New Zealand Unveils New Defence Industry Strategy Focus on Tech Fund and 2% GDP Goal.

New Zealand announced a Defence Industry Strategy with a NZ$100–300m military technology fund and stricter “buy local” rules, alongside NZ$9b in near-term defence spending. The plan targets ~2% of GDP for defence within eight years, reshaping procurement and accelerating innovation that could open opportunities for U.S. suppliers and partners

New Zealand’s government confirmed in Wellington on Friday, Oct. 3, 2025, a new Defence Industry Strategy that pairs NZ$9 billion in four-year spending with a NZ$100–300 million military technology fund and tougher local-industry integration requirements for foreign primes. The move advances a previously signaled path to lift defence outlays toward ~2% of GDP within eight years. It rewires procurement to favor domestic supply chains while creating new co-development and offset pathways relevant to U.S. defense firms operating in the Indo-Pacific.
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Anzac-class frigate HMNZS Te Kaha at sea, upgraded with the CMS 330 combat system and Sea Ceptor firing CAMM, fitted with a SMART-S Mk2 3D radar and a forward 127 mm Mk 45 gun. (Picture source: New Zealand MoD)

The approach to program management is being reworked. Wellington is introducing a Minimum Viable Capability method, which consists of holding cost and schedule fixed while adjusting scope to deliver a threshold capability more quickly, then iterating in spirals based on user feedback and the state of the art. Future tenders will explicitly invite industry to indicate requirements that lengthen timelines and to propose technological alternatives when they reduce schedule risk. The objective is to avoid the pursuit of a perfect solution that arrives too late and to redirect effort toward deliverable military effects on short timelines.

The government understands these components only matter if market access is clear. The strategy therefore provides for New Zealand Industry Capability Plans, modelled on Australia, with a minimum weight in bid evaluation and particular attention to supply chain resilience and the ability to support systems in New Zealand. The text also mentions a Thin Prime option, under which a small or tier-two supplier takes the role of managing contractor and aggregates subcontractors, including the original equipment manufacturer, to deliver a system more quickly. Derogations from generic procurement rules are foreseen to secure critical supply chain links or where interoperability with Australia is at stake.

At sea, the example of the Anzac-class frigates shows the level of ambition. HMNZS Te Kaha has received a CMS 330 combat system, Sea Ceptor air defence firing CAMM in place of Sea Sparrow, and a SMART-S Mk2 3D radar, while retaining a 127 mm Mk 45 gun, a Phalanx CIWS, and Mk 32 torpedo tubes. This architecture aims for robustness and availability. It fits into a wider surface surveillance and data fusion framework in which the National Maritime Coordination Centre provides a real-time, shareable picture fed in particular by AIS. In 2024, the ministry contracted start-up Starboard Maritime Intelligence for a Data Fusion System that analyses multiple datasets from different jurisdictions, to identify anomalous vessel behaviour more quickly to support security, biosecurity, and search and rescue missions.

The light fleet reflects the focus on sustainment. Three Littoral Manoeuvre Craft Sentinel 1250 were delivered in 2023, with high-density polyethylene hulls that require no paint, resist corrosion, and exhibit a low electromagnetic signature. The design maximizes deck beam, integrates flush hatches, and accepts an extensive electronics fit. A parallel contract provides for 17 sea boats 780R, with first delivery expected at the end of 2025. The whole effort draws on a network of local subcontractors, including Hamilton Jet and General Marine Services, for major equipment and support.

In the air domain, New Zealand validated C-130J-30 self-protection domestically. Trials at RNZAF Base Auckland and the Kaipara Air Weapons Range qualified chaff and flare release using a ground stimulator. Conducting the campaign in New Zealand accelerated entry into service, reduced costs, and built local integration and electronic warfare skills useful for future retrofits.

On land, the army is pursuing a frugal and iterative approach to FPV drones and additive manufacturing for parts and sub-assemblies. The aim is to create short loops: train operators, validate useful configurations, and rapidly produce mounts, pods, or protection. Properly employed, an FPV module provides near-immediate reconnaissance at section level and enables very short-range precision strikes at controlled cost. This requires radio discipline, clear rules of engagement, and electronic warfare measures that protect friendly links without saturating them. This philosophy, reflected in the strategy’s priority for uncrewed systems and counter-systems, also leads to more ambitious projects: long-range UAVs for maritime surveillance, uncrewed VTOL as a partial substitute for shipborne helicopters, and uncrewed surface and subsurface vessels to reinforce EEZ coverage.

Sustainment remains decisive. The Defence Capability Plan allocates between 300 and 600 million New Zealand dollars to strengthen logistics chains. Priority goes to MRO and local manufacture of spare parts where the strategic and economic case is clear, with the option to bypass open competition for critical goods and services. When outsourcing is required, Australia is preferred to reduce downtime, as shown by repairs of P-8A Poseidon radars and military radios carried out in Adelaide and Brisbane. In parallel, the strategy supports regional initiatives such as PIPIR to provide in-theatre repair capacity and reduce dependence on distant supply chains.

Operational employment evolves with these choices. A modernized Anzac frigate protected by Sea Ceptor improves convoy escort and presence in straits, while the embarked helicopter extends anti-submarine detection chains. On land, the spread of FPV modules restores initiative at low cost and complicates an irregular adversary’s actions. All of this demands maintenance, spares, and instructors. This is where additional funding and procurement reform are intended to make a difference: an annual NZDF Procurement Pipeline to give SMEs visibility, a procurement centre of excellence, and skill development to accelerate contracting. Deeper integration with Canberra, up to mutual recognition of industrial clearances and market-access pathways, provides scale and a safety net in a more contested Indo-Pacific with more vulnerable maritime flows.