"The [current] rules under the Overseas Investment Act only allow the Government to take into account the financial capability of the investor and their integrity/reputation," Parker said.
"So long as they're not corrupt and they have the financial capability to manage the investment ... there's no way the Government can turn down an investment currently."
The national interest test would be similar to that of Australia, Parker said.
"That's a broad discretion for the Government to reach into those transactions when it wants to and decline to approve it where we think it's not in the interest of the country."
Investments likely to be subject to the tests was infrastructure with "monopoly characteristics" such as airports, ports, electricity lines companies and monopoly providers of water.
"If these things were ever to be sold, we think the Government should have the right to say they have to be sold to a New Zealand entity rather than to a foreign entity."
Parker said sales which might be considered under the rules might have included the failed attempt by Canadian investors to buy a major stake in Auckland Airport - which was ultimately turned down because the airport was on sensitive land - and the sale of Wellington Electricity to the Hong Kong-owned Cheung Kong group of companies.
Other changes would also include a "call in" power, with no investment threshold for proposed sales of "our most strategically important assets" such as companies developing military technology or suppliers to defence and security agencies.
Parker said the test could also apply to media companies.
Foreign investors wanting to buy sensitive land for the purpose of bottling water for export would have their applications considered for "the impact on water quality and sustainability" of a water bottling enterprise.
The Government has also pledged to charge a royalty on exports of bottled water. Parker said on Tuesday that the work was progressing separately from the Overseas Investment Act reform.
Other changes include a sharp increase in fines for non-compliance with the act, raising from a maximum of $300,000 under the current rules to $500,000 for individuals and $10m for corporate investors.
In 2018 the Government amended the Overseas Investment Act to make it much harder for foreign buyers to purchase a residential home as well as adding restrictions on the purchase of pastoral land.
Parker said the first round of changes had been a "huge success".
