NZDF General discussion thread

[MrConservative]

I am not too far off with this Todj. Just some subtle nuances here and there, plus prejudices on one or two things.

Naval Combat Forces: Expand the force to 4+ GP escorts. I have in mind large GP frigates able to conduct ASW, ASuW, and area air defence, all to a greater degree than the upgraded RNZN frigates will be able to. IMO VLS cells in sufficient quantity to support a number of ESSM-type SAM, as well as an ASROC-like capability, towed sonar arrray, plus AShM would all be required. My rational for 4+, is that for surface vessels the rule of threes applies. At any given time, one vessel will be undergoing some sort of maintenance, repairs, or upgrade, another will be in either a training cycle or recovery from a deployment, with the third either on or available for a deployment. Adding a fourth (or more) vessel into the mix should permit there to be one vessel away on a deployment, with one at home in or local/regional waters available to deploy. A surge capability can also exist at times where the vessel on a training or recovery cycle could also potentially be deployed as well. This should permit at least one, and potentially as many as three frigates to be deployed in the event of some incident or crisis.

Definitely agree on 3 larger surface combatants. Four hulls would be nice. I wonder about the merits of possibly utilising the StanFlex system whereby we would be able to at least deployed to sea 2 full kitted hulls and a third available on a surge if need be whilst the fourth hull undergoes maintenance. With that also a landbased immersive naval combat training facility.

The other alternative on the above is to go for three hulls and have a patrol / asw further emphasis on the MRAASS (outlined below) for example a couple of Sprites could be deployed in a ASW role from the ship per the Palazzo and Trentini concept. The Japanese envisaged MCM rotary flying off their flatdecks.

Naval Patrol Forces: This I would also seek to effect some changes to. As is and has been discussed in the RNZN thread I would eliminate the current IPV's since they add little to current defence capabilities, being too small to really operate well in some of the waters around NZ, yet too large (and requiring too large a crew) to operate as close inshore as apparently desired at times.

Inshore patrol out to the 12 mile limit would be better served by the Civilian Agencies. Police and Customs already share a couple of Q-West 19m vessels, which I think were around $2.8m each. Police own them and Customs work with them for now. Fisheries have their own small launches like Customs do. Of course there is the Coastguard and Maritime New Zealand which could also be further partners involved. Local build construction, national coverage, shared ownership models they could really be a good solution. With better aerial surveillance coming from a 2nd tier MSA and with the new approach for intel led discovery and directed response rather than the old sea days patrol methodology the inshore patrol coverage would be more efficient and basically out of defences hands and directly operated by the endusers.

I would look to expand the Patrol Forces capability up to ~4+ OPV-sized vessels, again to allow for training, refit/repairs, deployment and available for deployment. Me being me, I would look to introduce a newer, more capable design than the current OPV so that they could at least conduct anti-piracy patrols safely. I would also prefer some additional thought and options (like a magazine in the hangar for armed helicopter operations) be built into the design, so that if things really went to custard the OPV's could be modified and then tasked with some of the lower risk escort duties. By modified, I mean fitted with MCM kit, or Sea Ceptor for VSHRAAD, or a towed sonar array and some LWT launchers, etc. I would also likely delete the ice strengthening, since that inclusion in a design seems to really have a negative impact on a number of ship characteristics and I have to question just how much value there is for the RNZN to have three ice-strengthened ships. If things could be arranged, I would also like to then retire/sell the two current OPV's and replace them with the newer, improved OPV.

The DWP is going to place more focus on the Southern Ocean according political sources. Where we need to focus on is how the Scando's do this. So what we are looking at is two Southern Ocean Patrol vessels. I also think that in light of the Rena incident that an improved environmental protection dimension to these ships would be advisable as well a 1A Ice as I could see them also being utilised in a Scot Base supply dimension. TCU's and stanflex mission capability, helo and hanger. I would also add that this vessel would also be available for other missions in other roles such as EEZ, salvage, whatever stanflex module is plausible. Really a multi-purpose ship.

It is still very up in the air with what is planned for the 3rd OPV and the LWSV. With stanflex module approach a single vessel can do both and more. I do like the idea of a swing role vessel of around 2500-2750 tonnes / 95-100m with a 57mm bofors, flight deck and hanger and then plug and play like lego depending on the mission profile. Being able to quickly morph into a Corvette. The Danes way of doing things is smart and we should pick up the methodology.　

Aerial Surveillance: For this... Several things need to be improved IMO. The P-3K Orions need to regain an ASW capability, and then need to start rebuilding any/all atrophied skills. This is only for the short term. In the medium to long-term, I believe a two-tiered fixed-wing aerial maritime patrol capability is required. The top tier should be made up of at least 4 P-8 Poseidon's, a 1:1 replacement ratio for the Orions if feasible, and even more than 6 if possible. I have my doubts on that score. I would also advocate for 4-6 second tier MPA, something along the size and capabilities of the C-295MPA, or one of the armed MPA versions of the CN-235. These second tier aircraft could then cover most of the lower level maritime patrol activities which the P-3K Orions have been performing, but also be able to be kitted out to conduct ASW and ASuW operations if needed, either around NZ proper, or forward deployed alongside or in place of some of the P-8 Poseidons. On a side note to this, I would also recommend increasing the number of naval helicopters in service as well. This would allow more to be deployed operationally if/when RNZN vessels are deployed, as well as providing more aerial surveillance in and around NZ proper when operating from a land base.

