Editorial: PM's foreign investment stance correct

Those opposed to foreign investment ignore the fact that it has always driven the New Zealand economy. Photo / Mark Mitchell

State of the nation speech strong on desire to welcome overseas capital to create jobs and talking straight about housing to councils

John Key has not always been an unalloyed advocate of foreign investment. In mid-2010, as the rumblings over the sale of the Crafar farms to Chinese investors began, he was worrying about New Zealanders becoming "tenants in their own country". All the more reason, therefore, to welcome the clarity of the message in yesterday's state of the nation speech. This country, the Prime Minister said, had to be a magnet for investment. "The more investment we get, the more jobs will be created," he added to reinforce the point.

An unemployment rate of 7.3 per cent, the highest since 1999, may have concentrated Mr Key's mind. So might the example of Taranaki, where substantial oil and gas investment has prompted a low unemployment rate and faster-growing workers' income than elsewhere in the country. Whatever the reason, the Prime Minister has become an unequivocal supporter of investment from any source.

"That's investment by individuals and small businesses as well as big businesses; and it's investment by people from overseas as well as Kiwis," he said.

In that context, New Zealanders' placement at "the front of the queue" for shares in the part-sale of state assets would be an exception, rather than the rule, the Prime Minister indicated. Unequal treatment is a common occurrence worldwide when such assets are sold and will not unduly disturb potential overseas investors. Mr Key did, however, put all investors on notice that the Government intended to proceed with the part-sale of a second power company this year in addition to that of Mighty River, which is scheduled to start before mid-year, subject to Supreme Court rulings.

His straight talking will not have been welcomed by those opposed to the sale of the Crafar farms and, indeed, any foreign investment. But he is right to try to project a consistent and principled approach. Those opposed to foreign investment ignore the fact that it has always driven the New Zealand economy. Therefore, it is folly to send the wrong message to potential investors. Opponents also disregard the fact that a country with limited domestic savings - a situation compounded these days by the emphasis on investment in rental property - needs to be as welcoming as possible to overseas capital.

The impact of New Zealanders' investment preference on housing affordability prompted another of the stronger statements in Mr Key's speech. The Government wanted, he said, to co-operate with local councils to ensure more houses were built at a lower cost.

"In particular, we are keenly awaiting the Auckland Council's spatial plan, and I'm expecting it to include multiple options for both greenfields and brownfields residential property development." If councils were not able to change their planning processes, said Mr Key, the Government would have to get a lot more proactive.

That represents a clear challenge to the Auckland Council's preference for a compact system. It wants Auckland to go up, rather than out. The Prime Minister's stand is, however, the right one. If young adults are to have access to affordable housing in Auckland, some greenfields developments will have to be part of the picture.

Mr Key says he has told his ministers to "step up momentum". He is signalling a greater willingness to venture into areas of obvious tension. The problems confronting the Government demand nothing less.