Will NZ follow the UK in cutting foreign aid to boost defence spending?

It would not make New Zealand any safer if the government followed the UK in cutting international aid to boost defence spending in Budget 2025, says an aid researcher.

But it could work out better for the Pacific - where China is buying influence with aid - in the long term, says Victoria University senior lecturer Dr Iati Iati.

The UK has moved to virtually halve its aid budget to boost defence spending, sparking a backbench revolt and a minister's resignation.

Five other European countries are making similar moves, including Germany and France. Across the Atlantic Ocean, US President Donald Trump has shut down USAID.

New Zealand's aid spend is already low by OECD standards and dropping, but its defence spend is at half the two percent that the US and NATO demand.

"There isn't that much foreign aid to cut," aid researcher Dr Terence Wood said.

Aid is widely seen politically as an easy target to take money from, because it lacked a constituency.

Other countries were now debating the humanitarian and national security implications of aid cuts.

The Council for International Development said for humanitarian reasons, the many aid groups it represented were "nervous".

But the ACT Party is not backing swinging cuts in New Zealand, suggesting there was waste elsewhere in government that could be used to fund defence.

"I think there are plenty of ways we could cut waste," said Laura McClure, ACT's MP on the Foreign Affairs select committee.

"You've got to remember more than half our aid goes to the Pacific, and the relationships we have there are extremely valuable and important, so I think actually it's quite important for New Zealand to maintain that influence."

It was tougher for Europe, which was facing an existential threat, she said.

Iati said New Zealand had already lost influence in the Pacific, making it hard to know what to cut if it chose to do so.

"I'm not sure New Zealand is in a position to roll smart policies out," he said.

"You need some really good aid planners and foreign policy planners to... redo our foreign policy to the region based on a new aid budget, should we go down that route."

Wood cautioned against that route, for both humanitarian and geopolitical reasons.

"Major aid cuts would actually make life quite a lot harder for people in countries such as Papua New Guinea or Solomon Islands," he said.

"That would be both morally irresponsible... and it would also be a geostrategic blunder.

"It would open up increased opportunities for China."

The first review in seven years of overall aid for Foreign Minister Winston Peters, out last month, hinted at the pressure on budgets when it recommended further consolidation.

Peters steered aid into a reset, favouring the Pacific more, in 2018.

But he also wants more defence spending, saying last week that "two percent doesn't cut it", and advocating a very fast path.

Peters was "kind of an unfathomable figure", said Wood.

"He's always been something of a hawk... by the same token, he has actually been a champion .. of the aid that we give.

"So I presume if Peters had his say, he would increase defence spending, but he wouldn't do so by cutting aid."

Peters' office declined to comment ahead of the Budget in May.

While China's aid and infrastructure spending in the Pacific has actually been slightly dropping, Beijing's recent deal with the Cook Islands rattled the New Zealand government.

Iati said it was an example of Pacific states making their own decisions, and they would factor in aid cuts.

"Short term, I think there will be some pain and there may need to be some structural adjustments," he said.

"Perhaps in the long term this could work out better for them... it gives the opportunity to the region and it prompts them to actually look at other avenues for funding."

That China-Cook Islands deal also showed how New Zealand had lost influence despite Peters' 2018 reset to push Pacific aid, Iati said.

Aid is one of the "3 Ds" that have long underpinned the US approach to international engagement: diplomacy, development, and defence.

USAID has been called a "critical national security tool" by the non-partisan American Foreign Services Association.

The US aid cuts in the Pacific would hit hardest on the Marshall Islands, Palau, and the Federated States of Micronesia.

The UK is aiming for basically a straight swap of aid for defence spending. Defence would go up 0.2 to to 2.7 percent of GDP by 2027, and aid down 0.2 percent to 0.3, from 0.5 percent where Boris Johnson left it, after several years peaking at the OECD's target of 0.7 percent.

Trump is now pushing for five percent of GDP on defence.

New Zealand is at slightly more than 1.1 percent GDP on defence, or $5 billion, and already under 0.3 percent GDP on aid.

Aid amounted to about $1.3 billion this year, if specific 'climate aid' was counted in.

But the climate finance was the previous government's 2022-25 initiative and ends in December. Without it, aid thins down to $950m or 0.22 percent of GDP.

McClure said all aid had to be tested to ensure it was effective, but climate finance was the one part that needed a really tough look at.

The new MFAT aid review for Peters recommended a bit more money for Southeast Asia, and a bit less for multilateral support such as to the UN.

It sent "some positive signals in terms of humanitarian assistance" such as disaster relief, said Peter Rudd, head of the Council for International Development.

But "everyone is nervous and there's a lot of change happening", he said.

It was the time to step up in the Pacific, his group was telling ministers.

"It should be a number one strategic priority for this coalition government that you can't just have hard power in terms of defence spending, but you also need that community- level engagement."

Public opinion may not help, one way or the other. In a 2019 government survey, about a quarter of New Zealanders questioned or were entirely anti foreign aid.

Rudd said it would not be enough for the rest who were more sympathetic to aid, to try to make up for any government cuts.

What Winston Peters has said

Earlier, on his trip to Asia, the Foreign Minister said New Zealand had not done enough when it came to international development aid.

Winston Peters did not directly say if he would consider following UK Prime Minister Keir Starmer's lead.

"They were 0.5 [aid as a proportion of GDP] going down to 0.3," he said.

"The only people who've got 0.3 is me, three times as foreign minister and before that a guy called Norman Kirk.

"My country has to step up and play its role if it wants to be successful both economically and in terms of freedom."

Peters had stressed his personal view that defence spending had to be pushed above two percent.

Asked if there was merit in what Starmer had done cutting aid, he said:

"Look I can't judge him on that, all I can say is, though, for a country like ours who's not played its way in terms of aid and smart help for our neighbourhood, should not be criticising of all countries the UK when our records been so much worse", apart from Peters own previous record.

New Zealand had to look after a big surface area - though he then added that "in the big picture" New Zealand was going to be facing "reality".

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