Comment: Security was among the “major themes” announced by Finance Minister Nicola Willis in her recent Budget. In her words, the country is facing the “most adverse and contested geostrategic environment of the past 80 years”.
What the Budget revealed is that, in a world increasingly structured by US-China competition, New Zealand is quietly aligning with Trump.
The most explicit evidence for this was the Budget’s progression of last year’s Defence Capability Plan, which committed $12 billion of investment into defence. Alongside ring-fencing defence from cuts felt elsewhere, the plan is expected to push defence spending above 2 percent of GDP for the first time in a generation.
This year’s contribution to the plan included life extensions for the navy’s ships, as well as a boost for the intelligence services. Much more is to come, most notably a $2.6 billion purchase of a new fleet of Seahawk maritime helicopters from defence firm Sikorsky, a subsidiary of US arms giant Lockheed Martin.
What, though, is all this defence spending for? The consistent message of the Defence Capability Plan is interoperability with Australia and the “wider Five Eyes partnership”, as well as embracing new technologies of war.
At a time of Australia’s growing investment in US defence plans through Aukus, and the ongoing militarisation of Silicon Valley, the implications of this message are clear.
While the US is rarely (if ever) mentioned directly, the implicit direction for New Zealand of aligning with the US against China is everywhere.
The proposed Seahawk helicopters, for example, allow for a “combat-capable” maritime force that will work with Australia’s planned Aukus nuclear-powered submarines. As has frequently been made clear, the purpose of these maritime forces is for use in a future potential confrontation with China.
It is easy to normalise this direction of travel for New Zealand. The US is a long-standing security partner through Five Eyes. Likewise, New Zealand’s relationship with Australia is unquestionable. Where both countries go, it may be unsurprising that New Zealand would follow.
But these are not normal times. As the Iran war has revealed, the US is an increasingly erratic security partner. Moreover, the militarising path set for Aotearoa New Zealand contradicts a long history of independent foreign policy, connections with the Pacific, and the close commercial relationship built up with China over decades.
Why, then, is New Zealand seemingly sleepwalking into alignment with an increasingly militarising and antagonistic United States?
Setting foreign policy is not simply a matter of choice. It has deeper roots both within the domestic political economy and the structures of world order.
And, on this account, New Zealand is navigating a US-centred world beyond which it is difficult to imagine.
Again, the Budget contains clues to this.
Zooming out from defence, the Budget’s overarching message is the drive for fiscal surplus. The Budget Policy Statement, for example, set the objective to “get the Government’s books back in order and restore discipline to public spending”.
Beyond the moralising, there is the hard fact of the international bond market that hangs behind this objective. In her speech, for example, Willis warned of the negative outlook for New Zealand’s sovereign credit rating as justification for planned cuts.
There is nothing natural, inevitable, nor unique about the discipline of international financial markets that Willis is referring to. What her comments reflect is the place New Zealand has carved for itself in a US-centred global economy.
While we rightly worry today about the price and supply of fuel imports, another major import for New Zealand is foreign capital. The Reserve Bank of New Zealand—Te Pūtea Matua’s recent Financial Stability Report cautioned about growing volatility in international financial markets given a fifth of New Zealand’s bank funding comes from offshore markets, mostly for US dollars.
This is reflected in the persistent current account deficits that New Zealand runs. Willis uses this as motivation to cut Government spending, and return to surplus, to demonstrate to international investors that the country can cover its borrowing.
But, far from a moral problem, this in fact reflects New Zealand’s relatively advantageous place in a US-centred global financial system. It allows for an influx of foreign capital that is channelled into mortgage debt and sustains an economy dominated by housing. And it is secured by New Zealand’s privileged access to the US Federal Reserve’s swap lines, should it all go wrong.
While huge house-price fluctuations and growing unaffordability make this model increasingly brittle, those offering a project to sustain it win elections.
The point is that New Zealand’s growing alignment with the US is not simply a foreign policy choice, which could be straightforwardly replaced by another. It is the product of deeply woven connections, such that imagining divergence from the US would require a broader political economic transformation.
Ultimately, this was an election budget. It gave little away as it tried to balance the increasingly fractious coalition Government. As a result, there were few surprises when it came to security and defence policy, largely implementing the plans already set in the Defence Capability Plan.
While this reflects the fact that foreign policy is rarely an election issue, this is not a normal election. In an increasingly turbulent world, reading the implications of the Budget shows New Zealand’s clear direction of travel towards aligning with the US. As Aotearoa New Zealand heads towards a general election, the question is whether it is a road worth taking.
