Ticket to ride
Scary policy dilemmas await the new Government at every turn.
New governments are supposed to get honeymoons, but instead of the Tunnel of Love, this one’s on the Ghost-Train ride. New ministers are still rummaging through cardboard boxes in the Beehive, yet already their scariest policy dilemmas are leaping and leering at their every turn.
Boo! Trans-Pacific Partnership, foreign ownership rules and Apec, all needing to be progressed at once if not sooner, despite conflicting bureaucratic and legal advice, and two of the governing parties opposed to any progress at all, ever. Don’t look now, but: Argh! Here’s a major oil and gas find that the Greens will hate, but which the Government probably can’t stop even if it wanted to, which it (mostly) doesn’t but daren’t say so. And, Duuuck! Perhaps scariest of all, Australia Needs to Talk About Our Relationship.
Rattling in the closet is immigration, and the seeming impossibility of lowering it by 20-30,000 a year as promised just by cracking down on student visa abuse, given the rapacity of horticulture, construction, teaching, health and other sectors for foreign labour. Each day brings a new trick-or-treat ultimatum: abortion reform, sugar tax, publicprivate partnership vetos, charter-school conversion, Wellington trolley-bus preservation – what’s it to be, yes or no?
Still, new governments have a useful excuse in the sunset clause that’s best understood as the “A Big Boy Did It and Ran Away” doctrine. For now, anything tricky can be sheeted home to the previous Government’s negligence or perfidy, and the new status of our TPP negotiations is a bottler example. It now transpires that, despite the urgings of former Trade Minister
Tim Groser, National rejected the long-standing convention of negotiating bipartisan safeguards into the 12-member free trade deal (now being renegotiated with 11 countries, following the US’s withdrawal).
There’s an understanding going all the way back to Closer Economic Relations with Australia that such deals are so important to the country that the two major parties – then as now, National and Labour – take care to stay in lockstep on them, or as close as possible.
For the past few years, Labour has disagreed with National on the question of foreign housing, land and asset buying, and made it clear it would further restrict it if elected. Groser argued that his Government should build enough “give” into our TPP schedules to allow Labour to exercise that policy preference.
Now, we don’t know whether National simply said, “No, Labour can get stuffed”, or officials inferred that it would be futile to give advice on ways to accommodate Labour policy in the negotiations because National would tell them to get stuffed. What we do know is that National’s refrain, that there was no way on Earth of curtailing foreign buyers without busting the TPP and other free trade deals to smithereens, was, ahem, a misconstrual.
That the normally ebullient previous Finance Minister Steven Joyce can summon only a weak-tea sort of smile when discussing these issues suggests a bluff has now been called. An outright ban on existing home sales to non-residents is about to be enacted, no “workaround” or special exemption needed.
Even sceptics concede that curtailing that money’s-no-object end of the market will help stabilise house prices.
THE DEVIL’S WORK
Still, that funny industrial smell that people may have noticed lately is from all the fu-fu valves being welded shut, as Labour,
Green and NZ First legions of TPP-deniers try to restrain themselves from exploding. On the one hand, it’s a bit early to go dog on the Government they scarcely dared hope they’d ever see elected; on the other hand, the TPP is the devil’s work.
In full knowledge of this, Prime Minister Jacinda Ardern came out of the blocks at full speed with a pro-TPP stance within days of forming the Government. Under her watch, Labour is again a pro-free-trade party. She “refused to accept” the foreign buyers’ issue would stop New Zealand signing the deal – a clear message to unions, the Labour Party council and the many TPP opponents that the deal was on and no correspondence would be entered into.
Ardern is lucky the TPP re-negotiation has come to a head at the start of her tenure, when she has the political momentum to outpace the Government parties’ grass roots on this issue. There will be bitter garment-rending on the party-conference circuit, as Ardern has said the deal will be done even though it’s unlikely that other dead rats, such as investor state dispute rules, can be disposed of.
Meanwhile, the Government will have to endure a chorus of “Xenophobia!” over the foreign buyers ban. But even sceptics concede that curtailing that money’s-no-object end of the market will at least help towards stabilising house prices.
“A TRAGIC FLAW”
Those who say foreign buyers, measured at just 3% of our housing market, don’t make a difference ignore two rather cogent factoids. First, we don’t measure the extent or impact of foreign buyers comprehensively – for deliberate political reasons, as National was implacably opposed to restrictions – so it’s possible it’s higher than it appears. Second, Chinese investors have long been buying heavily in many other countries’ markets, and have been measured as making an empirical difference there. As the Economist observed earlier this year, Canada’s housing market in particular exposed “a tragic flaw in the global economy”, which is the dearth of investment avenues for newly prosperous and developing countries’ moneyed citizens. China industrialised in just a few decades, but has yet to match its high-quality goods with safe places to store the resultant earnings.
The Chinese have increasingly sought developed countries’ real estate as a safe, readily understood place to stash their money. Those countries have been unable to stop this from inflating housing prices. Even massive stamp duties are little deterrent. The Chinese just pay them.
The TPP topsy-turvying also underscores the old saying about being careful how you treat people on the way up, lest you meet them on the way down. Appetites were keen among our new leaders to summon Groser home from his Washington ambassadorship. His newly
discovered role as lone defender of bipartisanship may not quite qualify him for the Tunnel of Love, but at least it may allow him to stay on the merry-go-round a bit longer.
Chinese investors have long been buying heavily in many other countries’ markets.
Prime Minister Jacinda Ardern: each day brings a new trick-or-treat ultimatum.