The government is expanding the official term "veteran" to cover about 100,000 more ex-soldiers, sailors and aviators, as well as setting up a new national day of tribute.
The largely symbolic announcement will not, however, expand eligibility for support entitlements under the Veterans' Support Act.
It comes in response to a long-standing gripe among former Defence Force (NZDF) personnel who argue the existing narrow definition of veteran creates an unnecessary divide among those who have served.
New Zealand's most-decorated war hero Willie Apiata last month handed over his Victoria Cross medal to Veterans Minister Chris Penk, challenging him to hold on to it until the definition was broadened.
As well, Veterans' welfare group No Duff this week called for a boycott on Anzac Day commemorations until a number of grievances were resolved.
Willie Apiata presents his Victoria Cross medal to MP Chris Penk. Photo: LDR/Diane McCarthy
In an announcement on Friday morning, Penk said the government had heard the voices of the military community and would honour and uphold their legacy.
"Under the Veterans' Support Act, the term 'veteran' is currently reserved for New Zealand Defence Force personnel who have completed Qualifying Service, either in deployments where there has been a significant risk of harm to those deployed, or in routine service before ACC was introduced in 1974.
"While that definition remains appropriate for determining eligibility for support entitlements, it has unfortunately left many who have loyally served our nation feeling excluded, given that they fall outside the current narrow legal scope of the 'veteran' definition."
Penk said it was time the law reflected the broader cultural understanding used in everyday speech.
"This distinction may appear small but is significant. For those who have worn military uniform, the word 'veteran' carries profound personal meaning. It speaks to identity, pide, and a recognition of service and sacrifice.
"It's more than a title - it's about knowing that your country understands your contribution and acknowledges the sacrifices you made while wearing the uniform.
A new Veterans' Recognition Bill would introduce a broader definition of veteran covering all former NZDF personnel with the Defence Service Medal acknowledging at least three years' service - including in reserve.
As well, it would cover those with operational service or campaign medals, medals for bravery or excellence, or honours and decorations through the royal honours system.
Penk estimated the new definition would cover about 140,000 former NZDF personnel, of which about 40,000 were already deemed "veterans".
Acknowleding that the bill would not change existing entitlements, Penk said he remained committed to better addressing the needs of veterans, including by reducing wait lists for medical and rehabilitative care.
New national Veterans' Day
Penk said the government would also set up a national day to honour New Zealand's veterans through annual Veterans' Service Awards.
The event, which would not be a statutory public holiday, would be held at a time of year decided after consultation with the Royal New Zealand Returned and Services' Association (RSA) and the independent Veterans' Advisory Board.
"The government acknowledges that some New Zealanders have historically felt invisible after leaving service - and we agree that this must change.
"The steps we're announcing today mark meaningful progress toward a future where those who have served feel recognised and valued by the nation they served to protect."
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