Despite Labour sweeping to electoral victory and allowing it to govern alone, it appears to be hamstrung on property investment. Photo / Michael Cunningham
Despite Labour sweeping to electoral victory and allowing it to govern alone, it appears to be hamstrung on property investment. Photo / Michael Cunningham
OPINION
New Zealanders' excessive investment in property continues to damage the productive sector.
Kiwis trading in increasingly expensive houses has been likened to a Ponzi or pyramid scheme, in which returns given to early participants come from money contributed by later ones.
The longer it goeson, the worse the consequences and the greater harm an about-turn will do. Yet the public balks at swallowing short-term pain for long-term gain.
Our Labour Government wants us to believe the remedy lies with the Reserve Bank.
However, it is overwhelmingly government fiscal levers that can right the tilted investment playing field.
The failure of our society to reach a well-informed, effective consensus on investment is illustrative of our divisive, quarrelsome individualism and disconnectedness. Vehement voices drown out reasoned arguments whenever taxation or any financial resets are raised.
Despite Labour's recent sweeping electoral victory allowing it to govern alone, it is hamstrung. This is partly due to erstwhile National Party voters voting Labour on the understanding the status quo on property investment will continue.
Successive governments' "no-change" policies have left longstanding crises unresolved.
They include unaffordable homes, exorbitant rents, child poverty, rising inequality, deficient healthcare, low productivity, inadequate transport, and climate change. Many semi-literate and semi-numerate students leave school with forlorn employment prospects.
John Hawkes. Photo / Supplied
Lack of investment bedevils many economic sectors. Central government determines the expenditure of more than 90 per cent of the taxes raised nationwide. Consequently, cash-strapped local governments struggle to fund infrastructure for housing, water care and transport.
To fund local government better, we must greatly increase our nation's wealth.
Regardless of party affiliation, MPs have long neglected wealth creation. They are preoccupied with its redistribution.
Entrepreneurs who have created successful export-led enterprises avoid entering Parliament to reshape the national dialogue. That's a pity because we have far too few such enterprises earning vital dollars for the nation's coffers and providing well-paid, satisfying jobs for New Zealanders.
As the most tax-preferred investment, property sucks up the lion's share of Kiwis' discretionary funds. That's why startups needing capital to grow are forced to seek overseas investors or move their enterprises abroad.
A striking example is former All White Tim Brown's San Francisco-based revolutionary footwear enterprise, Allbirds, which he co-founded in 2016. Its estimated worth is now NZ$2 billion. If Brown had had the financial backing of New Zealand-based investors, Allbirds' headquarters would be located here.
We need many more flourishing export-led enterprises such as Buckley Systems, Beca Group, Fisher & Paykel Healthcare, Zespri, Gallagher Group, Tait Communications, HamiltonJet and Canterbury Scientific.
To create the right environment for the next generation of Kiwi trailblazing companies, not only our predilection for property, but also our culture must change.
Sportspeople's achievements dominate our media. This is magnified by multinational businesses paying sports stars small fortunes to promote their products. Hence tens of thousands of young Kiwis spend an inordinate amount of time developing their sporting ability, hoping they will become internationally renowned and well-rewarded financially.
Devoting their lives to sport risks compromising these youngsters' academic attainments and job prospects. Even if they do get to the top, international sports careers are extremely competitive and usually brief in the totality of one's life. And after being idolised for their sporting accomplishments, the period of adjustment to a comparatively mundane existence is difficult. Mental health problems arise, and some succumb to alcohol and drugs.
Why Kiwi businesspeople are averse to spending many years creating a NZ-based world-class enterprise is complex. It is understandable that some entrepreneurs who make a tidy sum early on decide to sell their enterprise in favour of a less stressful life. With the proceeds, some fulfil the 3Bs Kiwi dream: BMW, bach and boat, enabling them to enjoy our idyllic countryside, mountains and coastline.
Some had hoped the Covid-19 pandemic would see expatriate New Zealand entrepreneurs return home to set up high-quality export-led enterprises that would pay New Zealanders well.
Some such entrepreneurs have arrived, wanting to set up shop. However, after doing due diligence they dropped the idea, finding the temptation of investing in property too irresistible to ignore.
• John Hawkes is a fourth-generation Kiwi; a medical graduate of Dunedin Medical School; a consultant rheumatologist near London for 25 years; a NZ athletics champion; and author of New Zealand: Paradise Squandered?
