New Zealand's reputation of being a "Switzerland of the South Pacific" — a beautiful and wealthy bolthole for high net-worthers — is under seige.

Former Prime Minister John Key positioned New Zealand as a magnet for high net-worth consumers wanting to escape from an unstable world.

There were articles aplenty in publications ranging from The Telegraph to the New York Times and The Guardian which extolled New Zealand's reputation as a billionaire's bolthole — an "escapee's paradise" — attracting the mega-rich, including US investor Peter Thiel.

But the Labour Government has sent a clear signal that it will take a lot more than personal wealth to buy a stake in New Zealand, particularly when it comes to prime farmland and (as expected in the future) how foreigners build a pathway to permanent residency.


The attitudinal shift was made clear by Cabinet Minister David Parker when he spoke to journalists on Wednesday after unveiling a ministerial directive setting tough new conditions for foreigners seeking to buy farmland in excess of five hectares.

Parker — who holds both the Economic Development and Trade portfolios — staked out a position before the September 23 election where he expanded on Labour's policy to clamp down on farm sales to foreigners.

His contention was that by removing the offshore buying pressure the market would be constrained to New Zealanders who would not find themselves priced out of the contest.

In other words, the foreign buyer premium would be removed.

But there were two new elements that surprised.

First, in comments to journalists, Parker said: "People who commit themselves to New Zealand, pay tax in New Zealand, they're the ones who should have first bite at buying our land assets.

"We think that impediments to share milkers graduating to be farm owners are wrong, and they shouldn't be effectively prevented or blocked in their progress in life from a one per center from overseas bringing their wealth from a low-tax jurisdiction or from countries that have got far higher rates of inequality than we have."

Foreigners who do get approval will have just one year to relocate here where relocation forms part of the approval process.


Second, the Government has refused to grandfather existing applications from foreign interests to buy New Zealand farms under the rules that were previously in place at the Overseas Investment Office.

It is well known that the OIO has been sitting on a raft of applications to buy not just farmland but businesses that sit on sensitive land.

Those applicants now have to rework their applications and build in a much higher benefit to New Zealand or walk away.
There is a nationalistic streak to Parker's philosophy.

It is one which surprises some from the ruling coalition who believe he may in fact be stronger in his pro-New Zealand leanings that New Zealand First leader Winston Peters.

But Parker could usefully constrain his rhetoric and possible contempt for the one-per centers so that the Government does not acquire a reputation as being against foreign investment.

The Government's determination to confine offshore investment in residential housing — to new housing which adds to the overall stock — was underlined by Finance Minister Grant Robertson at an address to a business breakfast at ANZ yesterday.

Some of the sting from Parker's rhetoric was removed by Robertson's message that New Zealand would continue to welcome overseas investment.

New Zealand will also continue to welcome immigrants. But the conditions will be tougher.

For instance, when it comes to those coming here to study — it must be for a quality education. Not a "rort" or backdoor path to a work visa.

Some Cabinet Ministers, such as New Zealand First's Shane Jones, who succeeded in ring-fencing forestry land from the full ambit of the ministerial directive, have a different appreciation of the role foreign capital can play.

Key was frankly unapologetic about the massive increase in Auckland residential property values during his period as Prime Minister. It resulted in many established Aucklanders becoming relatively rich, but younger people being locked out of the market.

Right now the Labour-NZ First coalition (supported by the Greens) sees domestic political capital by keeping more New Zealand assets in New Zealand hands.

The problem is that those who own existing farmland or housing assets — which includes foreigners as well as New Zealanders — are set to take a hair cut.

Ensuring the country buys the argument that the Government is simply out to introduce fairness will not be easy, after New Zealand has enjoyed being part of the global market for nigh on three decades.