When it is holiday, the minor MPs will play

Stuart Nash has used the media’s thirst for content to push various messages of late, one of them being that the Overseas Investment’s Office needs to implement audits on foreigners who bought properties under the condition it would generate an economic benefit to the country.

On the surface of it, this seems entirely fair, until you think it through a little, and come to the penalty or enforcement portion:  do you take the properties off them again?   Nash, cleverly, left that unsaid.

ACT’s ex-candidate Jamie White equally brought joy to media still on holiday skeleton crews when he penned a response to Nash’s proposal.

If you want to sell your farm to a foreigner, you must get permission from the Overseas Investment Office (OIO). They usually give it. Indeed, they decline only 1.5% of requests.

According to Stuart Nash, the new Labour MP for Napier, they should decline more, because allowing foreigners to take profits out of the country is a “dead end street.”

Last week William Rolleston, president of the Federated Farmers expressed agreement with Mr Nash.

Both are confused, as was David Cunliffe and many other politicians who peddled the same idea during the election campaign.

When a foreigner buys a New Zealand business, all the expected future profits of the business come into the country in the purchase price. When the actual future profits then go out to the new owner overseas, there is no net loss.

In fact, the transaction must involve a net gain for New Zealand. By hypothesis, no New Zealander valued the future profits as high as the foreigner did. Otherwise the foreigner would not have been the highest bidder. So the amount any foreign purchaser pays for a farm or other business must exceed the present value of its future earnings to any New Zealander.

In other words, there must be a net gain to the country. And this gain is easily measured: it is the difference between what the foreigner paid and the highest bid from a Kiwi.

The economic confusion does not stop there. The Overseas Investment Act, which Mr Nash and Dr Rolleston wish to see enforced more rigorously, has a provision whose effect can only be to make New Zealand businesses less efficient. Specifically, it allows foreign purchases of a business on condition that the foreigner will increase the number of people employed by the firm.

But employment is a cost to New Zealand, not a benefit. This is obvious from the fact that you need to pay people to work. If working were a benefit, people would pay to do it.

The benefit provided by businesses are the goods and services they supply. The effort that goes into supplying them is the downside. People who can find ways of producing the same amount of stuff but with less labour enrich us.

Politicians and bureaucrats who demand that more labour go into any given level of output impoverish us.

With only 1.5% of OIO requests declined, you have to wonder why it is there in the first place, especially when there is no follow-up as to the projected benefits.

Mr Nash is right to complain about the OIO. But the problem is not a lack of zeal in enforcing the provisions of the Overseas Investment Act. The problem is its existence.




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  • AC

    Of course when you are selling an asset you are exchanging the asset for cash which means in effect you would be less wealthy if you had to take the highest kiwi bid.

    • taurangaruru

      That is the crux of the matter, ask Nash if he had a bid for his house from a Kiwi of $100k & one from a foreigner of $150k which one he would accept?

      • Just a thought …

        Absolutely, I want everyone else to ” suck it up ” but I sure as hell wouldn’t……… classic nimbyism……

  • In Vino Veritas

    This is the correct analysis of buying and selling. The rhetoric used by Labour and the left whilst assets were being sold down “the country is forced to forgo all future dividends” was equal nonsense. The purchaser has paid the dollar value of future dividends today, to the sellar. Exactly what happens when a farm is bought and sold. Academically bright doesn’t necessarily translate into real world bright.

    • jagilby

      So very true, unfortunately only the financially literate (i.e. an ever decreasing proportion of the population) are capable of understanding Jamie White’s argument.

      White is clearly intelligent and is dead on the money with what he is saying regarding the present value of assets and foreign direct investment – his weakness is that he sounds like an academic and doesn’t communicate these concepts in a way that’s easily digestible.

      The simple fact is that a lot of truth in the world can’t be communicated through 5 second sound bites. The unfortunate reality is that the currency of the left is ill-informed sound bites – very difficult to counter.

      • In Vino Veritas

        Jag, its almost impossible to get this sort of thing across to people who don’t have any idea (and don’t want to have any idea). Why do you think that the likes of Cunliffe and now Little speak in tiny soundbites, “its not fair”, “the 1%”, “child poverty” etc? Because that is what dullards understand. The big problem for Labour though, is that there are more people out there than they think who do get it, or at least sort of get it. Ergo, Labour routed in September.