My take is P-8 Poseidon's x 4 followed up with a UAS platform that also slots into BAMS and acts as a generator for the NAB and then onto FYES partners. I am sure in a decade or so their will be a Triton-lite as there is already on paper a mini-Poseidon based on a SBJ as well as updated reboots of previously non accepted platforms once offered. The DWP will endorse UAS and note that our area of surveillance interest is massive and significant in its importance. I am of that with the C-17 as our strategic air mobility preference (see below) a Mariner / Reaper sized UAS is able to be deployed with ground station which could be brilliant in working from our offshore defence dependencies.

The eventual Seasprite replacement longterm would hopefully be seen in larger numbers and other possible developments of the Firescout post 2020 could be interesting to see how they unfold. An ASW version that can do more than detect?

I am also giving thought about what can be salvaged from the P-3K'2 once they get culled. What could be utilised on any future MPA/ASW platform that could be crossed over. (Todays tier 1 is tomorrows tier 2 and one could include stuff pinched from Frigates swapped over onto other vessels for greater economies)

Air Transport: The fixed-wing component clearly requires replacement, and rather quickly. Absent the release of the air transport review, it is hard to say what would be a good mix. I feel that greater numbers than the current 5+2 are needed, and that modifying civilian jetliners are not an efficient and effective method of airlift, but until more is known on the range/weight/volume requirements...

For rotary-wing airlift... while I am not a particular fan of the NH-90 (I feel that it was put into service before adequate development and prototyping had been done) I do feel that having a force of 8+1, is insufficient.

The failure to grab 2 of the C-17 whitetails when just 5 were left was poor. I believe that not wanting to miss the 2015 surplus target may have played a role. The opportunity cost is the opportunity lost and you would think the bright brains in Treasury would have remembered that mantra from their ECON 101 days. Everyone was happy with it except for Ron Mark. Big Jerry was very warm to it, Phil Goff was happy as was all the members of the Defence SC who enjoyed their demo flight. I am still of the view that a window can be negotiated to lease or buy a couple of the soon to be stored C-17s from the ones that were with 62nd AW at McChord (I believe with they are from 10 Sqd (the aircrew training squadron) and are possibly Block 9+ though not sure if they were updated to Block 16 at some stage - but that can happen if not done). A couple more 'Allied' C-17s workhorses in the Pacific and of course the Op Deep Freeze connection out of CHCH would be a plausible negotiating point. A couple of proven solid updated block C-17s years sooner would be my preference than waiting years for the unknown quantity that is still the A400M. Other than that what ends up as the tactical solution really comes down to the range/weight/volume metric as you point out. VIP jet can be funded elsewhere from the crown accounts or leased.

The promised LUH refresh in a couple of years will be interesting. I gather that the RNZAF is pretty happy with them. There was talk around the time of the last DWP that the refresh may see 3 civilian Power versions bought as trainers. I would see the opportunity to add marinized extra airframes for operations off the OPVs. This would take pressure off the NH-90's and Sprites.

Sealift: I would have the NZDF get as much practice in amphibious operations as possible out of HMNZS Canterbury, then sell or otherwise get her out of RNZN service and replace her with a vessel deliberately designed for sealift and amphibious operations. Something with a well dock, and greater self-defence capabilities from both air and surface threats.

As things stand now, the MRV is suitable for deployment on HADR operations, exercises, or amphibious landings in very benign situations. I am not advocating for the NZDF to acquire an opposed amphibious landing capability, but I do feel that the NZDF might be required to engage in amphibious operations in areas where not everyone is particularly friendly.

The CY is probably my most loathed ship. But I would keep it for as long as possible as a Sealift backup when the better Multi-role Amphibious & Aviation Support Ship replaces it is not available such as a refit. So a form of redundancy in a way. It could have a supplementary role as an aviation training and initial sea training vessel. The larger more capable MRAASS maybe deployed on operations and a Cyclone hits somewhere in the pacific requiring a HADR response. It would be available as a back-up. When I think of reserve it could well be a interesting alternative vessel for the VR on a national level as a kind of their flagship.

As for the 'MRAASS' I have laid out the rationale and modus operandi for that in the past and I agree entirely with Todj that it needs a well dock, and greater self-defence capabilities from both air and surface threats. The ST Endurance 160 is a hull that I have always liked from an ideal conops perspective of our F2035 JATF.

Looking out 2030-2031 Navy wise this is what I would sense as plausible.

