Nations: For sale to the highest bidders
Selling out the locals to encourage rich migrants is a growth business in rich countries with a history of good government. The world’s rich are looking for safe places in case they need to take the money and run. As a consequence, housing markets have been pushed beyond the reach of young New Zealanders and Australians.
And many of today’s market-obsessed politicians are happy to sell out their own citizens for growth and new money. This is a sad state of affairs, as it is our previous history of good government and active democracy which makes these nations so attractive in unstable times.
If you feel it’s high time to rethink market-led and growth-obsessed policies, you might like to visit the website of New Zealand’s Campaign Against Foreign Control of Aotearoa (CAFCA) and browse their Watchdog newsletter for ideas. This group has been analysing the failings of transnational corporations and arguing against foreign takeover since 1974!
Related NZ Herald article: “Stability, democracy and distance from terrorism make New Zealand an attractive destination for wealthy foreigners”
John Key is positioning New Zealand as an Asia-Pacific “Switzerland” – a beautiful and wealthy bolthole for high net-worthers seeking to escape from an unstable world.
Key believes that free-flowing terrorism is here to stay. To the Prime Minister, this simply makes New Zealand more attractive and will result in more high net-worth consumers wanting to come here – a theme he is developing in business briefings.
There is another strand to this developing Key mantra. He is frankly unapologetic about the massive increase in Auckland residential property values, which has resulted in many established Aucklanders becoming relatively rich, but younger people being locked out of the market. It is a trend which is not going to stop anytime soon, given the immigration figures.
The key question is wouldn’t New Zealand want to be like Switzerland – a wealthy and desirable haven that other people want to live and invest in?
This week’s Brussels bombings will simply have confirmed his belief that the world will remain unstable. “We seem to think about New Zealand as being little and not that relevant compared to other parts of the world when it comes to scale and size,” Key told a recent business briefing. “They look at us and think it is a highly developed first world economy, unbroken democracy, stable government, independent judiciary – and they put a lot of premium on that.”
New Zealand has also become an attractive destination for Asian high net-worthers who have invested in property here – particularly Auckland. Chinese investors are relatively open that they are seeking to de-risk their own exposure to the China market, get capital out and buy residential property in a pollution free environment.
To the Prime Minister, [terrorism] simply makes New Zealand more attractive and will result in more high net-worth consumers wanting to come here.
US investors have different drivers. If Donald Trump is elected President (assuming he first gets the Republican nomination) there may be a new outflow if his political bombast becomes reality.
But already there is a growing cohort of US investors here who are well-placed to establish business connections and help grow national wealth.
The Global Financial Crisis exposed the high indebtedness of several European nations. On top of that, there are inflexible labour markets, ageing populations and poor public policies.
But Key contends it is the fear of terror – which has been happening over a long time – which is the driver for Europeans to up sticks and leave.
That, coupled with the potential instability in nations such as Germany as they absorb vast numbers of Middle Eastern refugees. Conversation at a recent meeting of the International Democratic Union, which Key chairs, underlined Europe’s vulnerability.
His hypothesis is that if Isis wanted to destabilise Europe, it would insert a Jihadi amidst the refugees and get them to kill people in the middle of Berlin, then turn the gun on him or herself. This would not only destabilise Angela Merkel’s leadership, but with it, Germany’s leadership of Europe.
Key places a strong personal emphasis on networks. He burnished his credentials with his election to the IDU chairmanship (the IDU is a powerful network of many of the world’s centre-right political parties).
It is a world in which he is at home – likewise international investors. One of Switzerland’s attractions is its taxation environment and its strict secrecy laws, which until recently have enabled rich people’s investments to be squirrelled away in its banks, safe from the reprisals of revenue officials.
New Zealand does not compete on that score. But it is notable that one of the reasons why New Zealand has yet to follow Australia and bring in rigorous laws to clamp down on multinationals which are not paying significant tax here is because this country is competing for investment.
The Key Government is proceeding at a very slow pace indeed, which is rattling New Zealand businessmen like Spark CEO Simon Moutter, who is adamant that it is unfair to local companies that they have to compete against offshore players who have a tax advantage.
This is undoubtedly a pressure point. There is a growing perception that New Zealand domiciled companies are getting an unfair shake while international investors are offered incentives or have the rules cut in their favour to invest here.
If the Key Government keeps its nerve, the wealth transition will continue. For instance, New Zealand is becoming a magnet for high net-worth Chinese tourists and for students from Saudi Arabia – markets which are growing rapidly. That interest will bring with it investment in hotels, airports, and housing.
Latest figures from Statistics NZ show another monthly gain of more than 6000 people. Annual net migration reached an all-time high of 68,840 people. And net migration from Australia was positive for the 11th consecutive month. These positives underline that John Key’s vision of New Zealand as a Switzerland of the Asia-Pacific has indeed the potential to become reality.
Key won’t be doing anything to destroy that wealth effect.
Source: Fran O’Sullivan 26 March 2016 NZ Herald