New Zealand's top diplomat Chris Seed says there's 'concern' of 'state-on-state conflict' because of 'accident'

New Zealand might feel safe in our little corner of the world, but the country's foreign ministry has issued a bleak warning: "the future looks grim".

The Ministry of Foreign Affairs and Trade's latest state of the globe report goes as far as saying "conflict could occur" in our Pacific backyard as geopolitical concerns ramp up.

The main players are the US and China, who are vying for supremacy in the Indo-Pacific region.

The ministry says there's a shift happening from a system where everyone obeys the rules to one where what matters most is who's got the power. It also warns economy and trade will need to take a back seat to security and defence.

Fresh from a charm offensive in China, the Prime Minister is currently in Europe for a NATO meeting. 

But the straddling act between East and West is becoming progressively precarious as global power shifts and the world grapples with compounding crises.

"One way of thinking about it is the term 'polycrises'," said Chris Seed, the chief executive of MFAT.

It's all laid bare in a new strategic assessment called 'Navigating a shifting world'. 

This is the first time the foreign ministry has publicly released its three-yearly state of play.

Its conclusion: "The future looks grim."

"A candid assessment but a thoughtful one," Seed said.

The report identifies a shift from rules to power, warning the days of our Pacific safe haven are numbered.

"New Zealand faces a less stable Indo-Pacific region where inter-state conflict could occur."

Seed said it's about being "aware and alert, but not being anxious". 

Because with North Korea's nuclear arsenal, its frequent missile testing regime, and unresolved land and sea border disputes in the region, like the South China Sea, it might happen.

"All of those create risks of interstate conflict," said Seed. 

Even if not intentionally.

"Our concern would be about state-on-state conflict because of accident or miscalculation," he said. 

A US-China conflict would be catastrophic and the risk of that is not zero. 

"There is always some risk where there isn't confidence and guardrails which shape the way in which great powers engage with each other."

Seed said he doesn't believe New Zealand is being pressured behind closed doors to pick a side.

New Zealand has traditionally seen itself as protected from global threats by its geography and a relatively peaceful region.

A key pillar of our foreign affairs strategy has been trade, but the assessment warns: "As geopolitical and security considerations loom larger New Zealand will be less able to prioritise economic priorities and will likely need to devote more energy to defence and security."

Seed said he wouldn't say this is the "end" of the rules-based order. 

"We are definitely seeing it challenged, we are definitely seeing it stressed."

But Seed said, "we can get through the grim". 

Delivering a little optimism alongside his bleak state of play.