Agreed, if someone familiar with accounting practices could explain the accounting, capital charge and depreciation aspects that Todjaeger is referring to, it would be appreciated.
The information NZjoeAverage is referring to is at
http://www.parliament.nz/en-NZ/PB/Debates/QWA/c/2/7/QWA and two of the three questions I saw were:
"14098 (2007). Dr Wayne Mapp to the Minister of Defence (10 Aug 2007): What percentage has defence spending comprised of New Zealand's gross domestic product in each of the last seven years?"
"Hon Phil Goff (Minister of Defence) replied: Defence spending in each of the last seven years, as a percentage of New Zealand’s gross domestic product, has been: FY: 2000/01 - 1.26% 2001/02 - 1.13% 2002/03 - 1.08% 2003/04 - 1.09% 2004/05 - 1.02% 2005/06 - 1.06% 2006/07 - 1.10%"
"14099 (2007). Dr Wayne Mapp to the Minister of Defence (10 Aug 2007): What percentage has defence spending comprised of New Zealand's gross domestic product in each of the last seven years using standard NATO measures?"
"Hon Phil Goff (Minister of Defence) replied: Defence spending in each of the last seven years, as a percentage of New Zealand’s gross domestic product, and using standard NATO measures, has been: FY: 2000/01 - 0.97% 2001/02 - 1.03% 2002/03 - 0.87% 2003/04 - 1.08% 2004/05 - 0.91% 2005/06 - 0.99% 2006/07 - 1.09%"
Trouble is (in terms of easily comparing NZ to other countries) NZ does appear to budget for defence differently. The following quote is quite interesting and it is taken from Jim Rolfe’s “Cutting their cloth: NZ’s defence strategy” published by ASPI this year.
“The New Zealand Defence Force (NZDF) has some 9,000 professional servicemen and women, and a total personnel strength (including nonregular forces and civilians) of about 13,500. Its budget was very slightly less than NZ$1,750 million for the year ending June 2007 (to which should be added some $9.5 million for the Ministry of Defence and $285 million for defence capital expenditure, both accounted for separately). Overall defence expenditure is about 1.3% of gross domestic product and 4% of core government spending.
At 30 June 2006, the NZDF had 409 personnel operationally deployed (that is, not on exercises or other training) on eleven operations in some fifteen countries. Deployment numbers can change quickly-in the 2005-06 financial year, they varied between about 240 and 515, and have reached more than 800 at other times.
Although for many countries these numbers are not at all large in either absolute or relative terms, for a country the size of New Zealand (4 million population, $52 billion annual appropriated government expenditure) facing no military threat and no compelling reason to spend on guns rather than butter, they are significant figures”.
Now the Labour Govt have committed to some NZ$3B in defence capital equipment spending from around 2000-2012 and some NZ $4.7B in their defence sustainability initiative from 2005 (another 10 year project?). If I understand things correctly, these figures are in addition to defence’s annual operating budget. However while these figures appear impressive for a country and economy the size of NZ’s, from memory I believe the Govt conceded to the opposition a couple of years ago that these additional expenditures won’t significantly increase the overall spending in relation to GDP (can’t recall the reasons why, but perhaps it is because if you divide the $7.7B extra funding on a per year basis the annual figure is of course lower and probably because in actuality the capital expenditure will vary year to year depending on what was bought and paid for and in relation to the DSI, I recall the Govt saying that the DSI expenditure will be smaller in the initial first few years then ramp up in later years (eg presumably when the air force relocate to Ohakea and build new hangers and accommodation etc). Hopefully someone else can clarify this better than me here.
Also the following Parliamentary question better explains what the DSI is in simple language (ignore the ANZAC Frigate question which was fobbed off slightly):
"13075 (2007). Dr Wayne Mapp to the Minister of Defence (31 Jul 2007): Further to the answer to written question 04069 (2007), is the ANZAC frigate upgrade fully budgeted for in the Defence Sustainability Initiative (DSI); if not, what aspects of the upgrade are not covered by the DSI?
Hon Phil Goff (Minister of Defence) replied: The $4.6 billion Defence Sustainability Initiative (DSI) announced by the Government in May 2005 consists of operating funding to enable increased personnel numbers; increased reserve stocks of ammunition, fuel and spares; development of infrastructure at camps and bases; and improved corporate management capability. The DSI did include a modest capital contribution to the Defence Long-Term Development Plan, which remains the primary source of funding for capital equipment projects."
So perhaps one could conclude that even a "slight" increase to GDP expenditure to even 1.5% or slightly higher (don't think we will see that 2% cold war figure it used to be - could be wrong, off the top of my head etc), as Todjaeger asks, it would be an interesting exercise to figure out how much money could be allocated to NZDF projects etc, especially in light of our enthusiam here for the Govt to upgrade the NZDF further. Any accountants out there with a few minutes to spare to work it out?