The Coalition Government’s proposed NZ$12 billion Defence Capability Plan 2025 marks a significant increase in defence spending over the next four years. While NZ$12 billion may sound substantial, it represents a level of budget commitment that is not without precedent. New Zealand’s defence budget hovered near 1% of GDP for much of the past two decades, following a steady decline from a peak of around 3% in 1980 and 2% in the early 1990s.¹ 

What distinguishes the current uplift is its explicit intent to reverse decades of underinvestment and to reorient spending in response to an increasingly threatening strategic environment. The increase is framed as a corrective to persistent budgetary constraints and the resulting degradation of New Zealand’s defence readiness. The target of 2% of GDP reflects a recalibration in response to growing capability gaps and increasing global instability. It is intended to ensure that New Zealand can somewhat respond in a crisis, maintain regional stability, support Pacific partners, the international rules-based order, deter emerging threats, and enhance collective resilience.²

A region under stress

The proposed budget increase is taking place against the backdrop of a complex and challenging strategic environment.³ Russia’s war in Ukraine and other conflicts have eroded post-Cold War security assumptions,⁴ intensifying US–China competition across Indo-Pacific region, directly affecting New Zealand’s neighbourhood. Maritime zones across the Indo-Pacific, upon which New Zealand relies for essential resources without which this country will not function let alone trade revenue are increasingly contested, military modernisation is accelerating, and flashpoints such as Taiwan and the South China Sea carry rising risks of confrontation—all while China conducted live-fire exercises in the Tasman Sea in early 2025.⁵

This regional instability is also reflected in accelerating defence spending across Asia. Between 2022 and 2023, total defence budgets among the United States and its regional partners—including Australia, Japan, South Korea, Taiwan, and the Philippines—increased by 7.4%. Taiwan recorded the largest increase, raising its defence budget by 20% amid mounting concerns over a potential Chinese invasion. While the Philippines slightly reduced its defence spending in that period, it has deepened its operational cooperation with the United States and increased its posture in the South China Sea amid tensions with Beijing. Regional defence spending now exceeds levels explainable by growth —a string indicator that strategic risk is driving the change. Meanwhile, China accounted for 43% of all Asian defence spending in 2023, far outpacing its neighbours. Its growing alignment with Russia and North Korea—both of whom are also expanding military activity and explicitly rejecting a rules based international order—has further reinforced the perception across the Indo-Pacific that military preparedness is no longer optional, but essential.⁶ Now is the time to ensure that the insurance is paid, in case a claim is needed – the question however, is will this budget commitment mean that New Zealand is fully insured? 

Clearly, New Zealand can no longer enjoy the strategic insulation it once assumed.⁷ Distance and geographic isolation is no longer a protection.

Modern warfare

Warfare increasingly turns on information dominance, adaptability, mobility, and integration. The war in Ukraine has shown how commercial technologies like drones and satellite internet can offset conventional disadvantages. In this environment, outdated infrastructure, ageing systems, and failure to keep pace with emerging technologies constitute national security risks.

New Zealand’s ageing infrastructure and legacy systems leave it increasingly exposed. Investment in cyber resilience, space awareness, and self-reliant systems alongside traditional defence priorities is no longer discretionary — it is necessary.

A belated but necessary shift

The Defence Capability Plan 2025 translates strategic intent into a phased investment programme. It is the government’s response to a defence system assessed as underpowered relative to policy ambition and exposed in key operational areas. The plan is structured to deliver three objectives: protecting New Zealand and its region, strengthening partnerships—particularly with Australia—and contributing to global interests.

To support this, the strategy sets out a functional model— understand, partner, act —underpinned by four foundational requirements: people, infrastructure, military capabilities, and information systems. These foundations are essential to force generation. Current capacity is clearly insufficient.

The plan outlines targeted interventions across each domain. It includes a projected workforce increase of 2,500 personnel by 2040, over NZ$1 billion in estate and accommodation upgrades long overdue, and the acquisition of essential long-range strike systems, uncrewed platforms, and enhanced logistics. Cyber and space investments aim to improve interoperability and address vulnerabilities.

The funding uplift is not framed as an expansion of ambition, but as a necessary response to the gap between current capabilities and stated policy objectives. It is presented as the minimum required to align defence outputs with strategic intent. Whether the programme addresses the underlying gaps will depend on execution—particularly workforce retention, procurement stability, and the ability to coordinate capability delivery across multiple domains.

Looking ahead

The Defence Capability Plan 2025 is not the final answer to New Zealand’s defence challenges, but a baseline response to current conditions. The strategic environment is not static – it continues to evolve rapidly. Instability is deepening, competition is intensifying, risk is increasing and capability expectations —particularly among partners — are rising. Maintaining credibility in this context will require sustained attention, disciplined delivery, and policy agility.

If conditions worsen, spending levels near the 3% of the 1980s will return. As the Great Generation that took us through World War Two learnt the hard way, it is better to be prepared than not. A failure to be prepared will not just cost dollars and cents, it will cost lives, livelihood and ultimately independence. That is an unacceptable but, disturbingly, no longer unthinkable possibility in today’s world.

1. Information from the Stockholm International Peace Research Institute (SIPRI), https://data.worldbank.org/indicator/MS.MIL.XPND.GD.ZS?end=2023&locations=NZ&start=1960
2. NZ Government, Defence Capability Plan 2025
3. NZ Government, Defence Policy and Strategy Statement 2023
4. Thomas Greminger and Tobias Vestner (eds), The Russia-Ukraine War’s Implications for Global Security: A First Multi-issue Analysis, Geneva Centre for Security Policy, August 2022.
5. https://www.rnz.co.nz/news/chinese/542972/what-we-know-about-the-chinese-vessels-conducting-military-exercises-in-the-tasman-sea
6. https://time.com/6694387/asia-defense-spending-us-china-allies-iiss-military-balance-report/
7. NZ Government, Defence Capability Plan 2025