Finally, someone has staged an intervention to confront New Zealand Inc's addiction to living beyond its means through selling assets to foreigners and borrowing money from foreigners.
For decades we have spent more than we earned as a nation and funded the difference by borrowing foreign money through our banks, or directly in the form of companies borrowing offshore or the government borrowing from foreign funds and banks. If we couldn't borrow the money, we would sell assets, be it companies, land or state assets.
We've been kidding ourselves for decades that, like the L'Oreal ad, we were worth it. We have run chronically high current account deficits for most of the last 30 years. We believed, and have been encouraged by our leaders, bankers, and asset buyers, that New Zealand could afford it and we deserved it.
But in our bones we knew we couldn't, and it's great to see Justice Miller at the High Court now tell us in this decision it has to stop, even if the government can't or won't do it.
His ruling that any foreign buyer has to prove a bigger benefit to the nation than a local buyer sets a very high threshold.
It effectively says that any buyer has to invest an awful lot more, create a lot more jobs and pledge to reinvest dividends here, otherwise there is an inevitable drain on the nation.
In the last decade we have reached the limit of how much we could borrow and sell.
For any chronic overspender, there is a point where they can't borrow any more because they can't afford the interest payments and they don't have anything left to sell. Just before that moment comes, they accelerate their asset sales and borrowing to pay the interest on the previously borrowed money and to pay the dividends on the previously sold assets.
In April last year I wrote this article showing how this foreign drain of interest payments on foreign debt and dividends on foreign owned assets meant our income per capita had actually been falling since 2003.
I've taken the view since then that somehow, someone, needed to stage an intervention to stop it.
Our government surely isn't. It is in that desperate last stage of accelerating the borrowing and asset sales to allow us to keep the living standards to which we believe we are entitled.
The government itself has been the heaviest borrower through the bond markets. It doesn't matter who we have borrowed it off, but again China is the biggest creditor through its sovereign wealth fund. Our state owned enterprises have also been borrowing heavily overseas and the government is about to start selling the jewels in the crown, at least some of which will go offshore.
The irony is that this frenzy of last minute borrowing and asset selling accelerates the process of making our economy unsustainable, because it pushes up our economy and hampers our ability to export our way out of this mess.