Few issues of economic development arouse such deep emotions or controversies as the role of the foreign sector. Most orthodox economists believe that foreign aid, investment, technology and transnational corporations (TNC) are important contributory factors to economic development. On the other hand, the neo-Marxist paradigm suggests that the present system revolving around the foreign sector represents the continuation of domination over the developing by developed countries. Foreign aid, investment, technology and TNC are regarded as tools of neo-imperialism, the devices by which developed countries continue to retain control over the economies of the ex -colonies. The role of foreign aid in economic development is also criticised by some extreme right scholars who argue that foreign aid is neither necessary nor sufficient for economic development. In Section 1, foreign aid will be analysed both from the orthodox as well as from neo-Marxist positions. The main features of Australian recent foreign aid will be discussed in Section 2. The policy implications and some recommendations will be made in the final Section 3.