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What does Budget 2024 portend for Defence Capability Procurement?
With a challenging economic outlook, there has been no indication of a commitment to anything like the amount of money necessary for the replacement of essential defence capabilities, writes Editor-at-large Dr Peter Greener.
On 30 May this year the Finance Minister, the Honourable Nicola Willis, presented her budget speech to Parliament . In it she said, “I want to acknowledge how challenging economic conditions are for many Kiwis right now. New Zealand is experiencing a very difficult downturn.”
Such was the case almost half a century earlier. By the mid-1970s New Zealand’s economy was in a perilous state. In 1973 the New Zealand economy faltered as export prices fell and the price of oil went sky high . That same year Britain entered the European Economic Community and New Zealand’s exports to Britain continued to fall. In 1978 a second oil shock took place amid a still faltering economy. That year the National Government, led by Robert Muldoon, launched a new Defence White Paper. The Review noted:
“In this review defence policies are outlined which are tailored to New Zealand’s own special needs… Full account is taken of the limitations on this country’s resources and the problems it is at present facing. The aim is to make the best use of resources that are already available, and keep new expenditure to a minimum. The approach is realistic; the policy is practicable.” It went on to add, “New Zealand is not a rich country.”
Those sentiments could be reflected with regard to capability development today. The Budget itself painted a bleak fiscal near future for New Zealand over the next three to four years.
Whilst announcing a $14.72 billion tax relief package over four years, the Government forecast that there would be no surplus until 2027/28 , a year later than originally envisaged, and then only a marginal $1.4 billion. New Government operating expenditure over the next three budgets was set to be $2.4 billion
In speaking last month with Tim Fish from the Australian Defence Magazine , I highlighted that successive governments had remained wedded to the NZ$20 billion capital investment for defence equipment procurement originally announced by Gerry Brownlee in the Defence Capability Plan (DCP) 2016 . In that Plan it was emphasised that:
“Maintaining the confidence of Ministers, Central Agencies, industry and the public will be critical over the next 15 years as Defence progresses through a programme of $20 billion of capital investment.”
Prior to last year’s election, National made clear in their defence policy that they supported the then current defence
Notwithstanding the pre-Budget announcement of a $571 million increase in the defence budget over the next four years (of which about $100 million is to come from savings within Defence), there has been no indication yet of a commitment to anything like the amount of money that is going to be necessary for the replacement of essential defence capabilities.
The replacement of a number of major platforms will be central to the new defence capability plan which the current minister, Judith Collins, is expecting to receive next month . This plan will signal where further investment is needed, not least in the area of maritime capability.
Critical to the future utility of the Royal New Zealand Navy will be the replacement of the two frigates, the most expensive capability of the Defence Force. Planning for their replacement was first highlighted some eight years ago.
The Defence Capability Plan 2016 acknowledged that amongst a number of renewed capabilities, the force structure in 2030 would include a Future Surface Combatant capability, either in service or under procurement, to replace the upgraded
ANZAC frigates will be extended until after 2030… Delaying the replacement of the frigates improves the affordability of the Defence Capability Plan 2019”.
By May 2022, in discussing the Frigate Systems Upgrade, the Ministry of Defence noted that the replacement or upgrading of aging or obsolete systems, was intended to extend the Anzac-class frigates’ operational life out to 2035
HMNZS Te Kaha was delivered to the Ministry of Defence and commissioned into the Royal New Zealand Navy on 22 July 1997. The ship was the second of the ANZACS to be built, and the first steel for the vessel was cut on 11 February 1993 , already over thirty years ago.
HMAS Anzac, ship 01 of the ANZAC class, was launched in Victoria on 16 September 1994 and commissioned into the RAN on 18 May 1996. She was decommissioned on 18 May this year after 28 years of service in the Royal Australian Navy. HMAS Arunta, the next ship built following the completion of Te Kaha, is scheduled to be decommissioned in 2026. New Zealand’s two vessels are now expected to continue in service for more than another decade.
Former Minister of Defence Wayne Mapp, writing in the last issue of Line of Defence , observed that it has typically been the practice of subsequent governments to push out the replacement of major capabilities well beyond their use-by date. The consequence of this, as both the current and the previous Prime Ministers have discovered with the RNZAF 757s, is that the availability and reliability of the asset is severely compromised.
I noted in my last article in Line of Defence that former Defence Minister Andrew Little, speaking after the launch last year of the Defence Policy and Strategy Statement 2023 , predicted that there would ultimately need to be an increase in defence spending, but suggested that that would be two or three budgets away. Against the back-drop of this year’s Budget that time frame might now seem a little optimistic.
When Radio NZ spoke to the current minister last month , they noted that:
Many of our international partners are spending 2 percent of their GDP on defense (sic), whereas we’re only slightly over 1 percent. The minister says she would like to see it lifted, but there’s only so much money.
Increasing defence spending in the future won’t just be a lovely thing, but a necessary thing.
Increasing defence spending in the future won’t just be a lovely thing, but a necessary thing.
“It would be a lovely thing wouldn’t it.” [said Judith Collins].
Increasing defence spending in the future won’t just be a lovely thing, but a necessary thing.
Returning to National’s defence policy manifesto last year, they signalled that:
“For the New Zealand Defence Force to do its job to the fullest potential of its personnel, it must have available equipment, ships, planes, vessels, vehicles and appropriate weaponry to the most reasonably affordable standard.”
The question now is just what that reasonably affordable standard will mean for defence capability procurement, and how far away will future spending be?
