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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As much at home writing editorials as being the subject of them, Cam has won awards, including the Canon Media Award for his work on the Len Brown/Bevan Chuang story. When he’s not creating the news, he tends to be in it, with protagonists using the courts, media and social media to deliver financial as well as death threats.

They say that news is something that someone, somewhere, wants kept quiet. Cam Slater doesn’t do quiet and, as a result, he is a polarising, controversial but highly effective journalist who takes no prisoners.

He is fearless in his pursuit of a story.

Love him or loathe him, you can’t ignore him.