Aid advocates are angry the Federal Government wants to use millions in foreign aid money to feed and accommodate asylum seekers in Australia.
Foreign Minister, Senator Bob Carr, has confirmed plans to divert $375 million from the aid program to pay for the upkeep of asylum seekers being processed in Australia.
'Money spent on refugees within a country is legitimate aid,' he said from Sri Lanka.
The Australian Council for International Development (ACFID) says the diversion of aid money will not help people in impoverished nations.
'Instead this will strip money meant for the world's poorest,' ACFID executive director Marc Purcell said in a statement.
International aid agency Oxfam Australia says the government is juggling the books and playing politics with two groups of vulnerable people.
Oxfam's acting director executive director, Alexia Huxley, says Australians don't expect overseas aid money to be spent domestically.
'This money should be used to help build more secure communities in developing countries and possibly avoid more men, women and children resorting to desperate measures to start a new life in Australia,' Ms Huxley said.
Australian Greens Immigration Spokesperson, Senator Sarah Hanson-Young, says the additional $400 million is the latest blowout in indefinite offshore detention.
'The best way for the government to save money is to have a time limit on detention and to ensure people's claims for asylum are processed quickly,' she said in a statement.
Oxfam says the decision raises questions about Prime Minister Julia Gillard's role as co-chair of the United Nations Millennium Development Goals advocacy group that aims to boost global help for the world's poor.
The Government was fiercely criticised in May when it broke its promise to increase the aid budget to 0.5 per cent of gross national income - about $8 billion - by 2015/16.
Labor has pushed back the deadline by a year as part of its bid to get the national budget back into surplus. The move was designed to save about $3 billion over four years.