"While there is a lot of noise made about foreign capital and its impact on Auckland house prices, there is worryingly little discussion about the importance of foreign investment for business, or even informed debate on where that investment is from or how the source of investment may change over time," Makhlouf said.
Current levels of Asian investment in New Zealand did not yet reflect the level of growth and wealth in the region, he said.
"Australia is still by far New Zealand's largest source of foreign direct investment, representing 52 per cent of the total stock (the majority of which is in the financial and insurance sector), followed by the US at 8 per cent, Hong Kong at 6 per cent, and the UK, Singapore and Japan each at around 5 per cent."
Asia was the destination for around 40 per cent of New Zealand exports but represented only 16 percent of our foreign direct investment stocks.
Over time Treasury expected that Asia would become an increasingly important source of foreign capital for New Zealand, he said.
This meant growing businesses, more jobs and higher wages for New Zealanders. "Just as we should celebrate Fonterra investing billions of dollars in farms in China, we should be seeking out far greater investment from Asia. An important part of this increased investment will likely occur through portfolio and other financial flows, providing an important opportunity to deepen our financial markets."
Just as we should celebrate Fonterra investing billions of dollars in farms in China, we should be seeking out far greater investment from Asia.
Makhlouf highlighted the value the Trans-Pacific Partnership which he described as a good example of how we are drawing closer to Asian nations.
"These agreements are a springboard that we can use to better understand overseas markets, and importantly, to better understand consumers. I want to think about a world where our trade relationships with Asia are as close as they are with Australia."
Makhlouf also spoke directly to the Herald about the politics and public concerns around foreign investment.
"I completely understand that some feel passionate about these things." But from an economic perspective the ownership of a particular asset didn't really matter, he said.
"What matters is: what use is that asset being put to?`"
"The danger is that we're conflating all of these issues into one debate, and its the wrong debate," he said. "We're not debating the simple question of: what is the benefit of foreign investment into New Zealand and overseas investment out of New Zealand."
Some investments might be better than others but Treasury was reluctant to be saying that one sort of investment was bad and some were good, he said.
" The sort of investment that you want is the sort that will help the economy function well."
If you looked at an example like a new hotel for Auckland, the reality was that if it was to be New Zealand-owned it would be funded with borrowing.
It goes beyond trade, it includes capital flows, people flow and idea flows. We see it as a fundamental part of the whole strategy to improve our prosperity.
"They'd be most likely borrowing from overseas and paying interest to people overseas," he said.
Despite being very trade focussed New Zealand had room for improvement in its "connectedness" to Asia.
"It goes beyond trade, it includes capital flows, people flow and idea flows. We see it as a fundamental part of the whole strategy to improve our prosperity."
Asked about the Treasury's role in the foreign investment debate, Makhlouf said the primary mission was to improve prosperity and give Government the best possible advice.
"The Treasury's job is to make sure that people understand the implications of their choices. At the end of the day Ministers decide and the Government doesn't always agree with us."
