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RNZ News
7 days ago
- Business
- RNZ News
Defence spending is like insurance – how will NZ pay the higher premiums?
By Stephen Hickson* of NZ Army Bushmaster 5.5 armoured vehicles. Photo: Supplied/ NZ Defence Force Analysis : Defence spending is like insurance - you have to pay for it but you hope you never have to use it. And the higher the risk you face, the higher your premium will be. New Zealand has now committed to paying those higher defence insurance premiums. The government's 2025 Defence Capability Plan , released in April, includes NZ$9 billion in extra funding over the next four years. That's a sizable increase on a current annual budget of just under $5 billion. Read more: The multibillion-dollar boost for New Zealand's military: What you need to know New Zealand is not alone, of course. Driven by geopolitical tensions and US President Donald Trump's demand that other countries spend a higher proportion of their GDP on defence, global military spending rose for the tenth year in a row to US$2718 billion (NZ$4530b) in 2024, with huge increases in Europe and the Middle East. How much "insurance" a country should buy in the form of defence spending will vary. Too little, and it cannot respond when it needs to; too much, and resources are needlessly wasted. For New Zealand, it is a matter of finding the right balance. The country needs to find the right balance for its spending on defence. Photo: Supplied/ NZ Defence Force Economically, however, defence spending is more complicated than simply buying weapons and recruiting more personnel. There can be benefits beyond basic security considerations. One involves what economists call "technology spillovers". Past innovations developed for military use - such as jet engines, GPS and the internet - often found important civilian applications. The challenge is to design defence investments to deliberately build skills and technologies with wider economic benefit: advanced manufacturing, cybersecurity or clean tech. New Zealand's defence plan includes this kind of spending, including between $100 million and $300m on cybersecurity. On the other hand, promises of new jobs from large projects are often overstated, with New Zealand's best known example being the "Think Big" policy of the 1970s. Rather, there can be job substitution as people move from civilian roles into military ones. A NZ Defence Force Vector Scorpion drone. Photo: You Tube / NZ Defence Force In the end, of course, increased defence spending must be funded - through higher taxes, more debt or reduced spending on other items. Higher GDP growth would make the expenditure more affordable, but even then we face the same tradeoffs. It's not possible to have lower taxes and debt as well as higher government spending. Most of the expenditure set out in the defence plan will be on equipment. But any increase in the output of the defence industry will likely crowd out other consumer and investment goods. While clearly an extreme example, one only has to look at how defence spending rose during WWII. The increase in military output came at the expense of other goods, leading to shortages and rationing. New Zealand doesn't face that scale of change, but there is still likely to be some shift in production from "butter to guns". We might also see a shift in how businesses spend their research and development money, towards military and away from civilian applications. New Zealand does not have a large defence industry and will need to import much of the new equipment. This implies a need for higher exports to pay for those imports, meaning fewer goods for New Zealanders to consume. A New Zealand Defence Force plane arrives in the Middle East earlier this year during the Iran-Israel conflict. Photo: Supplied / New Zealand Defence Force Most countries are understandably reluctant to cut spending on health, education and other things voters care about in order to boost defence. Hence, governments can be tempted to label new expenditures as "defence" when it could otherwise be classified as "updated infrastructure". Spending on dual-purpose capital works is likely to increase, therefore, with projects earmarked for defence more likely to be funded. The New Zealand defence plan already allows for housing, airfield and port facilities that can all have multiple uses. There are also ethical considerations. Many consumers prefer not to invest in the arms trade, but components used in weapons manufacture often have non-military uses as well. Similarly, many consumer items, such as phones, vehicles and food, can be purchased by the military but clearly have non-military uses. We may see more of the output of companies that also produce non-military items directed into defence. All of this can make it difficult to classify a company as a defence contractor, and may be challenging for large investors (such as superannuation funds) with ethical investment policies. At the same time, the cost of not investing in defence firms might also rise as demand for their products or services increases and they become better investments. Like people in general, countries prefer lower insurance premiums. But when risks increase, so too does the price of insurance. Voters will disagree on how much should be spent on defence, but that is largely a political question. What economics teaches us, however, is that if you want to reduce your insurance premium, then reduce your risk. And that is something easier said than done. *Stephen Hickson is a Lecturer in Economics and Director, Business Taught Masters Programme, University of Canterbury. This article was originally published by The Conversation .
