Unions are warning of reputational damage to the New Zealand Defence Force and the country as a whole, in the agency’s cost savings scheme.

Documents obtained by Newstalk ZB show the NZDF admitting its savings drive could see programmes that impact the country’s reputation bound for the scrapheap.

The NZDF wrote that navigating its cost-savings challenge “requires the NZDF to cease, scale back or slow down a range of longstanding and significant programmes that have contributed to the reputation of the NZDF and New Zealand more broadly”.

Public Service Association union leader Fleur Fitzsimons said the correspondence showed the NZDF was “worried” about reprioritising its budget.

“Reputation counts for a lot with security partners,” Fitzsimons said in an interview.

In October 2024, the Defence Force wrote to the Public Service Association, saying that it was operating in a “challenging fiscal environment”.

It came as Defence Force found a $130 million budget shortfall for the 2024-25 financial year. In its communications, the NZDF confirmed $100 million had been found in cost reductions and savings.

The agency told the PSA that based on those numbers, enduring cost savings needed to be identified, as not everything cut that year can be scaled again.

The NZDF said it is focused on reprioritising its budget towards delivering on its core duties, and being able to provide the Government with military response options.

“The NZDF recognises that it is facing a challenge of sustaining essential operations across its asset and operational base within its funding allocation,” the letter read.

The NZDF reiterated it could not go into “overdraft”, and has to operate within its limits, as appropriated by Parliament. The agency said it “must operate within its means, and it cannot do this at the expense of its operational outputs”.

In an interview with Newstalk ZB, Public Service Association national secretary Fleur Fitzsimons said the documents showed the Defence Force itself was “worried” about the “Government-imposed” reductions.

“That’s another reason why these cuts are so damaging,” the union leader added.

Details about where cost-savings have been made are being kept secret.

In a statement, the NZDF said it has had to “reprioritise its budget”, but withheld details of what specifically was on the chopping block, under the Official Information Act.

The agency added the Minister of Defence, Judith Collins, has been kept informed throughout its cost-savings drive.

When asked to comment on whether she agreed with the categorisation of the NZDF’s cost-savings, Judith Collins said it was an operational matter.

The Defence Minister added the NZDF is “refocusing” as it aims to become “more combat capable” and focused on the frontline, “as we step up and pull our weight in an increasingly volatile world”.

Collins said that “time and time again” she was hearing the Government’s “growing contribution” to defence was being noticed, and added the hardworking men and women at the force were “doing us proud”.

The letter came as the PSA was bargaining for a new collective agreement, and was sent just days after the sinking of naval vessel HMNZS Manawanui. The latter was brought up in communications between the two parties about the pair’s collective agreement, with the NZDF writing “the sinking of HMNZS Manawanui has exacerbated NZDF’s financial position”.

Budget 2025 confirmed the sinking of the New Zealand vessel led to a $77 million write-off, and saw $32m allocated for the clean-up and salvage of the ship.

In a statement on this, the NZDF said it added “significant pressure” to the agency’s operating budget.

“The NZDF has always sought to get the best value for the taxpayer and negotiations with the unions have been carried out in the context of these pressures.”

In February this year, the dispute over civilian staff pay was formally settled after about eight months of bargaining and strike action, after union members voted to ratify a new collective agreement containing pay increases.

The collective agreement, also released to Newstalk ZB under the Official Information Act, stated the agency would make a $1450 payment to PSA members as at January 15, 2025.

2025 also saw the release of the Government’s Defence Capability Plan, which contained a blueprint for defence spending to reach above 2% of GDP within eight years. The plan announced $12 billion in funding over four years, which is expected to deliver a replacement Boeing 757 fleet and new maritime helicopters.

Azaria Howell is a multimedia reporter working from Parliament’s press gallery. She joined NZME in 2022 and became a Newstalk ZB political reporter in late 2024, with a keen interest in public service agency reform and government spending.