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Speech to Defence Industry Association conference, Devonport

Hon Dr Jonathan Coleman
Minister of Defence

20 March 2013

Speech to Defence Industry Association conference, Devonport Navy Base, Auckland

It’s a pleasure to be addressing the New Zealand Defence Industry Association again.

I want to focus my remarks today on a subject close to your interests: how to deliver results while managing the rising costs of doing business.

It is a topic close to the heart of our Defence Force as it juggles significant reform, making savings efficiencies, maintaining capability, while also dealing with the rising cost of defence.

With many of you being representatives of private sector businesses you will be acutely aware of the challenges of growing a business and building exports.

Building a competitive and productive economy is one of the key priorities for the government.

We have developed a Business Growth Agenda and a series of work streams for Ministers to help drive this along. The six areas we are aiming our focus on are infrastructure, natural resources, capital markets, skilled and safe workplaces, innovation, and a drive to expand exports.

My underlying point here is status quo or static approaches don’t serve us well, but an appetite for innovation and reform does.

The same disciplines need to be applied to the public sector as you have been forced to apply to your own businesses

Just last month I was in London, at a round table discussion comparing notes with commentators on defence reform. My comments were entitled: New Zealand Defence Force Capability in an Era of Tightening Budgets.

I noted that the New Zealand Defence Force has been directed to make savings which are being redirected inside the defence budget to ensure the organisation can deliver on its front-end requirements, including capability.

What was reinforced to me on my trip is that the issues confronting governments around defence affordability are the same across the western world.

Basically defence reform is a direct response to the global financial crisis.

The approach of redirecting resources from the back of a defence organisation to the frontline is also universal.

In our case, the NZDF is achieving its financial targets. For this current financial year $168 million in savings has been achieved so far, and its forecast $190 million in savings will be delivered by June 2013.

And it’s been tough. Each dollar saved doesn’t come easily, and the more you save the harder it gets to make those savings.

I want to congratulate the NZDF’s military and civilian leaders for this achievement, and I especially want to thank the soldiers, sailors, and air personnel for their support during a time of great change.

In my other role as Minister of State Services, I have oversight of the wider programme of state sector reform that is raising expectations of the public service while pressing for greater efficiency.

I am proud that the NZDF is leading the way – continuing to deliver its mandated services, while containing costs.

I’d note that there has been a fundamental difference between the NZDF change programme compared with other nations.

While some other nations have made well documented cuts to their military units or equipment, we in New Zealand have been careful to guard against making specific capability haircuts. We are simply too small for such a blunt approach.

And in fact, we have been busy implementing the Defence Capability Plan and have made excellent progress.

• Last December I announced the release of tenders to upgrade the self-defence and sensor capabilities of the Royal New Zealand Navy frigates HMNZS Te Kaha and HMNZS Te Mana. This will address issues of obsolescence with the ships’ technology and ensure the vessels are a credible capability which can operate in the South Pacific and wider Asia Pacific region.

• The Government is also looking seriously at the option of acquiring the ex-Australian Navy Seasprite helicopters to operate from the frigates, and our patrol fleet.

• In December, I also announced the release of tenders for a new military pilot training capability. This project will lead to the introduction of dedicated advanced pilot training aircraft.

• A wide-ranging programme is gradually replacing the NZDF’s land transport fleets. The immediate priority is to acquire new medium and heavy operational vehicles. That work is well-underway.

• A number of long-running projects are also in their delivery phase: upgrades of our C130 Hercules and P3 Orion aircraft, and delivery of A109 training/light utility helicopters, and NH90 medium utility helicopters.

• Looking further out, we intend to network-enable our land forces; strengthen our command and control systems; improve our intelligence, surveillance, and reconnaissance capabilities; and acquire much-increased satellite network bandwidth for global communications.

• Approval has been given for the design and developments of a Special Forces battle training facility.

The delivery of these projects will provide New Zealand with defence capabilities which are able to respond flexibly to varied and complex tasks both at home and offshore.

But that’s not to say we don’t have some serious thinking to do.

To use the military metaphor, we need to have the “over the horizon radar” operating.

Let’s start by taking a step back.

One of our priorities upon forming a government in 2008 was to commission a Defence White Paper.

Over a decade had elapsed since the last formal White Paper, so at the time a fresh look at strategic context, policy settings, and capability requirements was long overdue.

Completed in 2010, the White Paper identified the suite of military capabilities New Zealand would require, taking into account the growing uncertainty of our strategic environment.

As the White Paper indicated, to operate the NZDF and to replace equipment, especially major naval and air platforms, would require additional capital and operating spending in the long run. And there’s no strategy without dollars.

We are at a mid-point between the last White Paper and the next White Paper due to take place in 2015.

So now is an appropriate time to assess how we’re travelling and to have officials start some groundwork for what ultimately will be a future White Paper.

The officials have been tasked to start a piece of work called the DMRR, or Defence Mid-point Rebalancing Review, which undertakes analysis about long term Defence funding and capability.

This is set in the context that New Zealand’s spending on defence as a percentage of GDP has been steadily declining since the 1990’s when it was at 2 per cent of GDP to where it currently is hovering at about 1 per cent of GDP.

What understandably worries Defence planners is the current forecast for the defence budget for the next decade is a horizontal flat line. They are required to assume a fixed defence appropriation.

And that presents some obvious challenges.

On a fixed appropriation, the defence budget would eventually go into an operating deficit .

In reality I don’t think a flat line defence budget for the next ten years is a realistic option.

Whilst the savings and reforms have been excellent, you also need to guard against a rubicon moment where the money becomes so tight our defence strategy and capability are compromised.

So it is sensible for the DMRR process to be undertaken.

Cabinet has directed officials to analyse different levels of funding tracks for the future, and assess what level of military capability and equipment you get with each funding track.

It’s important to get the balance right.

I am at pains to say the DMRR is analytical work.

We will consider the results with an open mind. It is groundwork so that we’re well prepared for the next Defence White Paper anticipated in 2015.

The DMRR is likely to be reported back to the government later this year.

The over-riding objective is to ensure we have a capable, sustainable, deployable, and affordable defence force.

Can I just finally conclude by noting this is a significant period for the NZDF and its operational deployments.

You will be no doubt aware the Provincial Reconstruction Team in Bamyan will be returning to New Zealand soon.

The work they have undertaken in Afghanistan has been excellent and made a tangible difference to the Bamyan people.

And the sacrifice by the servicemen of the New Zealand Defence Force has been deeply felt. In total we have lost 10 of our people during service in Afghanistan.

But the service they have provided has been widely recognised.

In meetings and events with other Defence Ministers and military leaders from around the globe they all praise and recognise the quality and service of the NZDF.

That is for good reason. It is well worth remembering.

I expect many of you will have ideas of your own to share, so I look forward to hearing from you.

ENDS

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