CANBERRA PAPERS ON STRATEGY & DEFENCE NO. 166 Published in Australia at The Australian National University, October 2006. © Australian National University This book is copyright. Apart from any fair dealing for the purposes of private study, research, criticism or review as permitted under the Copyright Act, no part may be reproduced by any process without written permission. Inquiries should be made to the publisher. This book must not be circulated in any other binding or cover. National Library of Australia Cataloguing-in-Publications entry Quigley, Derek Francis, 1932- The War Against Defence Restructuring: A Case Study on Changes Leading to the Current Structure of New Zealand Defence ISBN 9780 7315 5477 5 (pbk.) ISBN 0 7315 5477 9 (pbk.) 1. Military planning - New Zealand. 2. New Zealand - Armed Forces - Reorganization. 3. New Zealand - Defenses - Economic aspects. 4. New Zealand - Military policy. I. Australian National University. Strategic and Defence Studies Centre. (Series : Canberra papers on strategy and defence; no. 166). 355.009931 Series editor: Meredith Thatcher Cover design by Meredith Thatcher Cover cartoon by Tom Scott, Evening Post, Wellington, Monday 6 March 1989. (Courtesy of Ian F. Grant, NZ Cartoon Archive, Alexander Turnbull Library, Wellington, New Zealand) Printed by Flash, Canberra Published and distributed by: Strategic and Defence Studies Centre The Australian National University ACT 0200 Australia Tel: 61 (0)2 6125 9921; Fax: 61 (0)2 6125 9926 Email: [email protected] THE WAR A GAINST DEFENCE RESTRUCTURING: A CASE STUDY ON CHANGES LEADING TO THE CURRENT STRUCTURE OF NEW ZEALAND DEFENCE by Derek Quigley Published by Strategic and Defence Studies Centre The Australian National University Canberra 2006 The Canberra Papers on Strategy and Defence series is a collection of monograph publications arising principally from research undertaken at the SDSC. Recent Canberra Papers have focused on major aspects of Australian defence policy, disease security in Northeast Asia, ballistic missile defence, the complexities of dealing with radical Islam, and aspects of transnational crime. A major title on the Allied Geographical Section in the Second World War was launched by the Chief of Army at the 2005 Chief of Army’s History conference in Canberra. As at 2006, all papers in the Canberra Papers on Strategy and Defence series are peer reviewed. A list of the most recent Centre publications appears at the end of this volume, along with an Ordering form. Electronic copies (in pdf format) of all SDSC published Working Papers since 2006 may be viewed and downloaded for free from the SDSC website. Unless otherwise stated, publications of the Centre are presented without endorsement as contributions to the public record and debate. Authors are responsible for their own analyses and conclusions. Strategic and Defence Studies Centre Publications Program Advisory Review Panel Editorial Board Emeritus Professor Paul Dibb Professor Hugh White Professor Desmond Ball Dr Chris Chung Professor David Horner Dr Brendan Taylor Professor Hugh White Dr Christian Enemark Professor William Tow Miss Meredith Thatcher (series editor) Professor Anthony Milner Professor Virginia Hooker Dr Coral Bell Dr Pauline Kerr CO-PUBLICATION WITH CSS Canberra Paper 166 is being co-published with the Centre for Strategic Studies (CSS) at Victoria University in Wellington. CSS provides a focal point for research and discussion of New Zealand’s strategic security environment. CSS develops independent views and opinions based on quality research and analysis that ensures the Centre enjoys and deserves a high standing in New Zealand and beyond. The Centre’s focus is on the Asia-Pacific region. It addresses matters of national security and defence, conflict resolution, arms control and disarmament. CSS also examines the strategic implications of political, economic, social and industrial issues, as well as global issues such as human rights, the environment and sustainable development. CSS draws support from relevant departments of the New Zealand Government, from the universities, the private sector, the media, and from individuals in developing an understanding of strategic issues. Its aim is to provide a constructive input into policy development and foster informed public discussions of strategic issues. CSS interacts with similar institutions and particularly in the Asia- Pacific region to ensure that the work of the Centre represents a worthwhile New Zealand contribution to the security dialogue in the Asia-Pacific region. ABSTRACT The changes that have impacted on New Zealand Defence over the past 20 years reflect five critical assumptions: first, that a country’s defence policy and defence force ought to be appropriate to its place in the world; secondly, that in an environment where resources available to defence are limited, if its efficiency and effectiveness are to be optimised, a direct link between defence policy, priorities and funding is required; thirdly, that although the operational performance of a defence