2 x South Ocean Patrol Vessels that swing roles via mission packages
4 x Minor Surface Combatants that swing roles via mission packages
3 x Large Surface Combatants
1 x Endeavour (Maritime Sustainment Ship)
1 x Canterbury (Sealift/Training)
1 x Multi-role Amphibious & Aviation Support Ship

 

[40 deg south]

Honestly not sure, perhaps CD could comment? IIRC the M119A3 version in use by the US was developed in 2013, and incorporates some digital targeting systems adapted from those developed for the M777A2.

Couple of relevant links here. I seem to remember reading that the refurbishment in Australia was supposed to keep them going until 2030.

Big Bang Theory: Asian Artillery Ambitions - Asian Military Review

Staff make light work of NZ guns | The Border Mail

Oops, just noticed CD had already responded.

 

[Rob c]

Looking out 2030-2031 Navy wise this is what I would sense as plausible.

2 x South Ocean Patrol Vessels that swing roles via mission packages
4 x Minor Surface Combatants that swing roles via mission packages
3 x Large Surface Combatants
1 x Endeavour (Maritime Sustainment Ship)
1 x Canterbury (Sealift/Training)
1 x Multi-role Amphibious & Aviation Support Ship

I would think this is a little ambitious, however I do agree with 3 x surface Combatants as 3 is the min number you can get better than 95% availability from and the maritime sustainment ship,I think you could combine the roles of the last two, using a slightly larger platform. I would add 3x OPV with a larger gun (+57mm )and fitted for but not necessarily carrying a close in defence against missiles/aircraft. and sonar. Ice protection could be added at the initial design stage so as to not incur the problems that the late add on did to the current OPV's. possibly more speed. This would enable to be used in low and medium intensity area's of conflict.

 

[Cadredave]

With that comment I made in my previous post about the Army's lack of MANPADs, I wasn't actually referring to your post. I was expanding upon RegR's reply to my post (Specifically "but would be happy to hear otherwise as does seem a rather gaping hole in our force structure otherwise. ") while expressing my own concerns about the matter.

So, when I said in my post"and, as an above post noted, ", I was referring another user's comment, not yours.

Apologies for the confusion.

Ok I see the confusion when you reply to anyone you quote the post you need to reply to, as you used my post I naturally thought you were replying to me no harm or foul done.

CD

 

[MrConservative]

I would think this is a little ambitious, however I do agree with 3 x surface Combatants as 3 is the min number you can get better than 95% availability from and the maritime sustainment ship,I think you could combine the roles of the last two, using a slightly larger platform. I would add 3x OPV with a larger gun (+57mm )and fitted for but not necessarily carrying a close in defence against missiles/aircraft. and sonar. Ice protection could be added at the initial design stage so as to not incur the problems that the late add on did to the current OPV's. possibly more speed. This would enable to be used in low and medium intensity area's of conflict.

Did you actually read in full and digest what I replied to in the excellent post by Todjaegers?

On one hand you say it is ambitious - what - for 15 years into the future a 12 ship Navy - then on the other hand you then add 3 extra OPV's, with ice strengthening, and then miss the whole point about Stan Flex. Why on earth would you want to now have 5 ice capable vessels? The proposed Southern Ocean Patrol vessels are ICE capable enough to task that seasonal patrol role and have further utility (again using the Stan Flex system to swing into other roles such ERP, MCM, Oceanography & Survey, sub antarctic supply....)

Clue: The 'minor surface combatant' is a OPV type vessel that has the ability via Stan Flex mission modules to conduct other taskings or capabilities i,e swing roles. MCM, ASW, Elint, ASM, SAM. There are even Stanflex modules for harpoon on the remote chance that was necessary. For a small navy it is the way to go, as it is significantly more economic approach to achieving capabilities.

Southern Ocean patrol and support role on one hand and our Northern EEZ and Pacific interests on the other actually require different conops and different strategic solutions. Thus there is a different patrol vessel configuration required for each. That is why their is a clear difference in their orientation marked by whether or not they need 1A ice capability. The minor surface combatant (or you could call them OCV's like Australia will per SEA 1180) does not need a 1A ice belt. The Southern Ocean Patrol vessel does not need advanced weapon modules to be fitted, it would probably need to have greater logistic and flexdeck space available for environmental clean-up, and more TCU spaces.

As for combining the 'last two'. Again you have failed to grasp or not read why I have included the Canterbury - in my view it should be retired from the main JATF centric role earlier for a replacement MRAASS though stay on as part of the fleet for as long as possible in a limited cover role (i.e the MRAASS cannot be available 24/7/365 yet we would not be able to operate 2 identical MRAASS ships), do the occasional aviation training role and other shipboard training roles and including availability for VR training. Its is bought and paid for it will still earn its keep and be very useful as a 12th vessel in a part-time capacity. The MRAASS is the ideal size for us and includes a growth factor over and above the current 9000t CY.

 

[Rob c]

Did you actually read in full and digest what I replied to in the excellent post by Todjaegers?

