The island nation will concentrate on peacekeeping skills to help its neighbors.
Until recently, Australia's independent-minded neighbor across the Tasman Sea chose to ignore grumblings from Canberra that it wasn't pulling its weight in defense spending.
But earlier this month, New Zealand started listening, announcing plans to boost its defense spending by $3.2 billion over the next 10 years to modernize equipment and add hundreds more ground troops.
In addition to frustrating Australia, New Zealand's antinuclear, pacifist stance has troubled its own generals and affected the morale of the armed forces in recent years. As the government moves to respond to these concerns with new money, it is also shifting strategy by concentrating on peacekeeping skills that it has developed in East Timor, Afghanistan, and the Solomon Islands.
"With the realization that the end of the cold war has only opened a Pandora's box and created more trouble spots, it's time, they feel, to contribute in the best way possible," says Peter Cozens, executive director of the Center for Strategic Studies at Victoria University in Wellington, New Zealand.
Almost two decades ago, New Zealand was thrown out of ANZUS, the trilateral security alliance with Australia and the United States, for refusing to allow US nuclear-powered or equipped ships to dock in its waters. It canceled a deal to buy 28 F-16 fighter jets in 2000, cut its modern warships to two, and slashed the air force. It currently spends $850 million a year on defense - less than 1 percent of its gross GDP.
The goal now is to reverse that trend, while still streamlining the military. When the budget was announced in early May, defense minister Mark Burton told the Australian Broadcasting Corporation that New Zealand would move away from trying to do a little bit of everything in favor of making "realistic contributions."