system does not lend itself easily to measurement by standard accounting or general commercial yardsticks, it is important to be able to relate expenditure decisions to results in some way; fourthly, that savings (or more capabilities per dollar) can be achieved from adopting a more business-like approach to defence management; and finally—based on New Zealand’s experience—that efficiency and effectiveness can be achieved by marrying state sector reform principles and defence needs. This paper discusses a variety of events that impacted on New Zealand defence during the period from the election of the Lange Labour Government in 1984 to the election of the Clark Coalition Government in late 1999 and ends with a brief section on the positive and negative aspects of those changes in terms of defence structure, systems, processes, accountabilities, roles and relationships. ABOUT THE AUTHOR The Honourable Derek Quigley is a Visiting Fellow at the Strategic and Defence Studies Centre at the Australian National University in Canberra. He has a background in farming, law, politics and consultancy and is a former New Zealand Cabinet Minister. He co-founded the ACT New Zealand Political Party with Sir Roger Douglas in the mid-1990s and was Chair of the Foreign Affairs, Defence and Trade Select Committee during the 1997–99 Parliament. His Committee produced the Defence Beyond 2000 Report, which became the blueprint for the Clark Government’s subsequent changes to New Zealand defence policy. Derek Quigley chaired the Strategos Resource Management Review of New Zealand Defence 1988, and in 2000 reviewed the contract to purchase F-16 fighter aircraft from the United States Government. He has also been involved in major reviews of Telecommunications, the Treasury, the Ministry of Justice, New Zealand Police and the Fire Service. For a number of years, he was Managing Director of the Hugo Consulting Group, which provides strategic advice to many of New Zealand’s major businesses. Derek Quigley received his LL.B. from the University of Canterbury in Christchurch, New Zealand, and in 2004 was awarded the Queen’s Service Order (QSO) for Public Service. CONTENTS Acronyms and Abbreviations xiii 1. Introduction 1 2. Two dominant issues from mid-1980 to the late 1980s 5 3. Reforms to the New Zealand Public Sector 13 4. New Zealand Defence Structure as at the mid-1980s 19 5. Strategos Resource Management Review of Defence 23 6. Reaction to the Report 71 7. National Party Governments and Defence Reform 85 8. Defence Beyond 2000 Reports 97 9. Australian View of New Zealand Defence in the 1990s 107 10. 2002 Report on Accountabilities and Structural Arrangements within New Zealand Defence 113 11. Conclusion 119 Notes 121 ACRONYMS AND ABBREVIATIONS ADF Australian Defence Force ANZAC Australian and New Zealand Army Corps ANZUS Australia, New Zealand, United States Security Treaty CAS Chief of Air Staff CDF Chief of Defence Force CDR Closer Defence Relations CDS Chief of Defence Staff CER Closer Economic Relations CGS Chief of General Staff CINCPAC Commander in Chief Pacific CNS Chief of Naval Staff DB2000 Defence Beyond 2000 Inquiry EEZ Exclusive Economic Zone FPDA Five Power Defence Arrangements GDP Gross Domestic Product GNP Gross National Product xiv Canberra Papers on Strategy and Defence No. 166 IEF Integrated Expansion Force INTERFET International Force East Timor MMP Mixed Member Proportional MP Member of Parliament MSE Military Strategic Estimate NZDF New Zealand Defence Force OECD Organisation of Economic Co-operation and Development RAAF Royal Australian Air Force RNZAF Royal New Zealand Air Force RNZN Royal New Zealand Navy RRF Ready Reaction Force SAS Special Air Service SOE State Owned Enterprise SSC State Services Commission USAF United States Air Force USN United States Navy VCDF Vice Chief of Defence Force CHAPTER 1 INTRODUCTION In 1990, the head of New Zealand’s Armed Forces became the only military chief in the West to control the human, financial, and material resources making up his country’s defence system. As a result of the 1989 Public Finance Act he had become accountable for the efficient, effective, and economical management of the activities and resources of the New Zealand Defence Force. The Chief of Defence force had always had the guns, but now he had the gold as well.1 This change, and a variety of others that have impacted on New Zealand Defence (Defence) over the past 20 years, reflect five critical assumptions: 1. A country’s defence policy and defence force ought to be appropriate to its place in the world. 2. In an environment where resources available to defence are limited, if its efficiency and effectiveness are to be optimised, a direct link between defence policy, priorities and funding is required. 3. Although the operational performance of a defence system does not lend itself easily to measurement by standard accounting or 2 Canberra Papers on Strategy and Defence No. 166 general commercial yardsticks, it is important to be able to relate expenditure decisions to results in some way.