Two-frigate price tag to top $1B

Press, 8 September 1989, Page 1

Two-frigate price tag to top $1B

By

BRENDON BURNS

in Wellington

Extra costs will push the Anzac frigate price, announced yesterday at $942 million for two ships, well over $1 billion.

The Government caucus approved the deal by a margin of at least eight votes in spite of a last-minute appeal from the Labour Party’s president, Ms Ruth Dyson, that this could “tear at the soul and unity” within the party. She said there was little Australia could do to punish New Zealand if it decided against frigates. “Saying ‘no’ to the frigates and then standing up to the bluff and bluster from across the Tasman would cement Geoffrey Palmer’s popular leadership,” she said in a paper to all Labour members of Parliament. The Prime Minister, Mr Palmer, said in announcing the two-frigate deal, with an option for another two, that his Government had not been coerced or forced by Australia. It was in New Zealand’s best interests to buy Anzac frigates. Mr Palmer pointed to events in Fiji, Bougainville and Vanuatu as evidence that the South-West Pacific was no longer peaceful. The Anzac frigates represented the best deal New Zealand could get to meet its blue-water Navy commitments. The total cost, including New Zealand’s share of project costs, was $942 million. An additional two ships, if confirmed late this century, would cost $867 million, said Mr Palmer. But the $942 million price tag does not include a range of additional costs. A helicopter for each frigate, estimated at $5O million each, is

yet to be added. There is a three-year delay in acquiring the first of the Anzac vessels, which requires further refits or other maintenance for the two existing Leander-class frigates. At present H.M.N.Z.S. Southland is undergoing a limited refit, costing $l6 million. The Minister of Defence, Mr Tizard, said yesterday that the size of gun to be installed on the two Anzac frigates was still being negotiated. A 76mm gun was originally proposed, but a 127 mm weapon is under assessment, which would cost about $ll million more a ship. . A more expensive missile launcher is also under investigation. New Zealand content in the over all project — building eight ships for Australia, as well as two for the R.N.Z.N. — will be in excess of $750 million. Exchange rate risks are said to have been minimised, but New Zealand will be responsible for the inflation content of the work it wins. Australia will similary have to cover inflation on its contracts. ’ Mr Tizard said inflation escalation clauses had to be included, as contractors could not be expected. to hold such costs. “By the time we get these ships in seven or eight years time, in actual dollars of the day it will be very much more than $942 million,” he said. Budgeting for the two ships

will begin with a $55 million payment this financial year, soon reaching about the $lOO million annually. Australia had sought a bigger sum up front, but this was turned down by New Zealand. This leads to a delay in delivery of the first ship from late 1994, or early 1995, to March, 1998. The result is continued expensive maintenance of the first two Leander-class frigates due for replacement, Southland and Waikato. Mr Palmer was unsure yesterday whether the price included a point defence’ missile system, estimated to cost $3O million a ship. This provides defence against aircraft and missile atHe said New Zealand was getting its frigates for 20 per cent less than Australia would pay. The frigate issue attracted emotions but a Government could not shirk from hard decisions. Mr Palmer said he thought the risk to unity, voiced by Ms Dyson, could be overcome. The Leader of the Opposition, Mr Bolger, said Ms Dyson’s call for the Government to stand up to Australia bordered on treason. “I am amazed that any responsible office holder in the Labour Party is prepared to say that it is worth provoking the anger of the Australian Government to try to make some cheap political mileage with New Zealand voters,” he said.