KEY POINTS:
New Zealand First wants to reduce foreign ownership of New Zealand assets and proposes setting up a fund to buy some of them back.
It is time, Winston Peters told the party faithful last weekend, to staunch the haemorrhage of money to Australian-owned banks and other foreign interests.
Yet this tub-thumping came only three days after the Treasury published research which concluded that foreign capital has been on balance positive for national income.
Just as well, because we are certainly hooked on it.
At the end of March foreign investment in New Zealand stood at $274 billion. That includes about a third of all the funds New Zealand banks lend out.
It is partially offset by New Zealand investment overseas, but the net liability position is still $154 billion or 86 per cent of gross domestic product, a very high level for a developed country. It is the cumulative legacy of decades of running current account deficits - another $13.8 billion in the year to March.
The deficits tend to be reported as bad things, a kind of indicator of national improvidence.
It is that assumption which is challenged by the Treasury report, by Professor Anthony Makin of Griffith University in Queensland, Wei Zhang of the Wellington think-tank Motu and Treasury economist Grant Scobie.
A current account deficit has to be financed by a corresponding inflow of foreign capital.
When foreigners finance an expansion of the country's capital stock (plant and machinery, buildings, infrastructure, livestock) the rise in external liabilities is matched by an increase in the nation's real assets.
The inflow of capital has allowed us to maintain a rate of investment in fixed assets, as a share of GDP, which is slightly higher than the OECD average and only slightly lower than Australia's over the past 10 years, despite a national savings rate significantly lower than either Australia's or the OECD norm.
"Without that capital inflow over past decades the combined saving of the private and public sectors would have implied less investment and hence lower real output growth," the report's authors say.
The question is whether the economy's output has been growing fast enough to cover the cost of meeting that increased international debt; if not, the debt will not be sustainable in the long term.
The answer, according to the researchers' number crunching, is yes, it has been.
"The use of foreign savings has augmented the capital stock and generated additional income more than sufficient to meet the obligations on the foreign liabilities."
They put a figure on how much more. The cumulative national income gain between 1996 and 2006 equated to $3300 per worker in today's dollars.
In terms of a national balance sheet it is a similar story. Growth in national assets easily outstripped growth in external liabilities over the same 10 years. Even with an 87 per cent increase in external liabilities we were $14,000 a head wealthier at the end of that period than at the beginning.
The researchers note, however, that while our current level of reliance on imported capital might be sustainable, in the sense of covering its costs, that does not necessarily mean it is optimal or poses no risks.
The kind of economic nationalism associated with New Zealand First is to be found overseas as well.
It can often seem that the "Washington consensus" of the 1990s (liberalising trade and international investment flows and the doctrine that whatever the problem the solution is a market) is in full retreat.
A team of ministerial surgeons is at work trying to save the life of the Doha Round in Geneva right now.
A paper to the Bill Phillips economics conference in Wellington this month by Professor Wing Thye Woo of the Brookings Institution warns of rising protectionism, not least in the United States.
At a time when the US is running large current account deficits, China's current account surplus has risen steeply, from 2.2 per cent of GDP in 2002 to 9.5 per cent last year.
This has resulted, Woo says, in increasingly harsh words about China's trading practices and exchange rate policy not only within the US but from the International Monetary Fund and EU Trade Commissioner Peter Mandelson.
But Woo argues against calls for a large revaluation of the Chinese currency or even a free float of the renminbi.
Such a move would only hurt China but not "save" the world, he says. Foreign companies manufacturing in China for developed country markets would only move production to other Asian countries and import from there.
Floating the renminbi and abolishing capital controls at the same time could result in a great outflow of funds on the part of individual Chinese possibly on a scale that would cause the currency to fall rather than rise, Woo says.
He looks for the explanation of China's high household savings rate, writ large in its current account surplus, in the lack of sophistication of its internal financial markets.
The decline in state subsidies for housing, medical care and education and the mismanagement of pension funds by the state have led people to save more for a rainy day, to buy their own housing, to build up a retirement nest egg and to invest in their children.
At the same time China has yet to develop sophisticated financial institutions for pool risks or converting savings into loans.
All else being equal, Woo says, the more sophisticated a financial system, the lower the savings rate.
In the meantime it leads to the unnatural spectacle of a fast-developing country exporting capital on a massive scale when you would expect it to be importing it.
Ben Bernanke, in 2005 before he became Federal Reserve chairman, argued that the US current account was the result of a "global saving glut".
Countries which had experienced, or merely observed up close, the financial crises in Asia, Russia and Brazil in the late 1990s were keen to build up reserves. They issued debt to their citizens, mobilising domestic savings, and used them to buy US government debt and other assets.
The sharp rise in oil prices has also created large current account surpluses among oil exporters.
These funds found a profitable home for a while in the dot.com boom and then the housing boom.
Right now, of course, we are very much between booms.
But Bernanke was surely right to say that in the longer term developed countries as a whole should be running current account surpluses and be net lenders to the developing world, not the other way around.
