VZCZCXRO9887
RR RUEHNZ
DE RUEHWL #0483/01 1770036
ZNR UUUUU ZZH
R 260036Z JUN 06
FM AMEMBASSY WELLINGTON
TO RUEHC/SECSTATE WASHDC 2942
INFO RUEHNZ/AMCONSUL AUCKLAND 0809
RHHMUNA/CDR USPACOM HONOLULU HI
RHHJJAA/JICPAC HONOLULU HI
RUEKJCS/SECDEF WASHINGTON DC
RHEHAAA/NATIONAL SECURITY COUNCIL WASHDC

UNCLAS SECTION 01 OF 03 WELLINGTON 000483 
 
SIPDIS 
 
SIPDIS 
 
SENSITIVE 
 
STATE FOR D (FRITZ), EAP/FO, AND EAP/ANP 
NSC FOR VICTOR CHA 
SECDEF FOR OSD/ISD LIZ PHU 
PACOM FOR J01E/J2/J233/J5/SJFHQ 
 
E.O. 12958: N/A 
TAGS: PGOV NZ
SUBJECT: SOME QUESTION NZ'S DEFENSE STRATEGIES IN LIGHT OF RECENT 
SPENDING INCREASES 
 
REF: WELLINGTON 449 
 
Summary 
------- 
 
¶1. (SBU) Embassy contacts have generally welcomed the defense 
spending increases in this year's budget.  Some question, however, 
the general direction of New Zealand defense policy, and others 
remain concerned about what they say are continued problems with NZ 
Defense Force (NZDF) recruitment and retention.  Although increased 
defense spending does not feature high on the political concerns of 
voters in New Zealand, this could change were social spending 
reduced as a consequence.  End summary. 
 
Details of the increased funding 
-------------------------------- 
 
¶2. (SBU) As noted reftel, the NZDF received an extra capital 
injection of - NZD 72 million (approximately USD 4.5 million) on top 
off baseline finding in the 2006/7 budget, as part of the Defense 
Sustainability Initiative (DSI).  (FYI: DSI is a 10-year initiative 
announced last year designed to enhance recruitment and retention, 
including by increasing salaries and upgrading facilities.  At the 
time the budget was announced, Defense Minister Phil Goff declared 
that this new expenditure ensured that the Government will achieve 
its goal of contributing in a meaningful way to international 
affairs and rebuilding a "modern, professional, and well-equipped 
Defence Force."  The budget also includes an NZD 305 million 
(approximately US 188 million) allocation to various capital 
projects for the 2006/07 financial year, under the Long Term 
Development Plan the Government launched in 2002. 
 
News of capital injection of spending is well received 
--------------------------------------------- ------ 
 
¶3. (SBU) The injection of capital from this year's Budget and the 
financial certainty that the DSI guarantees is widely welcomed by 
some analysts of New Zealand defense matters.  Peter Cozens of the 
Centre of Strategic Studies at Victoria University in Wellington 
believes that with DSI, funding, plans and political commitments are 
now in place to allow the NZDF to meet its future policy objectives. 
 Dr. Lance Beath, a former New Zealand defense official and diplomat 
now at Victoria University's School of Government, agrees. 
 
¶4. (SBU) The Director of the Strategic and Defence Studies Centre at 
the Australian National University, Dr. Robert Ayson, a New 
Zealander who was formerly an advisor on New Zealand's Parliamentary 
Foreign Affairs, Defence and Trade Select Committee, believes that 
the capital injection will enable the defense establishment to meet 
the expectations of the current Labour Government. 
 
The political argument is less about spending, more about general 
direction 
--------------------------------------------- ------ 
 
¶5. (SBU) The National, NZ First and ACT Parties have complained 
about what they say is a lack of coherence in the Government's 
strategic decision-making.  In particular, they have questioned 
NZDF's asset acquisition in past years (such as Light Armored 
Vehicles instead of tanks) and the dearth of Government White Papers 
published since Labour took office in 1999. 
 
¶6.  (SBU) Paul Buchanan, an Auckland University security analyst who 
often provides New Zealand media with blunt assessments of security 
policy, believes that increasing expenditure is too simplistic a 
cure for perceived defense ills in New Zealand.  He believes that 
New Zealand needs to align its strategic outlook with its resource 
base, taking into account the country's location, and relevant 
security threats.  He argues that so long as the political argument 
is about money alone and comparisons are made to larger states, New 
Zealand will continue to drift with regards to its strategic 
position. 
 
No, it's about spending 
----------------------- 
 
¶7. (SBU) It is true that some analysts say New Zealand's per capita 
military spending is insufficient compared to that in Australia. 
Most compare the United States, United Kingdom, France or Germany. 
The inference is that New Zealand is not pulling its weight on 
matters of international security and instead is freeloading off the 
 
WELLINGTON 00000483  002 OF 003 
 
 
Australians and others.  Beath notes that New Zealand is 
historically parsimonious when it comes to defense spending, 
especially when compared to Australia. 
 
