A review of New Zealand's defence policy and strategy has been announced by Minister of Defence Peeni Henare.

The review comes off the back of last year's Defence Assessment, which stated: "New Zealand's strategic environment is deteriorating, and security threats are increasing," and that Covid-19 had intensified the impacts of other longer-term strategic trends.

The assessment identified two major challenges: strategic competition and the intensifying and wide-ranging impacts of climate change.

It suggested New Zealand's defence policy settings should be reviewed, and that policy shifted from a predominantly reactive, risk management-centred approach to a more proactive and deliberate strategy.

"The importance of this review is paramount so that we can make sure future investments are fit for purpose in a post-Covid-19 environment, a Pacific region grappling with climate change and the intensification of strategic competition and a world which is seeing a brutal invasion of Ukraine by Russia," Henare said.

The Defence Policy Review terms of reference, agreed to by Cabinet and released by the Ministry of Defence, have outlined the steps needed for a long-term capital plan.

The terms of reference "will reflect the government's priorities for Defence - people, infrastructure, and Pacific, and will also draw on the recent Defence Assessment, reflecting our commitment to regenerate the Defence Force in a post-Covid-19 world while putting a stronger focus on the region in which we live," he said.

The review will deliver a defence policy and strategy statement, which will outline the government's defence policy interests, objectives, high-level strategy and indications of prioritisation.

"In addition, a set of design principles will be developed to help shape the future New Zealand Defence Force so that they're enabled to undertake activities that may be required of them."

The minister expected the policy and strategy statement to be delivered by the end of the year, with the future force design principles to follow in the first half of next year.