On one hand you say it is ambitious - what - for 15 years into the future a 12 ship Navy - then on the other hand you then add 3 extra OPV's, with ice strengthening, and then miss the whole point about Stan Flex. Why on earth would you want to now have 5 ice capable vessels? The proposed Southern Ocean Patrol vessels are ICE capable enough to task that seasonal patrol role and have further utility (again using the Stan Flex system to swing into other roles such ERP, MCM, Oceanography & Survey, sub antarctic supply....)

Clue: The 'minor surface combatant' is a OPV type vessel that has the ability via Stan Flex mission modules to conduct other taskings or capabilities i,e swing roles. MCM, ASW, Elint, ASM, SAM. There are even Stanflex modules for harpoon on the remote chance that was necessary. For a small navy it is the way to go, as it is significantly more economic approach to achieving capabilities.

Southern Ocean patrol and support role on one hand and our Northern EEZ and Pacific interests on the other actually require different conops and different strategic solutions. Thus there is a different patrol vessel configuration required for each. That is why their is a clear difference in their orientation marked by whether or not they need 1A ice capability. The minor surface combatant (or you could call them OCV's like Australia will per SEA 1180) does not need a 1A ice belt. The Southern Ocean Patrol vessel does not need advanced weapon modules to be fitted, it would probably need to have greater logistic and flexdeck space available for environmental clean-up, and more TCU spaces.

As for combining the 'last two'. Again you have failed to grasp or not read why I have included the Canterbury - in my view it should be retired from the main JATF centric role earlier for a replacement MRAASS though stay on as part of the fleet for as long as possible in a limited cover role (i.e the MRAASS cannot be available 24/7/365 yet we would not be able to operate 2 identical MRAASS ships), do the occasional aviation training role and other shipboard training roles and including availability for VR training. Its is bought and paid for it will still earn its keep and be very useful as a 12th vessel in a part-time capacity. The MRAASS is the ideal size for us and includes a growth factor over and above the current 9000t CY.

I was only referring to your fleet make-up, By 2030 -35 most of the current fleet will be over 25 years old and will either have been replaced or nead replacing, The current OPV's due to the lack of ability to up grade with any weight increase I assumed will not go beyond this time frame so would be replaced and it was the replacement I was talking about. and while not using your terminology, I was indicating a more flexible approach to the OPV's design. The Ice protection was a could be , not a would be, as stated. I do get your point regarding MRAASS ship and availability however CY would be closing in on 30 years old and maintenance would be a problem as would crewing, I feel we would struggle both financially and manpower to get even close to operating 12 ships even if we closed down the army and went to 2% GDP under the current financial accounting system. I do think from a defence of NZ perspective we would need to regenerate ACF first. I agree with you that a more flexible approach, allowing multipule tasks to be performed by the same platform is very desirable.

 

[MrConservative]

I do get your point regarding MRAASS ship and availability however CY would be closing in on 30 years old and maintenance would be a problem as would crewing, I feel we would struggle both financially and manpower to get even close to operating 12 ships even if we closed down the army and went to 2% GDP under the current financial accounting system. I do think from a defence of NZ perspective we would need to regenerate ACF first.

The RNZN can operate 12 vessels and has operated more in the recent past during times of less automation and more intensive crewing using far less efficient and more costly to operate ships. It can do this well within manpower per captia growth margins and fairly modest GDP per capita increases over a 15 year replacement program.

In 1996 years ago when funding was at similar levels (low) to present we operated 3 Frigates, the Canterbury, Waikato, and Wellington with complements at over 240 and had just retired the Southland and just acquired the Sealift ship the Charles Upham the previous year. Also the Endeavour, the Manawanui, the 1300 tonne HMNZS Tui an oceanographic survey and research ship with a crew of 36 was in the 1996 RNZN fleet and the 3900 tonne Monowai with a crew of 120. Add to that minor fleet tug the Arataki II and the 7 Moa Class IPC’s 3 of which were in the regular fleet and 4 with the reserve divisions.

You do not really need to point out the bleeding obvious to me regarding the CY. Of course the CY will need replacing eventually, but I would keep it on for as long as possible before replacing it with another basic multi-role sealift ship (to back up the MRAASS and to be used for training and a ship in which can be associated with the VR). It has been relatively lightly used due to a number of obvious reasons and could be in the fleet until the late 2030’s in the managed part-time / back-up/ reserve role I outlined.

Finally though I have made it clear that NZ needs to return to possessing an air combat capability as an ideal it will be well down the list of priorities, such as a small balanced fleet like I outlined, improved Air Mobility and IRS capabilities, network enabled Army, and the other foundation building blocks of the JATF thus outlined so far.

If you do not know basic terminology such as 'minor surface combatants' please do your homework and research or become more circumspect before critiquing others posts.

