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Opinion: Dear Labour. Please revise and re-submit Shearer's desired Overseas Investment Act changes; Sunday's rush job doesn't look good

Posted in Opinion

Dear Labour,

This morning I was going to write an article about your leader David Shearer’s new Member's Bill which would make it easier for the government to turn down Overseas Investment Office approvals for foreigners to buy New Zealand assets.

I was going to include a large amount of Shearer’s comments from the Bill's explanatory note about the need for the law change Labour is calling for. Comments like this:

A major part of our current account deficit is already comprised of interest and dividends paid to overseas investors. New Zealand’s poor savings record means we are reliant on imported capital to fund our current account deficit. Most of this comes via increased lending to home owners, but our deficit is used by some as a misplaced justification for the sale of our productive assets to overseas buyers.

We need to take care not to lose ownership of our farmland by allowing New Zealanders to be outbid by foreign buyers. We cannot afford to lose control of our best income producing assets and become tenants in our own land.

New Zealanders are already good farmers. Overseas owners do not usually increase farm output by any more than a New Zealand purchaser would. Our processors and exporters are also very capable. More often than not foreign purchasers use New Zealand farmers and existing New Zealand processors. International trade, including our free trade agreements, give us access to overseas markets without selling our land.

The New Zealand Labour Party does not believe selling our farm land to foreign buyers improves our economy.

And comments like this

New Zealand farms should not be priced out of the reach of New Zealanders. Asset prices inflated beyond the means of New Zealanders undermine social mobility, and lead to concentrations of wealth amongst a smaller number. Unless we change our ways our farm will be increasingly owned by foreigners and those fortunate to be born into wealthy families – the 1% not the 99%.  

The prospects of a sharemilker becoming a land owner are diminishing. Labour thinks this is wrong.

That's all pretty strong stuff. I thought it would really get interest.co.nz readers going, seeing as this is a hot topic at the moment.

But then I started reading the actual Bill and just couldn't bring myself around to reporting it like that.

For starters, you can't even figure out what you want to call this law change.

Right at the top, in the space of eleven lines, you gave it two different names.

Overseas Investment (Owning our Own Rural Land) Amendment Bill is the initial title at the very top.

Then you decide that the new Act should be called the Overseas Investment (Owning our own Infrastructure) Amendment Act 2010

(Note to readers: I'm told by Labour that the top one is the correct one - the second one was a typo.)

Moving on, the move to repeal Section 14(1)(c), which stipulates Ministers must grant consent if satisfied that all of the criteria in section 16 or section 18 (as the case may be) are met, will do the job of making it easier to deny applications. I'll give you a tick for not stuffing that bit up. It's doing what you want your Bill to do.

And again, the desire to amend Section 16(1)(e)(iii) of the principal Act by replacing the words “the relevant Ministers determine that that benefit will be, or is likely to be, substantial and identifiable,” with the following words: “the relevant Ministers determine that under the principles set out in section 17 that benefit will be: (A) substantial and identifiable, and (B) would not be likely to otherwise occur,” would also do the job of entrenching Justice Forrest Miller's High Court ruling in February, and tighten requirements for foreign land purchases.

But then we get to section 17.

In the rush to get this Bill written before Shearer appeared on Q&A on Sunday, you managed to indicate that you would repeal all environmental, heritage, conservation and walking access requirements on foreign landowners for Ministers to consider when making their decisions.

Now I know you didn't mean to do this - you told me so this morning - but if you're going to go on national television and announce you're presenting a member's Bill to change one of this country's laws, then I for one would be hoping you've given it serious consideration, had a few people look over it, and had another look at the actual legislation to figure out what you'll be repealing.

For the record, here's what you suggested Section 17 should look like in the Bill (after having repealed the existing section)

Section 17 of the principal Act is repealed and replaced with the following words:

(1)  The Minister must be satisfied the overseas investment will result in:

(a)   the creation of a substantial number of additional jobs in New Zealand through the introduction of new technology or new products; or

(b)  a substantial increase in exports from new technology or new products that will be produced on the land or from the processing of that and other produce.

(2)  The Minister must be satisfied that the additional jobs or increase in exports will be additional to what would be likely to occur if a New Zealander purchased the land instead.

(3)  For the avoidance of doubt, a minor change to an existing technology or existing product type will not satisfy section 17(1).

(4)  For the avoidance of doubt, an increase in the volume of existing exports will not satisfy section 17(1).

And here's section 17 in the Act as it stands now, so you know what you'd be repealing:

Factors for assessing benefit of overseas investments in sensitive land

  • (1) If section 16(1)(e)(ii) applies, the relevant Ministers—

    • (a) must consider all the factors in subsection (2) to determine which factor or factors (or parts of them) are relevant to the overseas investment; and

    • (c) may, in doing so, determine the relative importance to be given to each relevant factor (or part).

