Foreign ownership vital - economist

Phil Goff says New Zealand is critically dependent on overseas investment. Photo / Herald on Sunday

A dramatic change in approvals of foreign ownership of farms could impact the wider overseas investment on which the country is dependent, says Infometrics senior economist John Carran.

"In the first instance it would lower land prices so existing land owners, which are predominantly New Zealanders, would experience a reduction in their wealth," Carran said.

"The second is to the extent that it causes perceptions that we don't welcome foreign investment or foreign investment is riskier in New Zealand," he said.

"Effectively what it does is it raises the cost of capital for New Zealand businesses."

Labour Party leader Phil Goff last weekend said a Labour government would welcome foreign investment but with strict controls and strings attached.

"Instead of the overwhelming majority of farm sales being approved, the overwhelming majority will be declined," Goff said.

Carran said Labour might be able to achieve what they wanted under present regulations where there was discretion for ministers to intervene.

New Zealand was critically dependent on overseas investment, Carran said.

"New Zealand just wouldn't be able to function, we wouldn't be able to sustain our standards of living if we didn't have foreign investment."

Foreign investment could transfer new technology, skills, management capabilities, access to markets and distribution channels.

"So there are real flow-on benefits from foreign investment and people focus a lot on the negative."

New Zealand was a small economy with a large current account deficit.

"We do rely on the savings of overseas investors," Carran said.

The fundamental cause of foreign ownership was a low savings rate.

"Anything that doesn't address that fundamental concern is likely to be window dressing."

Federated Farmers president Don Nicolson said foreign investors owned 1 per cent of land, 9 per cent of manufacturing industry and 61 per cent of insurance and finance companies.

"In the scheme of things land is minuscule," Nicolson said.

There was some merit behind the idea of reciprocity, he said.

"Like with like, if we can't do it in your country don't expect to come to our country and do the same."