Katie
Kenny, Digital Explainer Editor
A
government boost to military spending over the next four
years coincides with rising global tensions.
But it
comes after decades of struggle with limited funding for New
Zealand’s Defence Force.
Defence Minister Judith
Collins, unveiling the new Defence Capability Plan on
Monday, said she intends to take the force “out of the
intensive care unit”.
The boost – $12 billion, $9b of
which is new spending – sounds like a lot of money.
Especially as Aotearoa faces funding challenges in many
areas, such as housing, health, and education.
And
Prime Minister Christopher Luxon in a statement pointed out:
“This is the floor, not the ceiling, of funding for our
Defence Force.”
But how far will the money go, and how
does it compare to other, key public investments?
A
multibillion-dollar boost for the New Zealand Defence
Force
On Monday, the coalition government announced
its Defence
Capability Plan, setting out a spending blueprint for
the next 15 years.
The government has committed to
reviewing the plan every two years.
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“Global tensions
are increasing rapidly, and New Zealand has stepped up on
the world stage, but our current defence spending is simply
too low,” Luxon said.
The plan was “comprehensive and
very necessary”, and defence was not something that could be
mothballed until it was needed, Collins said.
The
shopping list
According to the plan,
given the “deteriorating strategic environment”, New
Zealand’s military needs to be “increasingly combat capable,
interoperable with our partners, able to act as a force
multiplier with Australia, and make the most of innovation
which allow us to be more effective”.
Some of the most
expensive projects are replacing maritime helicopters
(estimated to cost at least $2b), investment in software (at
least $1b), replacing the Boeing 757 fleet (up to $1b), new
armoured vehicles (up to $1b), and investment in defence
estate assets (up to $1b).
Collins has also mentioned
uncrewed inflatable boats, drones, and long-range
aircraft.
Where’s the money coming from?
Luxon
has said the plan can be funded from within the current
spending track: “We can afford this, we know this is a big
step up and a big commitment but in our current fiscal track
we can afford this.”
How do we know it’s
affordable?
Here, it’s important to distinguish
between operating allowances and capital allowances. Or,
day-to-day government spending on goods and services, versus
long-term investments in assets.
The coalition
government has made it clear that spending restraint is its
key, top-down tool to ensure its fiscal strategy. The
operating allowance for Budget
2024 is $3.2b – the lowest since Budget 2018. Operating
allowances for Budgets 2025 to 2027 will be $2.4 billion per
Budget. Again, these are tight allowances.
But a lot
of the proposed defence spending is capital, rather than
operating, Infometrics chief economist Brad Olsen told
RNZ.
Meaning the cost can be spread over time and
isn’t necessarily ongoing: “Once you’ve bought the new
helicopters, you’ve got them.”
And without investment,
operating costs will only increase: “People from a number of
quarters are saying it’s expensive, but necessary in the
current climate.
“We always have to ask, ‘What’s the
cost of not doing this?’.”
Of course, there’s a lot of
competition between defence spending and other big, capital
assets, Olsen added. “Hospitals, schools, and roads, for
example.”
Comparing core government spending as a
percentage of GDP
Again, $12b sounds like a lot of
money, but it can help to zoom out and compare it to other
Crown spending.
As a percentage of gross domestic
product, defence spending in 2024 was close to 1 percent.
That’s less than transport and communications (1.3 percent),
law and order (1.6 percent), education (4.8 percent), health
(7.1 percent), and social security and welfare, and
superannuation (10.6 percent), according to Treasury
data.
Just to throw some other figures around: In
total, $70.4
billion was allocated to the Covid-19 response and
recovery initiatives. The new
Dunedin Hospital project has an overall budget of
$1.88b. The National
Land Transport Programme will invest a record $32.9b in
the country’s transport network from 2024 to
2027.
New Zealand’s defence spending over
time
The plan means the country’s military spending
will increase from just over one percent of GDP to more than
2 percent of GDP in the next eight years.
Collins has
said: “You can’t go 35 years of not spending and cutting
and not expect you’re going to have to spend some
money.”
As you would expect, New Zealand’s defence
spending spiked in World War I and II. In 1943, it
constituted 35 percent of GDP, the highest recorded level in
the country’s history.
Defence spending was last near
2 percent of GDP in the early-1990s, before falling to close
to 1 percent where it remained under National- and
Labour-led governments.
Between 2019 and 2021 there
was an uplift, reflecting investment
in aircraft.
Increasing military spending as a
global trend
New Zealand isn’t alone in its decline
in defence spending in recent decades. Or in its recent
decision to reverse that trend.
In the United Kingdom,
United States, and Australia, for example, defence spending
as a proportion of GDP has been falling since the
1950s.
In December, the International Institute for
Strategic Studies in London published its annual Armed
Conflict Survey, counting 183 conflicts globally the year
prior – the highest number in 30 years.
Along with
many in Asia, the Middle East and North Africa, and Europe,
the above countries are now upping their defence
spend.
Of course, the actual dollars allocated varies
greatly. For example, Australia is already
moving defence spending up beyond 2 percent, at a cost
of about $62b next financial year.
Meanwhile, US
President Donald Trump has said the NATO alliance should
spend 5 percent of GDP on defence. But no NATO country,
the United States included, spends that much.
The
current target is 2 percent. According to NATO estimates, 23
of the alliance’s 32 members met or exceeded this last
year.
Plan ‘generally in the right direction’, says
former minister
While the plan is “generally in the
right direction”, ex-Defence Minister and former Labour
Party leader Andrew Little raised concerns about
remuneration and retention in the country’s armed
forces.
The nature of many roles has changed, with
more technical competence required and higher salaries as a
result, he told RNZ.
“We know there are ongoing
challenges in these spaces, and we won’t really know what’s
practically going to happen until we see this year’s and
next year’s budgets.”
The funding was still “subject
to year-by-year negotiations”.
“Priorities might
change.”
If the plan is affordable “in the current
spending climate”, that probably means something else will
be cut, he added.
But Little agreed tensions were
rising worldwide.
“The [Russia-]Ukraine war is an
indication that large nations will act unlawfully and seize
land. And the rules-based international system doesn’t seem
to be able to do a lot to prevent or push back on
it.
“If you look at the conduct of Israel […]
there’s not a lot of push back, and again, that sends a
signal.”
China has also grown its military spend in
the last 20 years.
“We have to be realistic about
potential risks and threats and respond
accordingly.”
But he disagreed with rhetoric that New
Zealand didn’t pull its weight, relying on allies rather
than building up its own forces: “Our SAS is one of the top
in the world. They’re highly trained and skilled and
sought-after. We’ve renewed a lot of equipment in recent
years.”
University of Waikato Professor Al Gillespie
told
RNZ it appeared New Zealand was joining a new “arms
race” in virtually doubling its defence
spending.
While ex-Defence Minister and former
National MP Wayne Mapp disagreed
about joining an arms race, he conceded to Morning Report
the investment was “a step up, there’s no doubt about
that”.
Collins has
highlighted New Zealand’s responsibilities to its
Pacific neighbours: “We do need to have strike capacity. Not
only are we living in New Zealand, but we’re a maritime
nation,” she said, also noting the Defence Force’s role in
responding to weather events and natural
disasters.
Labour leader Chris Hipkins said the party
backed the move to spend more on defence, but had concerns
about the
details.
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