 

[ngatimozart]

I was only referring to your fleet make-up, By 2030 -35 most of the current fleet will be over 25 years old and will either have been replaced or nead replacing, The current OPV's due to the lack of ability to up grade with any weight increase I assumed will not go beyond this time frame so would be replaced and it was the replacement I was talking about. and while not using your terminology, I was indicating a more flexible approach to the OPV's design. The Ice protection was a could be , not a would be, as stated. I do get your point regarding MRAASS ship and availability however CY would be closing in on 30 years old and maintenance would be a problem as would crewing, I feel we would struggle both financially and manpower to get even close to operating 12 ships even if we closed down the army and went to 2% GDP under the current financial accounting system. I do think from a defence of NZ perspective we would need to regenerate ACF first. I agree with you that a more flexible approach, allowing multipule tasks to be performed by the same platform is very desirable.

You need to go and undertake some reading before launching fully into something where it you are unfamiliar with the subject. In this case reading back through the RNZN thread would be highly recommended because the capabilities and platforms that are being discussed here, have been given a robust discussion over time there. That includes the Stanflex modules and concepts. The other main point is that defence has undergone a revolution in recent times, known as the Revolution in Military Affairs.

I very strongly suggest that you to do some reading, research etc., before butting heads with those who are very familiar with the subject.

 

[Rob c]

You need to go and undertake some reading before launching fully into something where it you are unfamiliar with the subject. In this case reading back through the RNZN thread would be highly recommended because the capabilities and platforms that are being discussed here, have been given a robust discussion over time there. That includes the Stanflex modules and concepts. The other main point is that defence has undergone a revolution in recent times, known as the Revolution in Military Affairs.

I very strongly suggest that you to do some reading, research etc., before butting heads with those who are very familiar with the subject.

Point Taken .However what I was pointing to was the cost factor (could this be possible to achieve ) I am sorry if I was not clear in this. The capital charge and depreciation ( average 19% of capital value for the last 5 years)would be on the wrong side of a billion dollars for the navy alone. That's before you start on extra basing, maintenance facilities, personal numbers, plus assault troops for the army and more helicopters and so on. Even the reduced fleet I suggested would be a tight fit in a 2% GDP budget. I am aware of the revolution in in military affairs but believe that it must be taken in context with the situation in any area and the country involved in that situation. In my roles as a manager in industry often I found some surprisingly good results can be achieved by new input from people not entrenched in the system. What would need to change would not only be a significant increase in the Defence Vote, but also a change in the accounting system. (I am not aware of any other Government using this system for defence) We are a minority of one in this regard. As I am retired I have time to read from many sources, and find that there are many and varied opinions on most subjects, not all of which can be applied to the NZ situation, in a lot of cases it simply becomes a matter of ones own opinion and logical deduction.
I have no problem with the fleet put forward, it would be brilliant if it could be achieved.

 

[Todjaeger]

Point Taken .However what I was pointing to was the cost factor (could this be possible to achieve ) I am sorry if I was not clear in this. The capital charge and depreciation ( average 19% of capital value for the last 5 years)would be on the wrong side of a billion dollars for the navy alone. That's before you start on extra basing, maintenance facilities, personal numbers, plus assault troops for the army and more helicopters and so on. Even the reduced fleet I suggested would be a tight fit in a 2% GDP budget. I am aware of the revolution in in military affairs but believe that it must be taken in context with the situation in any area and the country involved in that situation. In my roles as a manager in industry often I found some surprisingly good results can be achieved by new input from people not entrenched in the system. What would need to change would not only be a significant increase in the Defence Vote, but also a change in the accounting system. (I am not aware of any other Government using this system for defence) We are a minority of one in this regard. As I am retired I have time to read from many sources, and find that there are many and varied opinions on most subjects, not all of which can be applied to the NZ situation, in a lot of cases it simply becomes a matter of ones own opinion and logical deduction.
I have no problem with the fleet put forward, it would be brilliant if it could be achieved.

A few things to keep in mind. I have been banging on about how NZ handles accounting for Vote Defence for something like the last eight years or so. To the point where some Kiwi posters at times have commented about getting tired of hearing me point out the issue. Some of the Kiwis who are or affiliated with accounting have at times indicated that the Capital Charge and GST does seem to inflate the Vote Defence budget, without any actual increase in funding. In effect, the funding the NZDF actually gets is less than it appears to be.


With that in mind, if Vote Defence were to get increased to 2% GDP, that would be ~NZD$4.9 bil. Even if the Capital Charge and GST were not taken out of the accounting, that would still mean an increase of approximately NZD$1.14 bil. p.a. in real terms. If the accounting was changed so that Vote Defence only covered funding in real terms received and paid out, and Vote Defence were raised to 2% GDP, that would be nearly triple the level of current funding in real terms. The increase of course would not come all at once, but with some forethought and planning, funding should be able to be set aside so that some of the big ticket items can be paid for over a period of time instead of a 'lump sum' being paid out of the budget all at once.

