Frigates deal reached in Aust.

Press, 30 August 1989, Page 1

Frigates deal reached in Aust.

BRENDON BURNS

in Canberra

New Zealand will buy two Anzac frigates — and probably take a further two — if the Government approves a deal agreed to in Canberra yesterday.

The Minister of Defence, Mr Tizard, emerged from talks saying he and the Minister of Finance, Mr Caygill, had a price they were prepared to recommend to the Cabinet and caucus. A decision in favour of frigates now seems a certainty, as early

as next Monday, although Mr Tizard said he remained cautious because the Government caucus had to be consulted. Australia’s Minister of Defence, Mr Beazley, said that acceptance

of the deal would enable New Zealand manufacturers to gain full access to his huge over-all defence procurement budget. “I think the New Zealanders drove an extremely hard bar-

gain,” he said. “That was anticipated." The flying mission to Canberra by Messrs Tizard and Caygill had included financial limits and a Cabinet instruction to gain a suitable price. But speaking before his return to Wellington last evening after nearly three hours of talks, Mr Tizard said it was subject to interpretation whether these requirements had been met. He said it depended on how the costs were examined and over what period. Both he and Mr Caygill believed they had met the Cabinet’s demands. “It’s a price we’re prepared to recommend to the Government.” The deal entailed buying two ships and an option for two further vessels, said Mr Tizard. A cost of about $lOO million a year, over about 20 years, was involved. Mr Tizard was reminded that this sum had been estimated as covering the cost of four frigates, not two. “Yes, but we’ve still got to make provision for that,” he said. His comments indicate that a four-frigate deal is envisaged. The first two frigates are required in 1996-97. The second pair of serving Leander class frigates will still be in service nearly a decade later. Mr Beazley initially tagged unrestricted access to the wider Australian defence contracts

market to a requirement that New Zealand buy more than two frigates. He said the two-frigate deal gave New Zealand the guarantee of being able to win enough defence contracts to match the price of the vessels.

But he later said that once New Zealand confirmed the purchase of two Anzac ships, it would be impossible to restrain its manufacturers from full access.

“The reality is that irrespective of what we agreed with you in New Zealand, the defence budget of Australia will effectively be broken open as from the signing of this agreement.”

In the decade ahead, the Australian defence procurement budget is estimated at $25 billion. Mr Tizard was careful not to say the deal was guaranteed to gain approval. “We’ve got to be cautious,” he said. Government caucus discussion of the costed Anzac ship proposal had been promised. "And I’m anticipating rather more concern about the details of the price. The Cabinet is going to be more concerned with the over-all detail,” said Mr Tizard. A suggestion that New Zealand pay more in early payments had, however, been dropped because it would have impacted on other defence spending.

Mr Beazley rejected suggestions that Australia was subsidis-

ing the New Zealand price. He said the price was reasonable and there was the benefit to Australia of a “sound, firm alliance” with New Zealand.

While Mr Tizard, Mr Caygill, Mr Beazley and Australia’s Minis-

ter of Finance, Senator Walsh, were stitching together a deal on frigates, a joint Parliamentary committee of the two countries was meeting nearby. Ms Sonja Davies (Lab., Pencar-

row), who chairs the Foreign Affairs and Defence Committee, told her Australian counterparts that price was the determining factor in New Zealand’s decision. She is an Anzac frigate opponent.