1News
07-07-2025
- Politics
- 1News
NZDF Hercules not needed to assist NZers stranded in Iran and Israel
The NZ Defence Force plane sent to the Middle East to assist any stranded New Zealanders in Iran or Israel has returned to Aotearoa — because it was not needed. The C130-J Hercules was sent to the region two weeks ago, as a contingency for when airspace in the region reopened. A Defence Force spokesperson said the defence force began to "draw down the contingent" in the region as regular commercial flights resumed in Israel, and were starting to become available from Iran. "It was positioned in the Middle East region to provide an alternative means of evacuation for New Zealanders, but was not required," the spokesperson said. "Other personnel deployed to support New Zealand's consular efforts have also returned to New Zealand." ADVERTISEMENT The spokesperson said the Defence Force was proud of its personnel for deploying at short notice and being ready to respond, in case they were needed to assist New Zealanders in leaving Israel and Iran.
NZ Herald
06-07-2025
- General
- NZ Herald
Reserve Force corporal Ray Stewart balances spray painting and army training
Section commander Corporal Ray Stewart departs the 5/7 RNZIR forward operating base to patrol Maria Place as part of an urban security exercise in Whanganui. Photo / NZ Defence Force Whanganui spray painter Ray Stewart spends his spare time learning to de-escalate conflicts that the New Zealand Army might face. The Reserve Force corporal recently took part in Exercise Italy in Whanganui where, as part of the scenario, he and his infantry section were at the defensive end of a
RNZ News
05-06-2025
- Politics
- RNZ News
NZ Defence Force contingent headed for large joint military exercise with one drone
A new NZ Defence Force Bushmaster armoured vehicle being driven on to the HMNZS Canterbury in Wellington on Thursday, headed for the Talisman Sabre military exercise. Photo: RNZ/ Phil Pennington The army is heading for an international exercise where drones will be tested, taking a single drone of its own. Australia and the US are expected to test autonomous weapons as well as a vital new missile system - one that has already upset China - at the Talisman Sabre exercise, starting late next week. As the first 150 out of 680 New Zealand Defence Force personnel going to the exercise got on the Navy ship Canterbury in Wellington, on Thursday, its commanders reiterated their goal to provide the government with a more lethal combat force. "We are very mindful that the role of the Defence Force right now is more critical than it has been for several decades," Brigadier Jason Dyhrberg told reporters. "Therefore, it is important that we make sure we provide the government with a lethal, agile, effective combat force that can protect and preserve New Zealand interests, both domestically and abroad." Yet constraints were still obvious, with the government's $12 billion defence capability plan arriving too late to make a difference. "It's too early to put that into resource right now," Dyhrberg said. "Those capabilities will be in the pipeline in the coming years." That meant little on the drone front, with the motorised infantry combat team taking along just one drone. "This will be employed in a surveillance and target acquisition role by the Joint Fires Team," the NZDF told RNZ. Talisman was a proving ground for drones in 2023 , which have been transforming warfare in Ukraine. Lieutenant Colonel Caleb Berry said drones would be introduced at all levels of the NZDF, but it would take time. "The Defence Force is on a capability journey with drones," Berry said. "We identify that there is a need, but we're still going through that journey at the moment." One of three NH90 helicopters Defence is taking to Talisman Sabre in Australia. Photo: RNZ/ Phil Pennington Asked if the NZDF was taking anything more lethal now, compared to Talisman 2023, Dyhrberg said, "They're largely the same capabilities." He added quickly: "But in the defence capability plan, the minister has made it quite clear about making the defence force more lethal. "That will include more lethal fires as well. What there will be is still to be determined." "Joint fires" refers to digital targeting for shooting at targets synchronised at lightning speed across multiple forces and "domains" (land, sea, air, space). The US and Australia have made strides towards this since 2021, when the Australian Defence Force said it was "now plug and play" and "fully integrated". It not only coordinates the target, but recommends what weapon to shoot at it and how. Australian Army gunner Akbar