 

[shanes_world_05]

A few things to keep in mind. I have been banging on about how NZ handles accounting for Vote Defence for something like the last eight years or so. To the point where some Kiwi posters at times have commented about getting tired of hearing me point out the issue. Some of the Kiwis who are or affiliated with accounting have at times indicated that the Capital Charge and GST does seem to inflate the Vote Defence budget, without any actual increase in funding. In effect, the funding the NZDF actually gets is less than it appears to be.


With that in mind, if Vote Defence were to get increased to 2% GDP, that would be ~NZD$4.9 bil. Even if the Capital Charge and GST were not taken out of the accounting, that would still mean an increase of approximately NZD$1.14 bil. p.a. in real terms. If the accounting was changed so that Vote Defence only covered funding in real terms received and paid out, and Vote Defence were raised to 2% GDP, that would be nearly triple the level of current funding in real terms. The increase of course would not come all at once, but with some forethought and planning, funding should be able to be set aside so that some of the big ticket items can be paid for over a period of time instead of a 'lump sum' being paid out of the budget all at once.

At the risk of upsetting other participants in this discussion can you help me out and explain the capital charge again. The best I got was the whilst the logic was kind of there the justification wasn't in my mind.
As I understand there is a depreciation cost of owning major equipment which is supposed to be purposed to replace equipment and then the Capital charge was for the cost of owning? Is that correct? And the GST is just a simplistic waste of time in my ignorant opinion.

Separate question. Anyone familiar with shipbuilding or operating a large vessel. Can you make a small flat top carrier (8000 t) move like an equivalently sized conventional destroyer? In terms of change of direction, acceleration, overall speed etc? Do they have to be significantly different in the way they handle?

 

[Todjaeger]

The DWP is going to place more focus on the Southern Ocean according political sources. Where we need to focus on is how the Scando's do this. So what we are looking at is two Southern Ocean Patrol vessels. I also think that in light of the Rena incident that an improved environmental protection dimension to these ships would be advisable as well a 1A Ice as I could see them also being utilised in a Scot Base supply dimension. TCU's and stanflex mission capability, helo and hanger. I would also add that this vessel would also be available for other missions in other roles such as EEZ, salvage, whatever stanflex module is plausible. Really a multi-purpose ship.

<snipped content> AND

Looking out 2030-2031 Navy wise this is what I would sense as plausible.

2 x South Ocean Patrol Vessels that swing roles via mission packages
4 x Minor Surface Combatants that swing roles via mission packages
3 x Large Surface Combatants
1 x Endeavour (Maritime Sustainment Ship)
1 x Canterbury (Sealift/Training)
1 x Multi-role Amphibious & Aviation Support Ship

While I would not be surprised by a greater focus on the Southern Ocean in the DWP, I do question the wisdom and worth of such a focus. IIRC the NZ Antarctic EEZ claims are not currently recognized by other nations, and there is currently a treaty in force which prohibits Antarctic resource exploitation at present. Also from memory, there is precious little NZ can do legally if/when 'suspected' illegal exploitation is underway. Another area of concern is whether NZ would/could do something if another nation was involved which could apply diplomatic and/or economic pressure.

 

[Gibbo]

DWP publication date?

Think we're all wondering when this DWP will be published... think I've worked out why it's not yet... PM on a big tour of China & clearly doesn't want to upset them.

Clark's bid for UN top seat the talk on PM's trip to China | Stuff.co.nz

New Zealand wants an FTA upgrade, and China has its bargaining chip | Stuff.co.nz

Given the DWP is likely to puppet our key allies & identify the Chinese as a potential concern with regard to disputed islands etc this seems a logical reason for delay.

Mind you surely the DWP can be oblique & not actually 'name names'!?! I'd have thought they could simply list the risk of conflict in that area as a concern rather than stating who the potential aggressor(s) could be.

p.s. I don't think we're going to get too excited by the DWP anyway... it'll pretty much like to be 'steady as she goes'.

 

[Todjaeger]

At the risk of upsetting other participants in this discussion can you help me out and explain the capital charge again. The best I got was the whilst the logic was kind of there the justification wasn't in my mind.
As I understand there is a depreciation cost of owning major equipment which is supposed to be purposed to replace equipment and then the Capital charge was for the cost of owning? Is that correct? And the GST is just a simplistic waste of time in my ignorant opinion.

Perhaps one with experience in NZ accounting can pop in and give a better explanation of the Capital Charge.

My exposure is to US accounting systems and processes, which might be partially to blame for my thinking the Capital Charge makes SFA sense.

In annual reports issued by US companies, the objective is to show the net worth of the company, at the time the report is issued, as well as the various changes from prior years/reports. One type of asset a US company can have is known as "Capital Equipment" which tends to be high cost/value equipment used by the company. This "Capital Equipment" could be something like construction or engineering vehicles for a construction company, a fleet of cars for a car rental company, etc. As time passes and the equipment gets used, the value naturally diminishes due to age, use, etc. just like one's personal vehicle depreciates in value over time and with use. The "Capital Charge" for a business in something like the annual report is the amount the Capital Equipment depreciated in value.

