Amid Retention Woes, New Zealand Scrambles to Increase Defense Spending

New Zealand has announced its intention to provide its armed forces with an NZD748 million ($471 million) top-up of investment over a four-year period, or roughly NZD187 million ($118 million) per annum.

The statement by Defense Minister Andrew Little comes as the New Zealand Defense Force (NZDF) continues to suffer from an exodus of personnel. The funding initiative is aimed at patching gaps to NZDF equipment and infrastructure, as well as stopping the bleeding to its attrition rate.

The last few years have been particularly tough on the NZDF as it was tasked with enforcing the New Zealand government’s COVID mitigation efforts, which gradually took a toll on morale and personnel retainment, as well as on training and operational readiness.

Figures show that over the course of the 2021-2022 fiscal cycle, the full-time military force suffered an attrition rate of 30 percent of its uniformed, trained, and experienced staffing. Worse, over the 2022-2023 fiscal year, the Army’s aim of bringing in 539 new recruits fell short by 327, meaning it hit on a rate of just 39 percent. In the meantime, the attrition rate for the Army this year is at 17 percent.

To stave off a worsening crisis, the NZDF is starting to pay bonuses of up to NZD10,000 ($6,200) to retain personnel. To replace select critical roles within the military – plumbers, electricians, carpenters, and Special Forces personnel – the challenge appears even steeper, as the training involved takes up to at least four years, as per a statement by the chief of the NZDF, Air Marshal Kevin Short.

High staff attrition resulted in the 2022 docking of three Royal New Zealand Navy (RNZN) ships indefinitely due to personnel shortages, as well as the early retirement of the Royal New Zealand Air Force (RNZAF) fleet of P-3 Orion maritime reconnaissance aircraft. Improving recruitment and retention of personnel is therefore a core priority for the Defense Ministry moving forward.

After suffering a sharp reduction to its budget in fiscal year 2020-21 (with the money cut reallocated toward the national COVID recovery fund), defense received a large top-up in FY21-22 as the economy fully recovered. Going forward, the question remained how much budgets would increase, with economic growth and other policy items receiving higher priority from the Labour government.

Of particular concern is whether the government will remain committed to the NZD20 billion ($12.7 billion) capital investment provision outlined in successive Defence Capability Plans (2016 and 2019), with capital spending averaging just around NZD1.5 billion ($1 billion) per year since 2017. The Defence Capability Plan is to be executed through 2030.

The latest top-up funding does little to allay concerns, as the portion of the total NZD748 million dedicated to upgrading equipment and infrastructure amounts to 44 percent of the total, or NZD328 million ($207 million) – roughly $52 million extra per year.

With an election due in October, the defense policy climate in New Zealand remains uncertain. A first segment of a new defense review (consisting of four parts) scheduled to be released in October 2022 was pushed back into 2023, with the full review expected to be completed in 2024. To date, nothing has been unveiled.

However, a new government could be in place before 2024, rendering the four-part review dead on arrival – if not scrapped altogether beforehand. Indications were that the review would signify a shift – albeit likely a limited one – from homeland defense orientation to a bit more proactive stance, particularly concerning maritime awareness.

About Daniel Darling

Dan Darling is Forecast International’s International Military Markets Group Leader. Specializing in history and political science with a background in finance and economics, Dan provides insight into the military markets of both the Europe and the Asia, Australia and Pacific Rim regions. Dan's work has been cited in Aerospace and Defense News, Aerotech News and Review, Defense Talk, Global Defense Review, and Small Wars Journal, among others, and by the NATO Parliamentary Assembly. In addition, Dan has been quoted in Arabian Business, the Financial Times, Flight International, The National, Bloomberg and National Defense Magazine. He has also contributed commentary to Defense News and appeared as a guest on the online radio show Midrats and on The Media Line. As editor of International Military Markets, Europe and International Military Markets, Asia, Australia & Pacific Rim, Dan brings a wealth of expertise on the political and economic forces shaping these markets.

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