New Zealand Defence Force and the Ministry of Foreign Affairs will get more money in Budget 2024 due to the 'increasingly unstable world’

Diplomats and soldiers are likely to be among the few public service employees not facing budget cuts and job losses in 2024, thanks to shrewd ministers and tense geopolitics. 

While most departments are being asked to cut budgets by 6.5% or 7.5%, Finance Minister Nicola Willis told AAP the Defence and Foreign Affairs “grouping” would be getting a boost. 

She said this was because it was important to have a presence in the world and that we were living in a “less benign geostrategic environment”. 

On Friday morning, Defence Minister Judith Collins announced a $571 million funding boost for the Defence Force, across four years, to pay better wages and upgrade equipment. 

“The world is increasingly unstable. We have only to look at events in the Ukraine and Middle East to see how quickly people’s lives can change,” she said in a press release. 

“This Budget announcement is a signal that New Zealand is ready to step up and play its part to protect the freedoms that so many of us take for granted”. 

It is notable that defence has been prioritised in what is expected to be a very tight budget, when voters might prefer more spending closer to home. 

But Mark Cameron, the Act Party’s defence spokesperson, said this was about using taxpayer money to ensure the basics are covered. 

“The first job of government is to keep its citizens safe, so we’re taking our national security and the wellbeing of the personnel who protect it seriously.”

Act campaigned on gradually lifting defence spending to 2% which would bring New Zealand in line with its allies and partners, such as Australia and NATO.

While this goal remains a long way off for New Zealand, many countries are going over and above this target in anticipation of future conflict.

Playing catch up 

The Stockholm International Peace Research Institute said there had been a 6.8% real term increase in global defence spending between 2023 and 2022, the largest jump since 2009. 

China’s growing military budget has prompted bigger spending in Japan and Taiwan, while Russia’s invasion of Ukraine has caused a huge uplift in European spending. 

Peter Dunne, who served in multiple Cabinets, said there had been a historical underspend in defence capabilities which dated back to the Helen Clark Government in the 2000s. 

Military spending fell out of fashion and resulted in New Zealand struggling to contribute to conflicts involving our partners in the aftermath of the 9/11 terror attacks. 

At times, combat capability was so limited that there was a question whether NZ forces were more “hindrance or help” when being deployed, said Dunne.

Putting half a billion dollars into defence in Budget 2024 would send a very strong signal to partners that we would be willing and able to contribute to future security challenges, he said. 

The money being spent was about playing “catch up” while the possible protection of MFAT’s budget was more about coalition politics than geopolitics. 

Dunne said Foreign Minister Winston Peters had likely “put his foot down” and insisted on sparing the Ministry of Foreign Affairs and Trade from the spending cuts. 

Diplomatic incidentals

There have not been any announcements about MFAT’s budget but Willis has refused to say whether they would deliver the same cuts as other parts of the public sector. 

In 2023, the Foreign Affairs budget was about $2.2 billion and Defence was at $5.3 billion. 

Prime Minister Christopher Luxon has promised to put extra energy into its international relationships and the Government will need to put some money where his mouth is. 

It has already kicked off trade negotiations with the Gulf states and launched a charm offensive in South East Asia, where it hopes to develop much deeper relationships. 

Marion Crawshaw, a senior fellow at Victoria University’s Centre for Strategic Studies, said the latter might be “the most significant shift in NZ foreign policy” since leaving ANZUS in 1984.

The Prime Minister told Interest.co.nz that prioritising South East Asia wouldn’t mean neglecting other parts of the world. Other relationships would still be developed and maintained, he said. 

But doing so requires having diplomats on the ground in those countries and other policy officers back home working through issues. 

Any budget cuts would likely require closing overseas posts or reducing the amount of money available for foreign aid — either would be unacceptable to Winston Peters.

Suits on the ground

In February, he told the Foreign Affairs, Defence and Trade Committee that more people were needed on the ground if New Zealand wanted to “beef up” trade and international connections. 

He also criticised times when New Zealand’s foreign aid budget dropped to be the lowest in the OECD, which he saw as a risk to both national and economic security.

When asked how then he would handle the 6.5% budget cuts, Peters said he’d have to negotiate with his coalition partners. 

“Of course, you can always find economies but we’ve gotta start with the understanding that there are some things you cannot sacrifice,” he said. 

“But I’m not arguing from the point of view of favouring a department. It’s this country’s long-term future that’s critically dependent on this”. 

He also noted that spending overseas wasn’t inflationary, as that money didn’t go into the local economy.

Judith Collins was asked a similar question at her committee appearance. She said she had asked for Defence to look for savings in anything that wasn’t core business.

“But we are going to need to have investment in Defence, because everything it buys is expensive — it is just the nature of the beast,” she said.

On Friday, she revealed that $107 million of savings had been made by projects coming to an end, travel budgets being reduced, and consultant spending being cut.

That money was recycled into the $571 million headline being spent on salaries and new equipment, notably a new helicopter navigation system and replacement logistics trucks.