Australia will slow a projected increase in foreign aid spending as a cost-cutting measure in the new annual budget plan to be revealed Tuesday.

Foreign Minister Bob Carr said on Monday that Australia's long-standing pledge to increase its foreign aid spending to 0.5 percent of gross national income by 2015-16 would be postponed by two years.

The pledge already was delayed for the current fiscal year that ends June 30.

Carr said Australia's foreign aid budget would increase by around 500 million Australian dollars ($499 million) to AU$5.7 billion in the next fiscal year — a 9.6 percent increase on the current year.

He said the 24 wealthy nations in the Organization for Economic Cooperation and Development, which include Australia, had reduced foreign aid spending by an average of 4 percent last year.

"We are going to be increasing our aid, but not at the rate we had hoped in economically more buoyant times," Carr told reporters.

"The alternative would be to borrow money to spend on overseas development assistance and that's simply not sustainable," he added.

Overseas aid groups were critical of the decision to earmark AU$375 million of the foreign aid budget in the next fiscal year to accommodate asylum seekers in the Australian mainland or on island detention camps.

The Australian Council for International Development (ACFID), the peak body for Australia's overseas aid and humanitarian charities, said AU$375 million had already been taken from the foreign aid budget since December last year when the government decided to pay asylum seeker costs from aid coffers.

The Council's executive director Marc Purcell, said Australia had become one of the biggest recipients of its own aid, rivaling Indonesia, which receives around AU$500 million a year of Australian aid, and Papua New Guinea which receives more than AU$490 million.

"The diversion of AU$375 million for asylum seeker costs is a sleight of hand. It is not money that will ever assist the world's poorest overseas," Purcell said in a statement.

Carr said OECD rules allowed countries to spend foreign aid domestically. The United States, Norway and Sweden were among countries that spend foreign aid on refugees within their own borders.

Australia was "about in the middle" in spectrum of countries that spend foreign aid domestically on asylum seekers, he said.

Australia pledged in 2010 to scale up its foreign aid spending to meet the United Nation's millennium target by 2015-16.

While Chinese demand for raw materials such as iron ore and coal kept Australia out of recession during the global economic crisis, a cooling of the mining boom combined with a stubbornly high currency is eating into Australia's corporate tax revenue.

The government conceded in December that it was unlikely to keep its promise to return the budget to surplus in the current fiscal year. Economists expect the budget documents to be revealed to Parliament on Tuesday will forecast a deficit of between AU$10 billion and AU$20 billion for the current year.

The budget plan will need the approval of Parliament in the next two months before it can be implemented.