How the Capital Charge has been appearing in Vote Defence for a number of years seems to be somewhat related. IMO that is a problem, since from a business perspective there is a difference between net worth/Net Asset Value (NAV), and a budget or operating income/expenses.

As I understand it, the intent behind the Capital Charge was to introduce a benchmark to determine whether or not funding was being properly/efficiently used, and was to apply to all NZG ministries, departments, and agencies. However, I am unaware of any other NZG subsidiary from the NZDF which would have so much very high value capital equipment, that also would not have anything comparable in the civilian/business world. A car or truck, even a specialty vehicle, could be estimated based off something of similar age and type in the civilian world. Even then, few non-military vehicles have a price tag in the millions of tens of millions of dollars. That is quite difference from estimating the 'value' of an OPV with an initial cost of NZD$100 mil. after a decade of service...

The other issue with the Capital Charge, is that it seems more like the NZDF is being 'charged' the NAV for capital equipment it controls, and is then 'given' matching funding from the Crown which is supposed to represent the value of the service the capital equipment provides during a budget year, assuming the kit is actually able to meet the dictated performance targets. This funding from the Crown is, AFAIK, entirely distinct from the actual funding spent to operate the various pieces of kit, the pay personnel receive, fuel, consumables, etc. It is also not to my knowledge, actual funding coming in, more along the lines of a notional estimated value for service delivered.

To illustrate this a little clearer, (again, any Kiwis who know better and want to jump in, please do not hesitate...) consider the following hypothetical. Also please note, these figures are sourced from the WAG Institute...

A NZD$100 mil. OPV in RNZN service, with a target of 200 days of sea patrolling, and a cost of NZD$62.5k per day to operate.
The Vote Defence budget might show the annual budget estimate for the OPV of NZD$112.5 mil, with NZD$100 mil. being the Crown funding for the Capital Charge, and only NZD$12.5 mil. representing the actual cost of operating the OPV at sea for the targeted 200 days. In real terms, the cost of the OPV operations would only have been the NZD$12.5 mil.

Where things can get sticky, is if the actual performance falls short of the target. Imagine this time, the OPV was only able to provide 100 days of sea patrolling (due to maintenance, repair work, crewing issues, etc.) In this case, the Capital Charge would still be the NZD$100 mil. but the Crown funding would be only NZD$50 mil. and the actual operating costs would only be NZD$6.25 mil. Vote Defence would need to figure out a way to 'make up' that NZD$50 mil. shortfall caused by failing to meet the mandated service outputs tied to the Capital Charge.

From memory, this has resulted in some rather questionable or otherwise dodgy decisions being made. Things like using a frigate to deliver a load of firewood, despite the fact that using a commercial shipping service would have been far less costly. Or certain bits of kit being retired/sold, because doing so got them off the books so no more Capital Charge, plus the income received from the sale could be put to meeting a shortfall elsewhere due to a service issue with a piece of kit not meeting the required Capital Charge output.

Again, if anyone can confirm and/or clarify this, please do so.

 

[Zero Alpha]

any Kiwis who know better and want to jump in, please do not hesitate....

Source - The Treasury

A capital charge,which is levied on net taxpayer's funds,was introduced in 1991/92 to encourage the efficient use of capital resources. The capital charge expense is a component of the pricing of outputs, including supplies to third parties who would otherwise benefit from an implicit subsidy, and should be taken into account in decisions on capital/operating trade-offs (including lease or buy options) and on levels and types of assets held.​

Departments that are capital intensive(>$200million),or for whom the capital charge represent a high proportion of total output costs, have been eligible for compensatory adjustments to their baseline since 2002/03 as a result of movements in the capital charge rate, net asset valuation changes or accounting policy changes (Treasury Circular 2001/16)5. All other departments are expected to absorb or retain the effects of movements in the capital charge, but may apply for additional funding on a case-by-case basis if they can demonstrate that they are unable to absorb the additional cost.​

Effectively,the scheme incentivises departments to increase their cash balances through, for example, the disposal of surplus fixed assets, better management of debtors and creditors, or refining the timing of capital expenditure. The higher their cash balance (which the Crown earns interest off), the less capital charge they have to pay, and therefore they have more to apply to producing outputs, within their appropriation constraints.​

 

[Lucasnz]

The Capital Charge is fiscally suppose to be a neutral in terms of government funding as it contra's out in the consolidated accounts. In reality when you look at the Cashflow Statement for the NZDF it is a physical payment actually made, that distorts the actual defence spend.

Todjaeger summary of the NZDF and all government organisations being charged for the NAV of capital equipment is correct. The rate of charge varies each year, but it has typically sat at the 8% mark. A number of people I've meet have fundamental issues with Capital Charge in that it fails to recognise the public benefit provided by asset etc. More critically the Capital Charge was never meant as an organisation or even government wide policy. When invented in Japan (if my I remember my text books correctly) its purpose was to hold individual managers to account for the assets in their division of a business. Essentially it was seeking to maximise the rate of return on assets. As far as I'm aware the UK and NZ are the only countries that still use it at a government level. Australia went down that road but abandoned it.

