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Tightening purse strings for New Zealand's defence force?

Line of Defence Magazine, Summer 2017/18

Big defence capability projects on shaky ground?Big defence capability projects on shaky ground?


Robert Ayson, Professor of Strategic Studies at Victoria University Wellington, argues that a lack of cross-party consensus within the Arden government places big defence capability projects on shaky ground.


At some point the previous government’s ambitious vision for defence equipment spending was going to run into political reality. But courtesy of the Ardern government’s arrival, this is happening faster than expected.

New Finance Minister Grant Robertson is asking all departments to ensure their spending plans are in line with the new government’s priorities. These obviously include initiatives in housing, education, health and child poverty. It’s not clear that military spending is anywhere near the top of the list.

That’s not to say that defence has escaped Robertson’s attention. But in an ominous sign, he has accused National of leaving unfunded its big $20 billion idea for capital spending for the Defence Force.

That number stems from the 2016 Defence White Paper, although careful eyes would have seen that it only appeared in then Minister Brownlee’s Foreword. In its recent briefing for new Minister Ron Mark, Defence refers politely to last year’s big money promise as a series of ‘in-principle annual increases’.

You could hardly say then that this spending was locked in. But National never expected to spend the $20 billion quickly even if it had been re-elected. Instead, this was an aggregate figure for capital investment in the defence force out until 2030.

That translates into over $1bn a year on new and enhanced equipment over that period. While this would nearly be a rounding error for the Australians, for New Zealand this would still be a big jump.

Spending that amount over such a long period would require cross-party consensus about big equipment decisions which have been looming for many years. These include replacements for the defence force’s three most significant platforms, some of which are due to leave service as early as the first half of the 2020s.

The least politically controversial of these will be the replacements for the Hercules, the veritable (but venerable) workhorse of the defence force. These aircraft are useful in disaster relief and peacekeeping as well as in transporting soldiers and equipment. That means any coalition, left or right of centre, is going to see this project as essential.


This article first appeared in its original version in Incline, which publishes original analysis and commentary on issues and trends that impact New Zealand's international relations. Incline is an initiative of the Centre for Strategic Studies at Victoria University of Wellington.


This should make it easier sailing for Mr Mark when he presents the revised business case for the Hercules replacements. But Cabinet is likely to face an actual decision in the first half of 2018 about an identified replacement for the second big capability: the P3 Orion maritime surveillance aircraft. The proposal that Defence has been preparing is to acquire Boeing P8s.

These aircraft would give future governments good options to work closely with the Australians and the Americans. In fact, as the briefing to incoming Foreign Affairs Minister Winston Peters confirms, an Orion is currently deployed ‘to the United States Naval Forces Central Command and the Combined Maritime Forces for maritime security surveillance.’ 

The P8 plan also suited National’s desire to expand (rather than simply sustain) New Zealand’s surveillance capacity. And maritime surveillance is not an optional area for New Zealand.

No government wants to be unable to keep an eye on the country’s EEZ, the Southern Ocean, and the zones of our Pacific partners. But some Ministers in the new Cabinet may need convincing that this must extend to the underwater surveillance capacities that the Orions are receiving to make them suitable for anti-submarine operations for the remainder of their service life.

And that brings us to the frigates. By comparison to the Hercs and Orions, the two ANZACs are still relatively young. They are being upgraded for service until the late 2020s or early 2030s. Some of that work is already done. But escalating costs, which are not uncommon in the procurement of complex military systems, are an issue.

Defence’s briefing to its new Minister indicated that ‘the Frigate Systems Upgrade project is currently facing significant cost pressure.’ Mr Mark’s first major Ministerial contribution to the equipment debate has been to announce a cost increase on the upgrades of an additional $148 million and to put the blame on ‘a series of inaccurate estimates and project management errors by the Ministry of Defence, compounded by a failure to act by previous ministers.’

Then there are pressures of a different type. Simply because of the passage of time, there are other capability enhancements that any government would need to consider. These include the mid-life upgrade for the Canterbury multi-role vessel.

Part of the early spending in National’s $20bn plan included refurbishing ageing military bases, cyber protection, and ensuring the army has the command and control and communications networks it needs for modern operations.

But the later years of the Key-English era of New Zealand politics featured a growing confidence in what the country might be able to acquire. So we’d not just look for a replacement for the much-used tanker (the Endeavour): the successor would also be ice-strengthened.

The same ability would be included in the new plan to acquire a third offshore patrol vessel. And the littoral support vessel would be of a scale and ability that would make it useful for missions well beyond the South Pacific. That was until the most recent increase in the cost of the frigates upgrade created a hunt for savings. Instead of a military spec vessel New Zealand will now get an off-the-shelf diving and hydrographic craft.

Good arguments can probably be found for each new item in the Capability Plan. But in combination these projects were always set to compete for scarce money and time. And if too much of that early money and time is taken up for capabilities aside from New Zealand’s big three, one or more of these heaviest cans could be kicked further down the road, or even left on the side of the street. Or perhaps one or more of these cans will simply be made smaller: more affordable perhaps, but less potent.

Perhaps that won’t be impossibly bad news for some of Mr Mark’s new Cabinet colleagues. Few in Labour would have shared NZ First’s lofty campaign ambitions for defence, or Mr Mark’s comment last year that New Zealand needed to spend as much as 2 percent of its GDP on defence.

Indeed there is plenty of room for interpretation in Labour’s campaign statement on defence policy which ‘broadly supports the capability upgrades outlined in the 2016 White Paper, but reserves the discretion to examine further if the proposed purchases meet capability requirements at the best value for money.’

As the pressure of other spending commitments becomes more obvious, that examination may become less forgiving to some of the items in the existing Capability Plan. And there will be political currents to navigate as well. The Ardern government depends upon the support of the Greens, whose campaign statement suggested that the frigates ‘should be phased out and replaced by more appropriate boats.’

Labour is unlikely to want to push things as far as completely removing New Zealand’s naval combat capability. At the same time, however, the Party has tended to be uncertain about preparing New Zealand’s defence force for maritime missions and coalitions in the wider Asia-Pacific region.

So where might things fall? One possibility comes from the argument in last year’s White Paper that as a starting point the defence force needs to be able to operate in the South Pacific, New Zealand, and the Southern Ocean.

National may have promoted this trio to encourage cross-party consensus for its long-term spending plans, including – ironically - for equipment suited to combat missions in more distant zones. But the Ardern government might commandeer that same strategic triangle, and use it to shape defence choices away from the expensive maritime combat capabilities which are often of greater use further afield.

If that is the choice, then so be it. That is what governments do. But this could also happen as much by default as by design if the coalition pushes consideration of one of more of the big three replacement choices further into the never-never.

And that leaves Mr Mark with a real conundrum. National kept New Zealand’s options open to replace the big three capabilities including by supporting the spending of larger amounts in the future. That was the easy part. But to keep those options open, as big decisions loom, New Zealand needs to start spending those larger amounts now.That message is unlikely to be welcomed by the Finance Minister, the Prime Minister or many Ministers around the Cabinet table. Something will probably have to give.

This is a revised version of a post published by Incline.


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