The multibillion-dollar boost for New Zealand's military: What you need to know

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.

"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.