As far as I'm aware the Capital Charge is a straight levy of the NAV. It is not tied to the performance of the output in the budget as that is a separate part of the vote, though naturally any surplus would find its way back to treasury.

In terms of GST a policy change made removed the need to account for GST in the budget figures a few years ago.

 

[swerve]

We used to have a situation in the UK in which the MoD had huge amounts of land doing nothing, taken over in wartime & never handed back, no longer needed but not disposed of, etc. Introducing a mechanism to motivate officials to put unneeded property on the market, to the benefit of the economy, was a good idea.

But I think a capital charge is the wrong mechanism. It leads to such things as the scrapping of useful but temporarily unneeded aircraft, vehicles, etc. rather than keeping them in reserve, because of the capital charge. Then, when we need 'em, they aren't there.

 

[shanes_world_05]

Source - The Treasury

A capital charge,which is levied on net taxpayer's funds,was introduced in 1991/92 to encourage the efficient use of capital resources. The capital charge expense is a component of the pricing of outputs, including supplies to third parties who would otherwise benefit from an implicit subsidy, and should be taken into account in decisions on capital/operating trade-offs (including lease or buy options) and on levels and types of assets held.​

Departments that are capital intensive(>$200million),or for whom the capital charge represent a high proportion of total output costs, have been eligible for compensatory adjustments to their baseline since 2002/03 as a result of movements in the capital charge rate, net asset valuation changes or accounting policy changes (Treasury Circular 2001/16)5. All other departments are expected to absorb or retain the effects of movements in the capital charge, but may apply for additional funding on a case-by-case basis if they can demonstrate that they are unable to absorb the additional cost.​

Effectively,the scheme incentivises departments to increase their cash balances through, for example, the disposal of surplus fixed assets, better management of debtors and creditors, or refining the timing of capital expenditure. The higher their cash balance (which the Crown earns interest off), the less capital charge they have to pay, and therefore they have more to apply to producing outputs, within their appropriation constraints.​

I can see a rational need to cut away dead meat but when you are supposed to exist for the rare and worst case scenarios it seems like this incentivises a creeping battle with short sighted-ness and is the wrong mechanism to do this from what Todj. has outlined.

So if say funding of 4 billion is apportioned to defence and after careful analysis the capital charge comes to 1 Billion. That Billion goes back to Treasury? And then what? where is that money then direct or spent?

As far as incentivising efficiencies this seems absolutely excessive to the point of creating a factor for defeat.

 

[Todjaeger]

I can see a rational need to cut away dead meat but when you are supposed to exist for the rare and worst case scenarios it seems like this incentivises a creeping battle with short sighted-ness and is the wrong mechanism to do this from what Todj. has outlined.

So if say funding of 4 billion is apportioned to defence and after careful analysis the capital charge comes to 1 Billion. That Billion goes back to Treasury? And then what? where is that money then direct or spent?

As far as incentivising efficiencies this seems absolutely excessive to the point of creating a factor for defeat.

The impression I have is that extra $1 bil. exists only on paper. Hence part of the issue with how it ends up distorting the Vote Defence budget. Using your example, the Vote Defence budget is published as $4 bil. and is whatever % GDP that is for NZ that given year. However, the actual funding Vote Defence receives is only $3 bil. which is a lower % GDP than the listed/published amount for Vote Defence.

People who for political/ideological reasons have other things they wish to see funded by the NZG argue on the large amounts of money 'wasted' on defence fail to realize that the published budget for Vote Defence is (or at least appears to me to be) artificially inflated. Again using your example, the 'real' Vote Defence budget is only 75% of the published/listed budget.

When the published defence budget is so small (the 2013/2014 budget was NZD$3 bil. IIRC), an artificial inflation of hundreds of millions of dollars or more makes a huge difference in what a defence force can do.

 

[Lucasnz]

The impression I have is that extra $1 bil. exists only on paper. Hence part of the issue with how it ends up distorting the Vote Defence budget. Using your example, the Vote Defence budget is published as $4 bil. and is whatever % GDP that is for NZ that given year. However, the actual funding Vote Defence receives is only $3 bil. which is a lower % GDP than the listed/published amount for Vote Defence.

People who for political/ideological reasons have other things they wish to see funded by the NZG argue on the large amounts of money 'wasted' on defence fail to realize that the published budget for Vote Defence is (or at least appears to me to be) artificially inflated. Again using your example, the 'real' Vote Defence budget is only 75% of the published/listed budget.

When the published defence budget is so small (the 2013/2014 budget was NZD$3 bil. IIRC), an artificial inflation of hundreds of millions of dollars or more makes a huge difference in what a defence force can do.

It is a physical payment as it appears in the Statement of Cash Flows in the NZDF accounts, but contra's out to zero in the governments consolidated accounts.