NZ struggling to scratch up capital market

JOHN HARTEVELT
Last updated 11:54 19/02/2012

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John Hartevelt

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OPINION: As we know, since it's still being so thoroughly picked over, the country had a rough year in 2011.

So it is only right that one year on from the most devastating of the Canterbury earthquakes, there is sombre reflection. But that can be for only a moment. The first anniversary must also be an occasion for impetus. For the government, the weight of sadness this Wednesday must be lifted with one clean jerk because it cannot be distracted any longer.

For Christchurch, the personalities of Tony Marryatt, Bob Parker and Gerry Brownlee have become too much of a diversion to the job at hand.

But elsewhere the government seems at risk of becoming tongue- tied. The interminable debate over the Crafar farms, for instance, is an important argument but not necessarily for reasons the government has allowed. Maurice Williamson, one of the two ministers to have signed off on the Chinese bid for the farms, has railed repeatedly about xenophobia and he has been quick to draw comparisons with the welcome mats he says were rolled out for Canadian country singer Shania Twain and Canadian film director James Cameron when they bought land here. Williamson has a valid point, but there is a bigger picture to consider over the sales of productive farmland to foreign buyers.

The Crafar farms sale is really a case study in New Zealand's continued struggle to scratch up something like a decent capital market. The best price New Zealanders can offer for the farms is something like $40 million less than what's available from overseas.

National is clearly not going to cut the cord altogether on foreign investment because of the very likely depressive effect that would have on farm prices.

So what can it do, other than wail about xenophobia or kick to touch by appealing last week's high court decision?

It says the mixed ownership model will deepen capital markets and that its tax switch has already improved household savings.

And yet, still the current account deficit is projected to get worse.

The government's own projections have what is arguably the country's biggest structural problem - our overall income/ expenditure imbalance with the rest of the world - deteriorating in every one of the next four years.

It's surely that economic measure that lies at the heart of the government's biggest political headache, the Crafar farms.

It would be unfair to suggest National does not have an overall economic vision for the country.

Steven Joyce is practically fizzing in his new Beehive office opposite Bill English as he sets about trying to join up skills training with what he hopes will be an expanding jobs market. But Joyce is also the strategic maestro on matters political, an area that Key himself gives plenty of attention.

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When the latter gets in the way of the former - as it has for so much of this year to date - Key's government risks getting horribly sidetracked and hopelessly bogged down.

- © Fairfax NZ News

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