Overseas Investment (Owning our Own Rural Land) Amendment Bill

  • defeated on 22 July 2015

Overseas Investment (Owning our Own Rural Land) Amendment Bill

Member’s Bill

184—1

Explanatory note

General policy statement

This Bill amends the Overseas Investment Act 2005 to limit the sale of rural land to foreign buyers.

The discretion to turn down farm sales to overseas persons is already very wide, but has not been properly exercised by the current Government.

The New Zealand Labour Party (Labour) believes New Zealanders’ widespread concerns about farm sales to foreign buyers are valid, and that the discretion of the Minister to approve sales should be tightened.

This Bill limits the discretion of the Minister to consent to applications for the purchase of rural land. It significantly narrows the type of investment in rural land that will be acceptable in 2 ways. First, it requires foreign investment to deliver benefits that would be over and above what a New Zealand investor would produce. Secondly, it ensures that substantial job creation and increases in exports are the most important factors to be considered.

New Zealanders have a natural desire to control our own country for the benefit of New Zealanders.

A major part of our current account deficit already comprises 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 farm land 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 rules, including our free trade agreements, give us access to overseas markets without selling our land.

Labour does not believe selling our farm land to foreign buyers improves our economy.

While economic outcomes are important, they are not the only important goal.

Social structures—including social mobility and New Zealanders’ ability to own our own assets—are fundamentally important to Labour too.

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 farms will be increasingly owned by foreigners and those fortunate to be born into wealthy families. The prospects of a sharemilker becoming a farm owner are diminishing. Labour thinks this is wrong.

Other non-economic consequences include the loss of our traditional attitudes to allowing reasonable access across rural land to our beaches, lakes, and rivers.

Globalisation is averaging the price of many goods and services around the world. While prices of consumer goods and some related wages may be converging in different parts of the industrial and industrialising world, asset inequality is increasing.

Trade imbalances are high, with countries like New Zealand running long-term current account deficits while rapidly emerging economies are running very large cash surpluses.

The concentrations of wealth, even in countries far less wealthy than New Zealand, together with State control of the savings from trade surpluses in some countries, mean that there are many overseas entities able to outbid New Zealanders for our assets.

Liquidity constraints since the global financial crisis and the higher relative cost of capital in New Zealand increasingly constrain the ability of New Zealanders to buy our own farm land if our land assets are priced on an international rather than New Zealand market.

Since the global financial crisis a pattern has emerged internationally. Those with large trade surpluses or concentrations of wealth are investing unprecedented amounts in primary resources like land, water, and minerals, and their related supply chains.

The long-term solutions for New Zealand are complex and interlinked. We need to increase our exports and savings, so that we stop spending more on imports, interest to overseas lenders, and profits to foreign owners than we earn. To do this we need changes to tax, savings, and monetary policy.

Losing the ownership and future profits from our farm land, by allowing New Zealanders to be outbid by foreign buyers, is no part of the solution.

Clause by clause analysis

Clause 1 is the Title clause.

Clause 2 is the commencement clause. It provides that the Bill comes into force on the day after the date on which it receives the Royal assent.

Clause 3 provides that the Overseas Investment Act 2005 is the principal Act.

Clause 4 states that the purpose of the Bill is to substantially limit the sale of rural land of more than 5 hectares in area to overseas persons.

Clause 5 repeals section 14(1)(c).

Clause 6 amends section 16 to establish non-urban land as a category of sensitive land to be considered separately.

Clause 7 amends section 17 to make a technical change.

Clause 8 inserts new section 17A to ensure only rural land sales bringing substantial new jobs or new exports can be approved.

Clause 9 amends section 28 clarifying the conditions relating to intending residents as referred to in section 16(1)(e)(i).