      • In Vino Veritas

        Ill informed jag? I’d say made up in a lot of cases. Just listen to Ardern on “poverty”.

  • digby

    The primary aim of foreign investment is to get capital into the country to increase the economic productivity of the country’s resources. The recent Crafar farms is a good example. The NZ owner ran down the assets until he got to a point where it was producing low volumes of products (as well as having sick / dying stock). The new Chinese owners have poured many millions into the properties making them more productive. Kaingaroa Forest is another example, Fletcher Forests took on far too much debt. Much of this debt was from offshore with a net result of the forests being run down badly and all the profits being sent offshore in the form of debt repayment. Harvard Endowment fund reduce the harvest level and invested back into the assets. This made them significantly more productive of greater overall benefit to the country. Overseas entities may be able to buy these assets but they cannot pick them up and take them away.

  • Chris

    If I had wanted to sell my farm when I did to a foreigner who was prepared to pay more than a local then I would have taken the money without any problem.
    I do not think Dr Rolleston is outlining Federated Farmers Policy here, or at least I hope not.

    When I was involved in that organisation for 30 odd years it certainly wasn’t policy then.

  • rua kenana

    The OIO would be more accurately called the NZ Disinvestment Office.
    A country, like a business, selling off its most productive assets (for example its dairy farms) is the road to long-term impoverishment. (i.e. for it’s original inhabitants, although not likely the new, overseas, owners).
    And requiring New Zealanders to pay world prices for their own land, given the premium attached to NZ land (clean green, lack of corruption, good climate, lack of internal conflict, beautiful scenery, not yet too overcrowded, stable political system, etc) means that most NZers couldn’t afford that competition.
    The OIO should certainly be disestablished and replaced by something more in the interests of NZers and less for overseas buyers.
    I understood Stuart Nash’s suggestion was not much if at all concerned with enforcement stuff but rather for informational purposes so the whole process could be opened up to public scrutiny which is so lacking at present.
    NZ is (hopefully) a genuine democracy and the public should have this information openly available so they can vote for or against whatever government seems to be acting against their interests in this regard.

    • I’m thinking you didn’t actually read Jamie White’s article.

      • rua kenana

        I did read Jamie White’s article. Also have heard his viewpoint before and was very unimpressed.
        You may like NZ to disinvest in its own land in favour of overseas buyers. I don’t.

    • Chiefsfan73

      I think they call your last point an election.

      • rua kenana

        They probably do. But do they call it a fair election if the in-power government withholds information that some voters (a majority if I remember polls on this point) consider important for their vote?

  • Murray Smith

    We were all immigrants at some stage in our histories. Therefore I have no problem what-so-ever with foreign people buying our land that is in the open market.
    I do however struggle immensely with absentee ownership.
    If you buy, you should live. Easy.
    That’d damn the torpedoes of corporate squander.

  • FreeMack

    People forget half the transaction. The seller no longer has the land, but they have the equivalent value in cash – net effect zero. The seller can then redirect his cash in to smoothing they may make more NZ profit out of, then they would have had they retained the property.
    I personally think sales of land in Auckland should be restricted to only those who are resident in Auckland. All those wealthy Waikato people are coming in to the Auckland property market and making houses unaffordable to the average Aucklander.

  • twr

    Funny how so many people complain about selling “our” land to foreigners. Do they think that because they can see it, it’s theirs? It would explain most of the left’s policy, certainly.
    If they are so keen on it, they can put their money where their mouth is and buy it, otherwise, they can butt out of what other people do with *their* property.

  • The Accountant

    The thing that urks me isn’t foreigners buying NZ land, it’s that we can’t buy theirs – specifically China. Free market and all that.

  • TreeCrusher

    A point I heard a while back from a representative for a foreign buyer was that the OIO process was so expensive only people that were pretty confident of gaining approval bothered applying.

    • digby

      True, just the application fee is around 25K and when you add lawyers fees on top you are looking at around 40-50K