Q+A - John Key
Prime Minister John Key told TV One’s Q+A programme that the government could use a land tax to restrict foreign investment in residential housing under any re-negotiated free trade agreement with China.
“Well, we always have the right to make restrictions on investment in New Zealand, firstly through the Overseas Investment Office, depending on the criteria.”
“We don’t have the right to put on, funnily enough, a stamp duty, and the reason for that is that stamp duty was taken off the table, if you like, through the free-trade agreements we had not only with Australia and Japan, and that also includes Mexico.”
But the Prime Minister said, “at the moment, we’re not trying to stop the investment coming in.”
John Key said he doesn’t have any early indications on the numbers of foreign investors but that they are recording the numbers.
“.. my gut instinct tells me that the buying that’s happening in Auckland and potentially around New Zealand, but let’s just take the Auckland market, in so much that it’s, say, Chinese buyers or buyers of other ethnicities, I think they’re New Zealand-based. So I think they’ve got residency. They may or may not have citizenship. So the number of buyers I think that wake up on a particular morning, live in Shanghai and say, ‘Look, I’m going to go and buy a house in New Zealand for a million bucks or less,’
John Key told the programme a land tax could apply exclusively to non-resident investors.
“..we wouldn’t do it specifically for a country. We wouldn’t say, ‘For Chinese investors, you’ve got to have a land tax. If you’re Australian, you don’t.’ If we were going to apply that sort of thing, we would apply it to offshore investors.”
Q+A, 9-10am Sundays on TV ONE and one
hour later on TV ONE plus 1. Repeated Sunday evening at
11:35pm. Streamed live at www.tvnz.co.nz
Thanks to the support from NZ On
Air.
Q
+ A
Episode
97
JOHN
KEY
Interviewed by Corin
Dann
GREG Corin Dann raised the
housing issue with John Key in an interview at the end of
the China visit. Corin began by asking would there be
anything in a re-negotiated free trade agreement that would
stop New Zealand putting the brakes on foreign investment in
our property market?
JOHN Well, we always have the
right to make restrictions on investment in New Zealand,
firstly through the Overseas Investment Office, depending on
the criteria. People have to get through that. But if
you’re talking about residential housing, which tends to
not fall within that criteria, then ultimately we have the
right to put on some sorts of taxes. We don’t have the
right to put on, funnily enough, a stamp duty, and the
reason for that is that stamp duty was taken off the table,
if you like, through the free-trade agreements we had not
only with Australia and Japan, and that also includes
Mexico.
CORIN So
what’s still left in the
toolbox?
JOHN We
can always invent things, but the most obvious one is a land
tax.
CORIN You
would actually do that? A land
tax?
JOHN Well, at
the moment, we’re not trying to stop the investment coming
in. Obviously, we are recording the numbers. We’ll have
much better data on whether there is actually a problem of
Chinese-based investment or investment from other countries,
because we want to be specific per country.
CORIN What’s
your gut on that? Have you had any early indication? Because
it’s important. Is there actually some validity? We see it
in Australia. It is a
factor.
JOHN Okay,
so I don’t have any early indications on the numbers. I
could be proven to be wrong, but my gut instinct tells me
that the buying that’s happening in Auckland and
potentially around New Zealand, but let’s just take the
Auckland market, in so much that it’s, say, Chinese buyers
or buyers of other ethnicities, I think they’re New
Zealand-based. So I think they’ve got residency. They may
or may not have citizenship. So the number of buyers I think
that wake up on a particular morning, live in Shanghai and
say, ‘Look, I’m going to go and buy a house in New
Zealand for a million bucks or less,’ and have no real
connection to New Zealand I think is quite low. It doesn’t
mean that number can’t grow over time, but I think my gut
instincts are that people actually live in New
Zealand.
CORIN And
this land tax, would it be able to be exclusively applied to
non-resident
buyers?
JOHN Yeah.
A land tax could apply that way, so we could do that, for
instance, with all sorts of— well,
anyone.
CORIN If
the data came through that showed this is a problem in the
future, you would do
that?
JOHN Well, we
haven’t made that call, but we’ve always said, look, if
the thing became a runaway train on us and we were really
concerned about it, that’s always an option available. And
to be blunt, actually, land taxes are far more likely to
deter people than a stamp duty, because Australia, for
instance, has stamp duties. People tend to pay it. You only
pay a stamp duty once on the way through. A land tax is an
annual thing. Lots of countries have land
taxes.
CORIN If we
were to put in a land tax, would that upset the Chinese, do
you think?
JOHN I
don’t think any investor who’s in that category would
like it, but the question is – can we do
it?
CORIN They
would
understand?
JOHN Yeah,
they would do it, and we wouldn’t do it specifically for a
country. We wouldn’t say, ‘For Chinese investors,
you’ve got to have a land tax. If you’re Australian, you
don’t.’ If we were going to apply that sort of thing, we
would apply it to offshore investors.
CORIN If we can
move to the South China Sea issue, your government was sent
a very clear message via Chinese media to butt out of this
dispute. But why isn’t New Zealand getting more involved
and being more critical of Chinese aggression in the South
China
Sea?
