Indeed for a small army such as ours we obtained a rather capable vehicle. In terms of protection for the crew and troops being carried, ceramic appliqué armour (MEXAS) can be fitted to protect against 14.5×114mm heavy calibre rounds from 500 metres (the Canadians also have "add-on-armour kits to better protect against IED's, explosively formed penetrators (EFP's) and 30 mm caliber armour piercing rounds"). Cage armour can be fitted if required (eg for protection against shaped charges).
It is also fitted with a "nuclear, biological, chemical (NBC) filtration system (accompanied with a GID-3 chemical detector and AN/VDR-2 radiation detector systems)".
Something I didn't know is it was "designed to produce a very low and very compact structure to minimize radar and IR-signatures" and it also uses "heat-absorbing filters to provide temporary protection against thermal imaging (TIS), image intensifiers and infrared cameras (IR)".
However as the war in Ukraine has shown with tanks and other armoured vehicles being destroyed by ATGWs, there is an option to integrate an "active protection system based on the Israeli Trophy system", and one would hope this is something that the NZDF will be most interested in and could easily justify even for say a couple of dozen vehicles initially, trialed and tested ready for deployment (as we wouldn't likely deploy that many anyway - but if there was a need to deploy further vehicles then additional systems could be procured, noting though that this can cause some delays to deployments (as what happened with previous M113 deployments in the past IIRC), so it's a balancing act between needs and costs etc).
(The above "quote" marks are lifted from this book called "Ironsides
" which forms the basis of most of the info on the LAV III wiki page
Also as pointed out by other posters here, perhaps it could be questioned as to the appropriateness of this vehicle now that its user base and conops have changed, in terms of a replacement vehicle.
OTOH if upgrades are the way forward, perhaps it could be accomplished in batches seeing we have so many of them and not all are in use at any one time? Interesting options and decisions for Defence planners perhaps.