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Cablegate: Some Question Nz's Defense Strategies in Light of Recent

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

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