¶8. (SBU) However, Dr. Jim Rolfe, a former policy advisor in the 
department of Prime Minister and Cabinet and now an Associate 
Professor at the Asia-Pacific Center for Security Studies based in 
Hawaii, believes that comparing New Zealand and Australian defense 
budgets is not valid because of differing strategic perceptions and 
needs.  Buchanan agrees, saying it is "absurd to compare a small 
country like New Zealand with the behemoths like the US and the UK, 
or even Australia."  Instead, he contends it's more logical to 
compare New Zealand with other small democracies, such as Portugal, 
Uruguay, Norway and Costa Rica who "each share a similar strategic 
problem if not situation with New Zealand."  Buchanan claims that 
because these small democracies and New Zealand spend similar 
amounts on defense, New Zealand is in the mainstream of defense 
spending and foreign military commitment by small democracies. 
 
Defense spending typically loses out to social spending 
--------------------------------------------- ------ 
 
¶9. (SBU) New Zealand is also no different from other small 
democracies when it comes to other spending priorities. 
Historically, New Zealand budgets have allocated the majority of 
funds to domestic social programs, particularly health, education 
and welfare.  Moreover, since the Vietnam War New Zealand 
governments have -- in the absence of imminent threat -- been 
reluctant to engage in sustained external military operations 
without majority support.  The Government's unwillingness to commit 
combat troops to Iraq is testimony to this. 
 
Defense spending not an issue that resonates with voters 
--------------------------------------------- ------- 
 
¶10. (SBU) According to Beath "the average New Zealander is not 
sophisticated enough to grasp the nuances of defense spending." 
However, many more New Zealanders are critically aware of the new 
post 9/11 security environment and the need to secure New Zealand's 
immediate region and border from threats and to protect the region 
from instability.  Therefore, the recent increases in defense and 
related regional and border security spending do not seem to have 
resulted in any noticeable public outcry.  But it is also unlikely 
that renewed calls from National for greater military spending will 
echo with New Zealand voters.  Most New Zealanders still accept that 
the physical defense of New Zealand's borders is dependant on the 
country's larger military friends.  Nor would they want to see 
military spending eat into social welfare spending, a deeply-rooted 
and widely accepted tradition in New Zealand. 
 
Human capital most critical issue 
--------------------------------- 
 
¶11. (SBU) Government and critics alike acknowledge that the most 
critical issues facing New Zealand defense establishment is low 
personnel retention and recruitment rates.  In a buoyant labor 
market, many highly skilled defense staff - civilian and military - 
are being lured to other organizations by more attractive salary 
packages.  Cozens believes the loss of human capital is the greatest 
challenge facing NZDF and greatly limits the country's operational 
military capacity.  Although he applauds the focus on building up 
human capital in the DSI, Cozens notes that at present there is 
barely a sufficient number of personnel to attend to the operational 
obligations of the New Zealand Defence Force, a view endorsed by 
Beath. 
¶12. (SBU) The issue of personnel retention and recruitment is part 
of the political debate.  Ron Mark, defence spokesman for NZ First, 
has campaigned on the need to apportion funding to increase defense 
salaries across the board.  This, he argues, is the key to 
strengthening personnel retention and recruitment rates in the armed 
services. 
¶13. (SBU) In a recent appearance in front of Parliament's foreign 
affairs, defence and trade committee, Goff announced that the shroud 
of secrecy that has traditionally cloaked the SAS will be lifted, 
albeit slightly, to offer more transparency.  This pleased Mark, 
himself a former member of the SAS, who though acknowledging the 
need for secrecy on operational matters stated that the "the high 
and sometimes unnecessary level of secrecy was hindering public 
scrutiny of the [SAS] force."  This, he argued, hindered the ability 
to recruit and retain SAS troops given the competitive market for 
their skills.  Mark said that at present the members of Police 
 
WELLINGTON 00000483  003 OF 003 
 
 
Special Tactics Group are paid more than the SAS but are doing less 
operationally. 
¶14. (SBU) During the Committee hearing Goff also acknowledged NZDF 
recruitment is difficult but has said that a "not ungenerous" pay 
package introduced in 2005 went some way to address this issue.  He 
stated that the current defense salary range is from NZD 80,000 to 
140,000 (USD49,000 to 86,000) including benefits.  Yet despite this, 
Goff concluded, the armed services would continue to struggle to 
compete with lucrative private security contracts in Iraq, for 
example, which can pay up to NZD 300,000 tax-free. 
McCormick