WELLINGTON - The new Labour-led Government has indicated it may seek to cancel a deal to lease United States F-16 strike fighter aircraft - provided the termination cost is not too high.

The Shipley Administration agreed in July to lease 28 older-model F-16 A/B jet aircraft to replace the country's 19 ageing, subsonic Skyhawk A-4 attack aircraft.

Prime Minister-elect Helen Clark said yesterday that the new Government would adhere to its policy of focusing military spending on the Army, in line with a recent parliamentary study.

She declined to comment when asked what the cost cut-off point would be for scrapping the deal.

"I am taking a strong interest in this myself because whoever is Minister of Defence is likely to be someone who has not been a minister before, and not experienced the wiles of officials trying to defend a project," she was earlier quoted as saying.

Asked whether she was seeking a report on the F-16 deal by Christmas, Helen Clark said: "I certainly will be asking for reports. Whether they come by Christmas is another matter."

The planes were to be taken from US military stocks and updated by Lockheed Martin Corporation, which builds the F-16, the Pentagon said earlier this year.

The package included 28 engines built by the Pratt and Whitney division of United Technologies Corporation.

The Royal New Zealand Air Force's McDonnell Douglas Skyhawks - some dating back to 1965 and others to 1970 - were scheduled by the Ministry of Defence to be dropped in 2007.

Officials estimated the minimum capital cost of the F-16 aircraft deal to be $700 million. - NZPA