JOHN Okay, so
the first thing the Chinese would say is that there is no
instability. Their argument would be that, yep, they believe
they have a territorial right to the particular
islands—
CORIN Does
New Zealand believe they have that right to that
territory?
JOHN Well,
we can’t answer that question, because we simply don’t
know. We don’t pick sides, and we haven’t gone and
worked our way through all of the arguments when that
process is actually in relation to the Philippines is
happening at the moment in an arbitration, which I might
point out the Chinese aren’t really a party to it and
aren’t happy about, but nevertheless it is fundamentally
happening. But New Zealand’s long-standing position, as I
think a lot of countries’ is, is to say, ‘Look, this is
an issue where China needs to resolve its territorial
disputes with the individual country in question. I simply
made the point that it’s a statement of fact that China
have on some of these places like the Spratly Islands,
whatever, built up essentially some sort of
military—
CORIN Missile
bases.
JOHN Well,
military capability, landing strips, all those sorts of
things. But their argument would be, ‘This is our
territory, and we’re entitled to do
that.’
CORIN Well,
what about the Australian position? Do you agree with the
Australian position that that build-up of missiles in that
area or that build-up of military installations is
counterproductive?
JOHN Well,
we’ve had a statement that actually went— laid out the
New Zealand position when I was over having the bilateral
meeting with Malcolm Turnbull, and our main argument with
the Chinese and with everybody else is to say, ‘Look, this
is a very important waterway. It’s important for China,
but it’s also important for New
Zealand.’
CORIN But
is it
counterproductive?
JOHN Well,
we would obviously prefer that the parties resolve the
issues amongst
themselves.
CORIN With
the greatest respect, Prime Minister, it sounds very much
like you’re soft pedalling on this issue and that New
Zealand is soft pedalling on this issue because it does not
want to upset the Chinese and put its free-trade deal at
risk.
JOHN No, I
don’t think that’s right. I think what we are doing is
being careful because we don’t actually understand whether
the claims that are made that China doesn’t have, for
instance, territorial rights in these areas are correct or
not. It’s a very complex issue and goes back a long way.
The Chinese have been and made these claims for a long
period of time. It’s just not as simple as saying
they’re right or they’re wrong. I can’t answer that
question. I don’t
know.
CORIN But
what is simple to people is people can see that there’s
China on one hand and they can see the United States on the
other, and they can see these two great superpowers butting
heads and where New Zealand fits in that. For example, have
you talked to President Obama about this
issue?
JOHN Not
from memory at the nuclear summit,
but—
CORIN This
year?
JOHN Oh,
look, from time to time, the issue gets raised. I mean, the
Americans raised the South China Sea
issue.
CORIN Then
they obviously would like us to take a stronger stance,
wouldn’t
they?
JOHN Well,
they understand the New Zealand position. They also make a
call one particular way, and that tends to be that they say
that— they’ll find on the side of the other partner, for
instance. That’s fair enough. They’ve made that call in
certain circumstances. They’ve certainly been stronger in
their statements, but the point is they have long-standing
relationships there, and whether they’re right or wrong, I
can’t tell you. All I can tell you is there is a process.
The process that we would prefer to see is the partners sort
it out. It would be no different from if there was a
territorial dispute on the Auckland Islands between New
Zealand and Australia, who should sort that out? New Zealand
and Australia, or should others like China and the United
States take a
view?
CORIN Just
finally on this issue, what is America saying to you? Would
they like New Zealand to take a stronger
stance?
JOHN I
don’t think it’s so much they argue that we should take
a stronger stance. I mean, our position’s actually quite a
consistent position with what lots of countries take. They
are concerned, and they make those comments publicly about
their
concerns.
CORIN But
we’re part of the Five Eyes. We’re part of their
historical alliance.
JOHN Yeah, and we
say the same thing in so much that we say, ‘Look, it’s
an important waterway. Peace and stability in the region is
really important, and if that gets destabilised, then
that’s bad for China, but it’s also bad for New Zealand,
and it’s bad for Asian growth.’ So we’re not
inconsistent with what we say. What we do simply say is we
don’t choose who’s right and wrong in this argument.
Ultimately, that needs to be resolved, preferably by the
partners.
CORIN I
just wonder. We’re coming up to Anzac Day, and if we look
at our past, we have taken positions of right or wrong on
these types of moral stances. Why aren’t we doing
that?
JOHN But
it’s a really complicated things. There’s a nine-dash
line that sits around near the South China Sea. China for a
long period of time has said this particular area they
believe is theirs. Others have said, ‘No, we dispute that
sort of fact. It’s highly complicated. It’s not so black
and white.
CORIN But what we
could do is we could say, which is what China wants us to to
do, is we could break away from the
US.
JOHN Well,
it’s not so much that. China’s position – what it says
is, ‘Look, we accept that there is discussion by other
countries.’ China’s view is that that territory is
theirs, but they say in so much that there is a dispute that
needs to be resolved, it should be resolved on a bilateral
basis between China and the other
country.
