The Labour-led coalition yesterday agreed to New Zealand’s biggest defence purchase since the ANZAC frigates knowing that the previous Government had ducked the issue.

As expected, Defence Minister Ron Mark announced said the Government would purchase four P8 Poseidon maritime surveillance aircraft for $2.346 billion with the first plane due to arrive in 2023.

The need for the planes to replace the 50-year-old P3 Orions was confirmed in National’s 2016 Defence White Paper, but that was as far as the Key-English Government went.

Not only was there no financial provision for the aircraft in National’s long-term capital forecasts but Mark says the new Government has been unable to find a single Cabinet paper from the previous Government addressing the need for the planes.

Indeed former Finance Minister Steven Joyce told POLITIK last November that unless the American manufacturers (Boeing) agreed to spread payments for the planes over a number of years, the Government would not buy them.

Labour obviously looked at that option too; not buying the planes at all.

One Beehive official said that when it came to the crunch Ministers realised there was no choice and that going ahead with the purchase was just something that Governments had to do.

Some reports, like the Wall Street Journal, have suggested New Zealand decided to buy the planes because of the Government’s more critical attitude toward China.

And Peters appeared to confirm that China is concerned about the recent step up in New Zealand rhetoric aimed at China; first with Winston Peters’ speech to the Otago Foreign Policy school where China was hardly mentioned as a key partner of New Zealand and then Friday’s Defence Policy Statement which singled China out for its activities in the South China Sea.

Peters told his weekly press conference that New Zealand these comments were part of New Zealand’s independent foreign policy which was far more candid and far more honest than National had been.


He described National’s foreign policy as “a whole lot of nothing”.

And he rejected the proposition that China would be unhappy about the rhetoric in the Defence Policy Statement.

“We are not here to make people happy,” he said.

“We are here to be a responsible international citizen doing our best to preserve the neighbourhood within which we live, to preserve our sovereignty and to enhance the economic and social well-being of the people of this country.”

Peters confirmed that China had lodged a protest with the New Zealand Ambassador in Beijing and with the Ministry of Foreign Affairs and Trade in Wellington over the recent series of comments.

The P8 purchase, though they will have been expecting it, is hardly likely to make them any more comfortable with a country they have assumed up until now was one of their closest western friends. 

But the decision to buy the planes also throws the spotlight on Labour’s capital budget and its borrowing.

National Leader Simon Bridges has been claiming that Labour is already in trouble with its borrowing and is planning  $11 billion of additional core Crown debt and a further $6 billion in Crown entity borrowing. 

But Bridges appears to have misunderstood some crucial Budget numbers, and his figures are at odds with the Budget Economic and Fiscal Update  (BEFU) which show net crown debt rising by only $8 billion over the next four years.

His claim that Crown entity debt is to rise may be true, but much of that rise is due to decisions made by the National Government. 

The BEFU certainly concedes that crown entity and SOE  debt could rise.

“The primary drivers of this increase relate to the current PPPs (Public, private Partnerships)  NZTA has entered into and additional borrowing forecast by both Housing New Zealand Corporation and Crown Infrastructure Partners,” it says.

ironically, the PPPs and Crown Infrastructure Partners were both establioshed by National and the borrowing approved while they were in Government.

Meanwhile, sources say that the payment for the planes can be managed within the Budget Responsibility Rules which require that net debt be reduced to 20% by 2023.

However, POLITIK understands that just how the payments will be spread and accounted for has so far not been finally agreed.

There is one outstanding question about the planes.

The P8 is a high tech aircraft designed to operate with partner air forces like Australia or the UK or with the US-led Combined Maritime Forces in the Middle East.

It can carry an array of weapons.

The US P8s carry anti-submarine torpedoes and may also carry other torpedoes, missiles, free-fall bombs, depth charges, mines, or sonobuoys in its weapon bay. Air-to-surface and air-to-air missiles, and anti-ship missiles and land attack missiles, can be carried on the underwing.

That leaves a question as to whether it may be too high tech and too expensive to operate for mundane New Zealand coastal patrolling.

But Mark said The Government would also consider options for a complementary maritime surveillance capability during the forthcoming Defence Capability Plan review, due to be completed by the end of 2018. “The complementary capability will consider smaller manned aircraft, remotely piloted aircraft systems (RPAS) or satellites, for additional maritime surveillance tasks within New Zealand’s Exclusive Economic Zone and near region,” he said.

“This will free up the new P-8A fleet to fly more missions, in the South Pacific and further afield.”

That capability, to operate further afield underlines how much the planes will be a crucial part of New Zealand’s relationship with partners like Australia and the US.

The decision to purchase the planes has been regarded for some time by western diplomats as a litmus test of Labour’s foreign policy.

That being the case, what the test shows is that, perhaps surprisingly,  the Labour-led coalition was more willing to make the purchas3 decision than National.

Stack that alongside Peters more critical approach to China and it is possible to see this Government moving New Zealand quietly back closer to its traditional western partners.