    (2) The factors are the following:

    • (a) whether the overseas investment will, or is likely to, result in—

      • (i) the creation of new job opportunities in New Zealand or the retention of existing jobs in New Zealand that would or might otherwise be lost; or

      • (ii) the introduction into New Zealand of new technology or business skills; or

      • (iii) increased export receipts for New Zealand exporters; or

      • (iv) added market competition, greater efficiency or productivity, or enhanced domestic services, in New Zealand; or

      • (v) the introduction into New Zealand of additional investment for development purposes; or

      • (vi) increased processing in New Zealand of New Zealand's primary products:

    • (b) whether there are or will be adequate mechanisms in place for protecting or enhancing existing areas of significant indigenous vegetation and significant habitats of indigenous fauna, for example, any 1 or more of the following:

      • (i) conditions as to pest control, fencing, fire control, erosion control, or riparian planting:

      • (ii) covenants over the land:

    • (c) whether there are or will be adequate mechanisms in place for—

      • (i) protecting or enhancing existing areas of significant habitats of trout, salmon, wildlife protected under section 3 of the Wildlife Act 1953, and game as defined in sections 2(1) of that Act (for example, any 1 or more of the mechanisms referred to in paragraph (b)(i) and (ii)); and

      • (ii) providing, protecting, or improving walking access to those habitats by the public or any section of the public:

    • (d) whether there are or will be adequate mechanisms in place for protecting or enhancing historic heritage within the relevant land, for example, any 1 or more of the following:

      • (i) conditions for conservation (including maintenance and restoration) and access:

      • (ii) agreement to support registration of any historic place, historic area, wahi tapu, or wahi tapu area under the Historic Places Act 1993:

      • (iii) agreement to execute a heritage covenant:

      • (iv) compliance with existing covenants:

    • (e) whether there are or will be adequate mechanisms in place for providing, protecting, or improving walking access over the relevant land or a relevant part of that land by the public or any section of the public:

    • (f) if the relevant land is or includes foreshore, seabed, or a bed of a river or lake, whether that foreshore, seabed, riverbed, or lakebed has been offered to the Crown in accordance with regulations:

    • (g) any other factors set out in regulations.

So unless you'd like the Bill to remain as it is (and you've told me there are a few things you've got wrong), I'd expect you to withdraw the Bill in its present state and do a proper job of it. Either that or this was just a giant publicity stunt.

Kind regards,

Alex Tarrant

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14 Comments

We need to get the State out

We need to get the State out of the economy. These politicians are so stupid, why do we allow them control our lives, businesses and farms like this?
 
It's ludicrous.
 
You know, despite my linked blog post, I've got this suspicion Shearer is quite clued up, thus realises the irresolvable contradictions of Left politick, especially as it destroys economies and freedoms, thus the hesitancy he is becoming characterised by, is simply that of a possum blinded in the bright light of their nonsense.

Oh dear, I was hoping for a

Oh dear, I was hoping for a credible opposition but it looks like I was dreaming.

Are we to understand, then,

Are we to understand, then, that you believe "environmental, heritage, conservation and walking access requirements" to be more important when land is sold to a foreigner than when it is sold to a New Zealander?
 
Why?

Why aren't the same

Why aren't the same conditions that apply to farmland applied to foreigners wanting to buy residential/commercial property?  Unless a non resident builds from scratch what is the benefit to NZ and the economy?

Er - the same as the benefits

Er - the same as the benefits to NZ and the economy if a New Zealander buys farmland or residential/commercial property?

Absolutely! They just hike to

Absolutely!
They just hike to prices to locals who actually do like to live in a home they own rather than one owned by a foreign landlord.

What's the difference between

What's the difference between living in a home owned by a foreign landlord and one owned by a New Zealander?

The difference is in its

The difference is in its impact on our current account deficit.

How's that?  In case 1, New

How's that? 
In case 1, New Zealander A has a house (in NZ) and New Zealander B has money (in NZ); the sale takes place and now A has money and B has a house, both in NZ.  No actual increase in assets in NZ, although both of them now feel better off than before (otherwise they wouldn't have agreed to the trade).
 
In case 2, New Zealander C has a house (in NZ) and Foreigner D has some money (overseas); the sale takes place and now C has money and D has a house.  The amount of money in NZ has increased, while the nuimber of houses stays the same.  How is that bad for the national account?

Foreigner D makes then makes

Foreigner D makes then makes a profit (as a landlord or from capital gains) and remits that gain overseas. The impact on the current account deficit will be ....?
 
If you want to observe how this has been working, and the possible scale of the impact on our current account deficit, try rerunning your scenario replacing New Zealander A and a house with banks ANZ, Westpac, BNZ or ASB and their businesses in NZ.
 
You might also notice that our current account deficit fell sharply when profits for said banks took a hit (left right combination from IRD and increased provisions for losses).
 

Frankly it is just not enough

Frankly it is just not enough to bring in money. The only investments allowed to foreigners should be when a significant expertise is evident.
So Labour -Take your Bill and apply it ACROSS THE BOARD.
The next step is to review previous purchases and make it obligatory that any sale of whole or part must meet the new rules.

It seems the cause is as

It seems the cause is as follows:
New Zealand’s poor savings record means we are reliant on imported capital to fund our current account deficit.
Nothing in the policy addresses this cause.

They haven't opened the

They haven't opened the letter from the banks telling them what Labour's policies will be regarding protecting the rural property bubble.