CORIN Okay,
another issue that cropped up in this trip, of course, was
the extradition treaty that China wants. Is that really it?
Is that what China
wants?
JOHN Well,
firstly, they like the relationship with New Zealand and the
goods and services they buy from New Zealand and they’re
important to their market. They need to feed lots of people.
They’ve got growing middle-income consumers that want our
products. So we shouldn’t underestimate what we sell to
them. But, yeah, extradition is one thing that’s important
to them because if you think about what Xi Jinping has done
since he’s been president – he has been on a campaign
and a bit of a crusade, really, to try and knock the head of
corruption over and
basically—
CORIN And
you’re willing to help him do
that?
JOHN Well,
we’re actually support the view that there should be no
corruption in the world, and therefore if he’s dealing
with that issue, that’s a good
thing.
CORIN Can we
really trust President Xi, though, in terms of an
extradition treaty? Look, we’ve seen The Economist, Time
Magazine both write critical articles of President Xi
recently about his growing crackdown on the media, on
censorship, a more authoritarian approach that he is taking.
Can we really trust him that we can send criminals, alleged
criminals, back to China and that they won’t be killed or
tortured?
JOHN Okay,
so some of the latter things in terms of control of the free
press and all those sorts of things are not so free in
China. That’s not new news. That is something that’s
been there for some period of time. every country’s a bit
different. It wouldn’t work and operate in New Zealand,
but it’s the situation that’s taking place in China. In
terms of is he genuine about bowling over corruption and
dealing with that issue, I think so far from what we can see
he is. If he’s more authoritarian than other Chinese
leaders, that’s his right. I mean, some leaders take that
view; some don’t. The real point here is that in so much
as we can trust him if we send somebody back, well, if they
failed to meet that trust and broke that trust that we have,
then all of a sudden that would be the end of extradition. I
don’t think, actually, they are going to apply the death
penalty to people if we send them back. I think what
they’re trying to do is make an example to other people
that you can’t steal money, as they see it, from China, go
and hide in New Zealand and have no
consequences.
CORIN Whether
it’s coincidence or not, Prime Minister, the look from the
outside is that New Zealand is prepared to do an extradition
treaty with China to get its free-trade deal. Now, is that a
good look for New Zealand in terms of where its moral
compass is
at?
JOHN No, I
don’t agree with that position. That’s an easy thing for
the Green Party or others to try and say. Actually,
extradition’s been something that the Chinese have been
talking to us about for a long period of time, and,
actually, we’re dealing with an extradition case, as
you’re quite well aware, at the moment, and that’s got
nothing to do with the
FTA.
CORIN But
President Xi has raised it in this particular visit where
the focus has been on the two sides jockeying themselves
into a position as to what they want in a free-trade
agreement. It looks pretty much like, from the outside,
that’s the
deal.
JOHN But when
you have a bilateral meeting, you always raise the things
that are important. We’re raising the things that are
important to us; they’re raising important things to them.
Actually, in reality, they raised this issue in 2014 when
they came. They raised it prior to the 2014 visit with me.
So they’ve raised it lots.
CORIN Just finally
on the issue of tourism, are you confident that we’re not
going to see some sort of boom-bust scenario with tourism, a
bit like we’ve seen with the dairy exports to China? They
really boomed and all of a sudden dropped away. Is there not
a risk here that we could overdo it
again?
JOHN Well,
firstly, in terms of the investments, private sector
investments, so in the end an
investor—
CORIN But
you’re leading the
charge.
JOHN Yeah,
sure.
CORIN You’re out
there saying that it’s going to be a million tourists in a
year’s time or
whatever.
JOHN Well,
more than a year, but, yeah, my overall view is we’re on
our way to four million tourists, not 3.2, and
rising.
CORIN But
do you see that there’s an argument that that’s risky?
That if the market turns sour, that it’s
risky?
JOHN Well, I
guess if the government was putting in the money, then you
could make a case. The government assists tourism through a
number of different things we do, but relatively that’s
small beer compared to building the hotels and running them
and all the other things, and that’s the way it should be.
Actually, private sector investors need to make that call.
If the Fu Wah Group wants to put up its money and the Park
Hyatt wants to run their hotel, actually, we welcome that,
but they have to make the commercial calls. The only point
is that there’s been this, I think, systemic change.
You’ve got low oil prices. You’ve got lots more
middle-income consumers, better economic activity. New
Zealand’s a very attractive destination, and I just
don’t think that’s going to turn around. It’s been a
growth story in tourism for a long period of time. It’s
not just a 2016 issue. It’s been happening for quite a
while. I personally think, actually, Tourism New Zealand’s
doing a good job. I think Kevin Bowler’s been a very good
leader there, and the team actually deserves some credit
because we are doing better relative to other countries. But
are the numbers going to be greater in three years, four
years, five years, 10 years from now? Oh, look, I’d
probably bet every dollar I’ve got that it’s going to
be. That’s just the international
trend.
CORIN Prime
Minister, thank you very much for your
time.
JOHN Thanks
very much,
indeed.