New Zealand does not have the fiscal headroom to increase defence spending to the levels the US might expect, Finance Minister Nicola Willis said.

US Defence Secretary Pete Hegseth told delegates at an Asia security forum in Singapore on Saturday that New Zealand’s target of raising defence spending to 2 per cent of the economy is not enough and was an example of “freeloading”. He hinted that nations should aspire to a target as high as 3.5 per cent.

“That would be extremely challenging,” Willis told TVNZ’s Q+A programme on Sunday in Wellington. “We don’t have billions of dollars sitting under the couch.”

New Zealand recently unveiled a plan aimed at increasing its defence spending to the 2 per cent level from around 1 per cent, citing rising geopolitical tensions such as Chinese warships conducting live-fire drills in the Tasman Sea last year.

Willis included extra defence funding in her budget delivered on Thursday as part of that plan, but also continues to project large budget deficits as the nation’s weak economy curbs government revenue.

“We’re investing significantly in defence so that we can advance and protect New Zealand’s interests,” she said.