Say what you really mean Bernard :-)

Bernard Hickey’s a bit grumpy and quite frankly so he should be, no matter what you think about overseas investors owning bits of NZ ,the worrying bit of the midnight law change is its speed and, well, clandestine nature.  This is a major piece of law, it affects ALOT, and while I would prefer NZ to stay in NZ’s hands, this ain’t the way to do it.

It’s too good a rant, by one who is clearly gobsmacked, not to reprint in full; enjoy

 Why change foreign investment rules now?  Bernard Hickey

The government’s decision overnight to invent a new rule that allows it to block the sale of Auckland Airport is a stunning turnaround of decades of official policy. It will hurt our ability to encourage foreign investors to come here and help us pay for our current account deficit. It is also another sign that the government is on its last legs. Fearing it may not be in power for too much longer, it is showing its true colours and is embedding its naturally anti-foreign-investment instincts into law. 

Suddenly the government has decided that selling the Auckland Airport is a bad idea. It has invented a rule that says it can block any sale of ”strategically important infrastructure on sensitive land”.

Firstly, lets look at what this rule means or might mean in the wrong hands. The first rule of government regulation is that it is bound to have unintended concequences. Can you imagine how this rule might be interpreted if we have Winston Peters or Jim Anderton as a Minister of Finance?

Are the power plants owned by Contact strategically important assets on sensitive land? Should the government buy them back? What about the telephone exchanges owned by Telecom? They are certainly strategically important and I bet some of the land is sensitive. I believe there could be a lot of sensitive land out there that needs to be protected from foreign investors. After all, this land could be insulted or bruised in many ways. Are you confident that a minister of the crown can decide this for the nation without reference to Parliament or voters in an election? And will foreign investors give our government the benefit of the doubt whenever they’re considering buying an asset here on “sensitive land”?   

There are a hundred of these types of assets on this type of land. What about our banking system? There is no more strategic asset. Should the buildings with the servers hosting all our accounts be seized back by the government? I jest just a little here, but it shows the absurdity of this decision and how it could be extrapolated by an even more insensitive and insane government. For example, what about the assets of Fletcher Building. It is held in large part by foreign investors and is responsible for a good chunk of New Zealand’s public and private infrastructure building. Sounds a good enough reason to stop foreigners from owning it.

Secondly, why is the government doing this now? The Auckland Airport has been subject to a very public takeover battle for years, it seems. There have been at least two takeover bids by foreign investors. Why didn’t the government consider this when it became very clear that a foreign takeover bid was in the offing. Can you imagine what the Canada Pension Fund thinks of our government and our investment regime when it changes its basic rules right at the end of the process? They will rightly think New Zealand’s investment framework is a joke. So it’s clear that either the government didn’t think this through clearly enough and early enough, or it has decided for some other reason that now is the right time.

Were they hoping the bid would go away? Did they think changing the tax rules would discourage the Canadians? Or is the government in its death throes? Has it finally dawned on those at the top levels of government they should make any of the big changes they’ve always wanted to make now before they lose the power to pull these levers of government?

And finally, what was the government of a debtor nation with a current account deficit of around 8% of GDP thinking? That it doesn’t matter if we discourage foreign investment? That the foreign institutional investors will understand if we change our minds about the fundamental rules of the game right at the end of a bidding war? That they won’t mind? This is a plainly dumb thing to do when we need foreign investors to keep funding our way of life and building up our infrastructure. We spend more than we earn. We need to borrow from foreigners to do that or we need to encourage foreign investment.

What will turning off foreign investors mean for voters? It will mean higher interest rates on mortgages. When foreign investors believe we are a riskier proposition, they will increase the risk premium they demand for the money they lend us. That will increase wholesale interest rates and that will be passed on (as we’ve found in recent weeks) to us in the form of higher mortgage rates.

What on earth was the government thinking? Clearly, it was not thinking clearly at all.

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