The cost of cancelling Iraq's debts to Australia has been paid from Australia's foreign aid budget, a new report has claimed.

The report also claims that $1 billion of Australia's aid budget is not used to alleviate poverty. It also states that funding of Federal Police salaries in the Solomons and construction of Pacific detention centres was included in our aid budget.

The Aid Watch document claims that 95% of the $A661 million debt was for wheat purchases from Australia. Aid Watch writes that "Australia decision to cancel this debt was part of an agreement made in 2004 by the international group of rich nations called the Paris Club and was based on the premise that it would increase Iraq's economic prospects."

"This paper trail indicates that the sale of Iraqi bound wheat bolstered the coffers of Australia's wheat producers with little long-term developmental benifit to the people of Iraq" the report claims, adding that over half of the cancelled debt was for interest accrued on the principal sum.

And now here's the bit that tweaked my nerve endings. Apparently construction contracts worth less than six million dollars are awarded without tender. Remember last year when KBR advertised for an international aid director to be "preferably based in Adelaide?" KBR Australia satisfies Ausaid's requirements that contracts go to an Australian company, even though it is a wholly US-owned subsidiary. How many of these contracts have been given to the Halliburton subsidiary (as it was) to the exclusion of truly Australian businesses? How much construction work in Iraq is being carried out by KBR Australia, by workers from Texas?

Australia's Infrastructure for Growth program has a budget of $505 million over five years. Pretty close to the value of the cancelled wheat debt, it seems to me. Much of the planning for this program would no doubt have been carried out at Halliburton/KBR's Infrastructure Division Global Headquarters in Adelaide. In 2006 Ausaid awarded KBR fifteen million dollars worth of contracts.

The Aid Watch report cites KBR's involvement in the Australian aid program as an example of "enormous structural flaws" in subjecting aid monies to large private companies," adding that "the potential for conflict of interest is manifest unless the current lack of scrutiny for Australian aid projects is redressed."

Ausaid officials admitted last year that the organisation had no protocols for dealing with allegations of corruption. Are you surprised?

And the detention centres we paid for? Thanks to a new prisoner transfer agreement between Australia and the US, we're going to fill them with the U.S.' unwanted refugees.

The Aid Watch Report is availabe for download here.