Joeharris monitors an Advanced Field Artillery Tactical Data System inside a command post Bushmaster vehicle during a previous Exercise Talisman Sabre. Photo: Supplied/ Australian Defence Force Joint fire networks are a central part of the Pentagon's priority ongoing project to build a mega-network of sensors and shooters called CJADC2 (Combined Joint All-Domain Command and Control). Leading US contractor Lockheed Martin helped provide a joint fires network to exercises in Alaska and took part in Talisman Sabre in 2023. For Talisman 2025, the NZDF is taking more than twice as many people as in 2023, at a time when it had described itself as "hollowed out" and suffering high turnover. Also its stop-start Network Enabled Army project has so far put new digital communications systems into seven Bushmaster vehicles - out of 43 total - and those were driven on to the HMNZS Canterbury on Thursday. NZ Army Bushmaster 5.5 armoured vehicles. Photo: Supplied/ NZ Defence Force "We don't have drones as part of this combat team, but we do have the ability to communicate both digitally and via voice with the Australians at all levels," said Berry. Talisman would also give them the chance to see the missile capability of their partners, he added. Talisman and other major military exercises, such as Rimpac that the navy went to last year, align with the US's CJADC2 goals to build what the Pentagon calls "kill chains" that are ever faster. At a California exercise NZDF went to in March, the chain was down to just seconds over long distances, US media reports have said. NZDF told RNZ a key goal over the three-week Talisman exercise was to integrate its capabilities with Australian and US "command relationships including command and control". Dyhrberg added, "We always maintain sovereignty over our own forces in terms of doing command and control." They had stepped up for 2025 by sending the motorised combat team of Light Armoured Vehicles (LAVs) and Bushmasters, and aimed to build up further to contributing a battalion-size group for Talisman 2027, he said. Talisman, the largest bilateral Australia-US military exercise, comes at an interesting time for the allies' relationship. At the weekend, US Defence Secretary Pete Hegseth told Canberra it should lift its defence spending to 3.5 percent of GDP "as soon as possible", from 2 percent now. This is about the same proportion as America spends on defence. He conveyed this at the Shangri-La dialogue summit, where New Zealand Minister of Defence Judith Collins had spoken in defence of Donald Trump's proposed Golden Dome missile defence system. Hegseth and Australia's Defence Minister and Deputy Prime Minister, Richard Marles, "discussed aligning investment to the security environment in the Indo-Pacific", the Pentagon said. But Prime Minister Anthony Albanese later said Australia would decide what defence capability it needed, with spending to fit that. The Australian reported this as Albanese having "brushed off the request". "We'll determine our defence policy," Albanese said. His government's current goal is to hit 2.4 percent by 2033, which would take the total spend to over $100 billion a year. New Zealand in April announced its goal of doubling its defence spending to 2 percent by 2032, or over $10b a year. Japan's is only about 1.8 percent. However, some analysts predict US defence spending will actually go down in the coming decade, to under 3 percent, though Hegseth has made much about having the first US-trillion-dollar defence budget this year (which has not been agreed to yet). The share of the spend that US states get varies wildly, with Texas getting the biggest share, next Virginia and third California. More money has recently been going into Silicon Valley as the Pentagon signs contracts with various tech companies branching out into defence. Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.
RNZ News
18-05-2025
- Business
- RNZ News
NZDF staff to wear locally made socks
From this month on, our defence force staff will standing to attention with locally made socks on their feet. That's because The New Zealand Defence Force has struck a deal with Hawke's Bay apparel company Norsewear . The socks were previously brought in from the United States. Norsewear owner Tim Deane says it's also a real boost for his close-knit team of sock engineers based in the small Hawke's Bay town of Norsewood - population of just 150. Tim says the socks have been through "rigorous" testing involving real soldiers, sailors and pilots and are made using certified traceable fibre from Norsewear's farm partners. Norsewear owner Tim Deane joins Kathryn. Photo: Norsewear
