Canberra – Aid funding will increase but assistance for East Timor will be slashed under the Budget released tonight. In a sign of the government's continuing use of aid to help fight terrorism, much of the increase has been tied to the efforts of neighbouring countries to improve their governance and policing systems. The total aid budget will increase $79 million to $1.8 billion, or about 0.25 per cent of GDP.

Aid to Indonesia will increase $30 million to $152 million, while a special $7.5 million Peace and Security Fund in the Pacific has been created to assist post-conflict countries such as the Solomon Islands. Aid for the Solomons will increase $2 million to $37.4 million, while Tonga will receive an extra $400,000. But to keep a lid on the aid budget, funding to some countries has been slashed.

The biggest losers will be East Timor, with its allocation cut 24.1 per cent to $42.5 million, while aid to Middle East countries will fall to $37.8 million from $88.7 million. But about $100 million will be spent on reconstruction efforts in war ravaged Iraq. Foreign Affairs Minister Alexander Downer said much of the Asia-Pacific region, the biggest targets for Australian aid, faced major challenges to their stability and security.

"The Australian aid program will continue to place a high priority on promoting develping in the Asia-Pacific region, with a focus on good governance and ehancing partner governments' capacity to promote peace and manage non-military threats to security," he said in a statement.

Extra money will go into counter-terrorism programs, including those aimed at cyber-terrorism, developed by the Asia-Pacific Economic Cooperation group. Almost $2 million will be spent to maintain Australia's diplomatic presence in Nauru to oversee the government's Pacific solution program.

The government will put $16.5 million into the Global Conservation Trust which aims to convserve the genetics of agricultural plants.