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New Zealand - Defense Budget

New Zealand's military spending is about 3 percent of the New Zealand yearly budget, and about 1 percent of GDP [for the US, it is 4 percent of GDP]. Linking military spending to the GDP is an argument frequently made by supporters of higher military budgets. Comparing military spending (or any other spending for that matter) to the GDP shows how large a burden such spending puts on the economy. As forecast, large budget increases for departments cannot be expected for some time to come. Ways need to be found to ensure that core roles and capabilities can be maintained, improved and supported without significant cost increases. The NZDF has already started its Defence Transformation Programme (DTP). This is concentrating on efficiencies in logistics and human resourcing.

The annual Budget is the principle mechanism through which the Government reallocates existing resources and provides a limited amount of new resources, in order to achieve its desired outcomes and objectives within its fiscal policy objectives. Like all other Government Departments, the NZDF is required to budget for and seek the required funding from the Government, on an annual basis, to enable it to deliver on defence policy objectives required of it. This funding goes towards, in the main, the delivery of NZDF outputs (operating funding) and the upgrading and/or replacement of military equipment and infrastructure (capital funding). The whole budget process comes to a culmination on Budget Day (normally in late May/early June each year) with the tabling in the House of Representatives of the "Budget" - the Estimates of Appropriations.

New Zealand has considered its own national defense needs to be modest. Its defense budget generally has provided for selected upgrades in equipment. Shortly after winning the 1999 election, the Labour government canceled a lease-to-buy agreement with the U.S. for 28 F-16 aircraft. However, Labour did embark on a significant defense upgrade and acquisition plan. All three services have benefited from the upgrades/acquisitions. In 2001, the government contracted to purchase 105 LAVIIIs for U.S. $300 million, with delivery completed in 2005. The Army also purchased 321 Light Operational Vehicles to make its forces more mobile. In 2002, New Zealand announced planned upgrades of its P3 and C-130 Hercules aircraft, and purchased two Boeing 757 aircraft for U.S. $100 million.

In 2006 New Zealand contracted with NH Industries to purchase eight NH-90 aircraft to start delivery in 2009 (the first is now due for delivery early 2011). In 2007 the country entered an agreement to purchase 12 A-109 light helicopters from Agosta to also start delivery in 2009 (the number has since been decreased to 6, and the first is now to be delivered in late 2010). The B-757s have received significant upgrades to include installation of a cargo door and a strengthened floor that allows various configurations of cargo/passengers. The P3s and C-130s are currently being upgraded/modified; these upgrades have encountered significant delays, severely limiting available aircraft for 2009 and 2010.

In 2007, the Navy began accepting delivery of the Project Protector program, with an estimated value of U.S. $250 million, consisting of one multi-role vessel (MRV), two offshore patrol vessels (OPVs), and four inshore patrol vessels (IPVs), which concluded with the final ship delivery in May 2010. The Navy's two ANZAC frigates are receiving ship support systems upgrades (one is now complete), and the Navy is requesting additional funding for weapons systems upgrades for 2011-2012.

In May 2001, the government announced it was scrapping its combat air force. New Zealand states it maintains a "credible minimum force," although critics maintain that the country's defense forces have fallen below this standard. New Zealand still maintains, in a non-operational status, the fleet of A-4 Skyhawk jets and Aermacchi jets left over from the scrapping of its combat air force. Its attempts to sell the jets have thus far failed.

With a claimed area of direct strategic concern that extends from Australia to Southeast Asia to the South Pacific, New Zealand necessarily places substantial reliance on its defense relationship with other countries, in particular Australia. However, acknowledging the need to improve its defense capabilities, the government in 2005 announced the Defense Sustainability Initiative, allocating an additional NZ $4.6 billion (U.S. $3.19 billion) over 10 years to modernize the country's defense equipment and infrastructure and increase its military personnel. The funding represented a 51% increase in defense spending since the Labour government took office in 1999. However, the active duty component of the New Zealand Defense Force (NZDF) did not exceed 10,000 personnel and there have been no additional budget increases in recent years. The New Zealand Army is the largest service, with fewer than 5,000 personnel, the Air Force has approximately 2,700, and the Navy has approximately 2,300. There are approximately 2,200 territorial (reserve) forces and approximately 2,700 civilian defense employees.

The Minister of Defence is responsible for appropriations in Vote Defence Force, totalling just over $2,852 million, for the 2010/11 financial year. This includes just over $2,279 million for departmental output expenses and a capital expenditure appropriation of just under $573 million for the purchase of assets. The $2,279 million amount covers a total of just over $2,159 million on the Navy, Army, and Air Force to provide the Government with a range of military forces to protect and advance the security and interests of New Zealand. These forces are held at appropriate levels of capability and preparedness to protect New Zealand's territorial sovereignty and to contribute to regional and global security efforts. Most of these forces also contribute a range of services to other government departments and the New Zealand community when not committed to operations overseas. The breakdown of appropriations, by Service, is as follows: Navy: just under $673 million; Army: just over $843 million; and Air Force: just over $643 million.

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