Winston Peters is now into the third day of a Dutch auction as he weighs competing bids from Bill English and Jacinda Ardern to form the next Government.

Peters has put overseas investment, the NZ currency and affordable housing near the top of the issues he wants the new regime to tackle.

Tomorrow NZ First is expected to decide whose party has come up with the best policy and personality fit.

And given the sensitivity of the three policy areas he singled out for attention yesterday both he and the other main governing party will want to avoid any suggestion of a return to Fortress NZ and a managed economy.


It is important that the rhetoric is well-chosen and careful.

In particular, foreign investment has provided a lifeline for the NZ economy, companies and householders in recent years. It is foreign investors who (in the main) fund the Government's bond programme, own a good deal of our sharemarket - and by inference our listed companies; and own our major banks. The level of New Zealand household and farm debt will have to be factored in.

Importantly when NZ has burned through capital in the past, such as with the 1987 sharemarket crash, it was the offshore markets and foreign companies which bailed out our blue chips. Same too, after the GFC.

In its economic plan, NZ First says it welcomes foreign investment as long as it is in the interests of New Zealand and not the private interests of foreign shareholders. It wants to establish priorities for foreign investment in NZ that require investors to bring in new technology that leads to employment and export growth or import substitution.

It is fatuous to believe that any foreign investor is not going to act in its private interest.

But there is room for a conversation about just what comprises NZ's strategic or national interest and whether there should be a move to invite in investors who are focused on greenfield investments rather than the status quo. Particularly, if the latter is just an avenue for bolthole investors looking for a safe haven.

On top of that NZ First wants to impose strict controls over foreign ownership; create and maintain a comprehensive register of foreign ownership of land; prevent vertical integration and foreign control of key export industries; restrict ownership of residential land and farmland to New Zealand citizens, and permanent residents who are exercising their right to residence and majority New Zealand-owned companies.

As well it wants to prohibit the further sale of "strategic state assets" to overseas buyers and require foreign companies operating in NZ to pay their fair share of taxation.


This presents a challenge to the current laissez-faire regime for foreign direct investment. However, this existing regime is tempered by conditions imposed on foreign acquirers who buy farms or assets on "sensitive land" to come up with greater added value to New Zealand than a putative NZ acquirer could.

Peters has also campaigned in Parliament against what he believes is an open slather approach taking issue with the sale of prime rural stations to offshore buyers (many of whom are American); foreign investment in farmland and the sale of some of NZ's dairy and meat interests to Chinese buyers.

Yesterday he singled out the planned sale of the ANZ-owned UDC to the Chinese HNA Group. This group led by the charismatic Chen Feng - who developed China's first private international airline (Hainan Airlines) - has come in for considerable comment in recent months over its opaque funding.

HNA is China's largest non-bank leasing company operating one of the world's largest aviation finance businesses as well as one of the world's largest container leasing businesses. It has been on an international spending spree splashing out about US$6.5 billion on taking a 25 per cent stake in the international hotels group, Hilton Worldwide Holdings Inc, among a string of blue chip assets.

The deal is still waiting approval from the Overseas Investment Office and the Reserve Bank. Credit rating agency S&P Global has indicated it could potentially downgrade UDC's long-term debt if the sale goes ahead.

The negotiations appear to be focused on issues that do have the potential to affect New Zealand's established economic settings.


The other key issue is housing affordability.

Expect a smorgasbord of policies to deal with this difficult problem.

It's notable that one of the outcomes the NZ First leader wants to achieve - a decline in the NZ currency - has already taken place. But not as a result of any policy introduced by a new Government with NZ First input. It is simply because of election uncertainty.

On Monday the Kiwi dropped to a five month low to just over US70.5c. It also dropped against the Australian and British currencies.

Those inclined to levity might suggest the best way to keep the currency down to suit the exporting community would be for Peters to string the negotiations out -- rather than bring them to a conclusion.

It is unclear how Peters' aim to replace Inflation Targeted Monetary Policy with monetary policy based on the Singaporean model would work in practice. The Monetary Authority of Singapore, instead of relying on short-term interest rates or monetary aggregates as its monetary policy instrument, conducts policy by managing the trade-weighted exchange rate index.


If Peters can persuade either Labour or National to go down this route it would be a huge policy shift away from the Reserve Bank's monetary policy settings.

Nature also abhors a vacuum.

In the absence of any real detail from the NZ First leader it falls to the observers to speculate. A Herald story yesterday quoted Peters saying there was a main issue that was discussed in the meeting with the Labour team - but he would not elaborate.

Some of a mischievous bent have suggested that maybe a shared prime ministership could be back on the table. The storyline goes like this: If Peters took up the position of Deputy Prime Minister in a Labour-led Government he would be perfectly positioned to step up to the prime ministership if Ardern took time out to have a baby.

The speculation goes that this would be the perfect solution to Peters' reputed desire to be PM.

It is not something English could gift. But in the absence of detail, speculation will continue.