DEFENCE, TO A BUSINESS LUNCHEON

  • Paul East
Defence

EXTRACT FROM AN ADDRESS BY HON PAUL EAST, MINISTER OF

WELLINGTON

I would like now to address an issue I consider to be "unfinished business" and that is the matter of the acquisition of at least one further frigate for our Navy. The recently released Government White Paper categorically commits the Government to nothing less than a three frigate navy. As you are aware, the Government has also decided not take up the option to purchase an Anzac frigate under the Anzac Frigate Treaty. To some this would appear contradictory.

The decision to allow the Treaty option to lapse does not mean that it's the end of the issue. I have made a firm commitment that the Government will address the issue again in the New Year. In that regard I have noted carefully the comments of the Treasurer when he states that it is not possible to buy a further Anzac frigate at this time because of the state of the economy and the requirement for future surpluses.

However, there are a number of other alternatives that will be explored to see whether those concerns can be met. In particular, we will investigate in more detail the prospect of negotiating with the Australians in an arrangement whereby we purchase one of the early ANZAC frigates that they have taken delivery of and they buy a further frigate at the end of the production line. The Australians are planning substantial changes to their Anzac ships from their third hull onwards. It may be that it could be more economical for Australia to construct a new ship to the modernised design rather than remodel an earlier vessel. We would purchase their Anzac frigate at a time closer to the retirement of CANTERBURY in 2005 but make the necessary arrangements now so that we would be able to forward plan on that basis.

Other options include looking at spreading the payments under any contract for a third frigate over a longer period, or looking at a leasing proposal where the actual ownership of the vessel is with a third party. The RNZAF leases its basic training aircraft and will shortly lease twin engined aircraft for multi engined training. However, leasing a fighting ship is another matter. To my knowledge it hasn't been done before so we will look at that one slowly and carefully.

But perhaps I'm getting a little ahead of myself here. Before talking of 'how' perhaps I should mention the 'why'. I remain firmly of the view that New Zealand needs no less than a three-frigate Navy but others remain unconvinced.

The White Paper spells out in some detail why New Zealand must involve itself in world affairs. The bottom line is we are a trading nation and 95% of our trade goes by sea. To protect this trade it is in our interest to ensure the world remains peaceful and we should be ready to protect that peace. We also have our own resources to protect. The value of production to New Zealand of its fishery is $1.4 billion annually; that, in 1997 dollars, is $42 billion over the thirty year life of an Anzac frigate. To me it seems a $1.7 billion investment is reasonable to protect a resource worth $42 billion. And that is just one resource.

In this regard the frigates have already proved their worth. HMAS ANZAC has already been involved in a long range intercept and arrest of fishing vessels operating illegally in the Australian EEZ surrounding Heard Island deep in the southern ocean to the south west of Western Australia. No patrol boat could have achieved that. We are sending a frigate to Bougainville and no patrol boat could undertake its tasks at that distance either.

Commonsense and logic dictates that if we are to have three frigates, and we have already spent $1.2 billion on two ANZAC frigates, then the third frigate should be an ANZAC also. Considerable amounts have already been spent on infrastructure at the Devonport Naval Base in both maintenance and training for the first two vessels. With a third Anzac the Navy will only need to train its men and women to serve in one class of vessel. To purchase a vessel of another design would mean obvious duplication of training not to mention increasing stores inventories and spare parts.

The Anzacs themselves are expensive. But modern technology will reduce their running costs. Computerisation reduces the size of the crew from 250 on the current Leanders to approximately 150 on the Anzacs. They have a range of 6000 miles over the Leanders' 2400 - 3000 mile range. Modular construction and extensive use of computers will shorten the amount of time spent in maintenance and directly increase the availability of the vessel for operations. A common design with Australia will also serve to enhance maintenance and accrue all the benefits of economy that an eleven ship fleet will bring.

The benefit to New Zealand industry should not be underestimated. The main spin off will be the $800 million worth of work that is coming to more than 400 New Zealand companies both big and small. Then there is the secondary, but no less important, benefits to the economy of other contracts that companies have won as a result of their involvement in this project. To date some $90 million in spin off contracts have been won. And of course there are the skills and technologies that have been introduced into this country.

Of course the Government does get money back for this investment. I do not have the figure but it would be interesting to see how much of the $1.5 billion the Government has spent has been returned to the Government in the form of taxes and GST. I understand that the Australian Department of Trade and Industry have calculated that, over time, they receive sixty cents back for every dollar spent in industry. New Zealand may be less than that but it serves to illustrate my point.

The benefit to New Zealand of NZ industry involvement in the project has been realised nationwide. I understand that there are only two electorates that have not received any work from the project.