countries, such as Canada, the UK, and Australia, have pursued similar mergers with different results. Australia’s experience with the Department of Foreign Affairs and Trade (DFAT), which absorbed the Australian Agency for International Development (AusAID) in 2013–2014, offers important lessons for the administration, State Department, and Congress to consider.

Three findings emerge from a review of the Australian model. First, the reform was driven by a strategic imperative that gave the merged institution an organizing framework from day one. Integration without that framework produced the 2014–2017 period of operational disruption; the framework was what enabled recovery. Second, integration imposed real and lasting costs through the loss of development expertise, institutional culture conflict, and operational disruption that were only partially offset by subsequent reforms. Third, a second wave of reform produced the instruments that define the current DFAT model: the Australian Infrastructure Financing Facility for the Pacific (AIFFP); the 2023 Falepili Union compact with Tuvalu; and a portfolio of sovereign lending and blended finance tools. Australia’s experience yielded what it has termed “deep integration,” where DFAT has constructed an approach to foreign assistance aligned across four dimensions: policy, institutional architecture, geographic concentration, and program design.

This offers a potential approach for the US government to adopt, with the recognition that US interests are wider than Australia’s and will likely never be as tightly prioritized. The State Department’s nascent “strategic assistance” framework offers a potential American version of DFAT’s concept of deep integration. The State Department’s January 2026 Agency Strategic Plan defines strategic assistance as advancing longer-term US interests through economic support, commercial ties, and infrastructure development, which is the same logic that has underpinned DFAT’s program since 2015. Whether the State Department can operationalize this framework at even a fraction of USAID’s former scale, with less than 6 percent of USAID’s workforce, is an important question.

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