Overseas investment office rubberstamps current account deficit

The approval by the Overseas Investment Office of another $16 billion in overseas purchases of New Zealand assets only adds to pressure on the current account deficit, house prices, and farming practices says the Green Party.

"The current account deficit for the year ended June 2006 was $15.2 billion, which was $3.1 billion worse than a year before. Most of this increase was due to a $1.9 billion increase in the investment income deficit, due to incomes earned by foreigners on their New Zealand investments and interest payments on our foreign debt, says Russel Norman, Green Economics' Spokesperson.

"Yet the Overseas Investment Office has now approved another $16 billion worth of sales of New Zealand assets, which will add to this investment income deficit on both counts."

"The sale of additional profitable New Zealand companies to overseas owners results in more overseas repatriation of profits and dividends.

"The sale of additional New Zealand land and housing to foreign owners adds to the upward pressure on the housing and land market which in turn leads to rising levels of household indebtedness, debt which is ultimately sourced from overseas and interest payments which end up overseas.

"The free-for-all purchase of New Zealand productive and non-productive assets is adding to our current account deficit.

"Additionally, foreign investment is also putting pressure on the prices of productive rural land which in turn puts more pressure on farmers to get a return on their investment, pressure that can translate into poor environmental management practices as farmers cut corners to save costs.

"The 2005 Overseas Investment Act opened the door ever wider to the overseas ownership of New Zealand productive resources. It was based on the dogma that overseas investment in businesses is always good. But, with a structural current account deficit being driven by payments to overseas owners of assets and debt, maybe it's time to question that dogma."

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