Reporter: Tom Iggulden

Maxine McKew: This weekend marks six months since the Boxing Day tsunami. The worst hit area was the Indonesian province of Aceh, where almost 250,000 people lost their lives. Australia responded to the tragedy with unprecedented generosity, the Government announcing a record $1 billion in aid. But as the people of Aceh continue the struggle to rebuild their lives, Tom Iggulden reports there are questions over where the money is being spent.

Tom Iggulden: It was a disaster of unimaginable proportions and six months on, life in Aceh is still a daily battle for survival. And the response from the Federal Government matched the magnitude of the catastrophe.

John Howard, Prime Minister: $1 billion Australian will be made available in an aid package to involve the reconstruction and development of Indonesia.

Tom Iggulden: Travelling to Aceh to inspect the damage for himself, the Prime Minister took the opportunity to reinforce Australia's generosity.

John Howard: We want to help. We want to work with you to heal the sick and to comfort as best we can those who've lost so much and to help about rebuilding this part of Indonesia. And that is why Australia has committed its largest-ever amount of foreign aid.

Tom Iggulden: Despite those words, the Government was careful both then and now, to stress that not all of the aid would be spent directly on Aceh.

Alexander Downer, Minister for Foreign Affairs: And the logic of that is that the tsunami, obviously, not just devastated northern Sumatra, but the tsunami is a big setback to the Indonesian economy.

Tom Iggulden: But there are questions about exactly how much of the Australian Government's generosity will go to those who suffered the most. Should Australian taxpayers be concerned about where the billion dollars of promised aid is going in Indonesia?

Tim O'Connor, Aidwatch: I think Australian taxpayers have good reason to be concerned at this stage. Of their total money that's been allocated, through the Australia-Indonesia partnership for reconstruction and development just $50 million of that money has been dedicated to Aceh. And we see that as a bit of a concern – that money may be used for other reasons that may have some merit, but certainly aren't tsunami-related.

Tom Iggulden: Figures released to Lateline this afternoon from the Foreign Affairs Department show where the Government's priorities lie. It's allocated $177 million from the $1 billion promised, with just over a quarter of that going directly to the rehabilitation of Aceh. The other three quarters is being spent on general economic programs across all of Indonesia. A third will go to a scholarship program for Indonesian students. Another $50 million – the same amount as is being spent on Aceh – to a government exchange program. And the remaining money on other spending.

Tim O'Connor: We think a lot more money should be being dedicated to the people of Aceh. There's huge need there in areas of housing, general infrastructure. Many people still haven't got access to reliable food sources.

Alexander Downer: We are getting into the process of those projects being set up. Look, obviously that takes a bit of time. There are details that have to be worked out sometimes between the Australians and the Indonesians, there are contracts that have to be let and obviously that takes time.

Tom Iggulden: Mr Downer refused to confirm whether Aceh would get even half of the $1 billion over the 5-year life of the program, saying much depended on what others were doing to help the province.

Alexander Downer: A very high percentage of this money could be spent in Aceh. But that's not necessarily true. It's going to depend very much on how much NGOs do, how much other governments do and, importantly, how much the Indonesian Government does.

Tom Iggulden: Today the United Nations said up to 180,000 new houses were needed for the 400,000 people made homeless by the tsunami.

Tom Iggulden, Lateline.