Editorial by Selwyn Manning.
STATE OF IT: This week the National-led Government cited overseas investments made by the New Zealand Superannuation Fund as justification for offshore investors being permitted to purchase state house assets.
The argument goes that if it is ok for the Cullen Fund to make offshore investments then it follows that overseas entities ought to be free to invest in New Zealand’s social housing market, to exploit that investment and return profits to their state of origin.
The argument demonstrates how disciples of raw political ideology can quickly find themselves estranged from the very people, in whose interests, they are warranted to govern.
Of course, the backstory to this issue is the Government moving to create a law that will allow at least two Government ministers in its Cabinet (Paula Bennett and Bill English) the authority to direct the sell-off of state houses with a specificity not yet seen in New Zealand. It is the kind of law that would have prevented Murray McCully from being sacked as Tourism Minister in the 1990s.
Why is it doing this? Simply, the Government is desperate to create a market where, to date, no market existed, to encourage demand from offshore speculators and providers, and divorse itself of the responsibility of governing social provision.
This week, while squaring off against criticisms during Parliament’s question time, the Prime Minister John Key asserted that the in-flow of capital into New Zealand from offshore investors would be significant and that the out-flow of capital would be insignificant.
The devil, as they say, is in the detail.
That out-flow of capital the Prime Minister is sensitive to will be the sum of profits acquired off the back of former and current state tenants, profits topped up by New Zealand taxpayer subsidies.
But let’s also consider the return-on-investment offshore speculators will acquire from the future sale and trade of this country’s state housing stock.
The opportunities, and the subsequent out-flow of capital, will be significant and potentially extreme.
The legislation (which is designed to remove barriers so this new state house asset market can flow without bureaucratic weight) will, in effect, permit the fast track sell-off of this asset stock.
We understand from Government figures that it intends to shift 8000 state houses off its books. QV.co.nz calculates the New Zealand-wide average value of housing stock at $514,232.00 per unit. The annual market increase of bottom-line value is calculated at 9.0%.
Granted, this calculation does not match the exact value-per-unit that will be positioned for sale. For example, we know part of the housing stock has been poorly maintained. And it is obvious by the behaviour of the ministers involved, the Government has cloaked itself within a desperate-seller shroud.
But the QV.co.nz nationwide valuation does give us an idea of the potential profits to be made should an investor house-and-land-bank their purchases then simply wait for a couple of years while the former state house tenants and the New Zealand taxpayer pays the rent. Then, once the market promises a bounty, decide to flog them off and make a quick 20+ percent on the purchase price and siphon the loot offshore from whence they came.
Compounding this equation is the Government’s desire to sell, and sell fast, rather than strategise for the highest possible price. It appears that once the ministers have the legal status to acquire the experience necessary to safeguard their future careers, these taxpayer-paid real estate agents, fuelled by their desire to ‘sell, sell, sell’, will likely erode the book value of the state housing asset stock even further.
But then, perhaps we ought to give the Government credit. This is the kind of gift that will certainly entice foreign investors to enter this Key/English fire-sale market with the intent to exploit this country for all it is worth (pardon the pun). Will that create demand-heat above the scale of asset-dump? No, sorry, it’s not even an even bet. Sadly, it does seem this third-term government, fuelled by its long-disguised ideologic DNA, is suffering from a bad dose of arrogance over political pragmatism.
I have to agree with the New Zealand Herald’s John Armstrong who said this week: “Bill English’s willingness to allow an Australian housing provider to buy up to 500 New Zealand state houses veers perilously close to allowing blind ideology to get the better of political common sense.”
Clearly, the ministers have become impatient. Governance is too obscure for this party of economically-liberal zealots. For them, the status-quo is problematic, it provides public servants too much room to construct a bureaucracy that will in turn slow-down the rate of sale. So National’s ideologues will create a law that enables them to direct their officials, direct them to sell off specific stock to specific buyers.
It is bad lawmaking, designed around the party’s interests and not the nation’s. It will enable the Government to broker deals in the dark, in the privacy of back-rooms, to expedite the process of sale. How many blind-trusts will emerge as purchasers of these assets? How many politicians and National Party stake-holders will be invisible within those entities? This is the culture of suspicion the Government is creating. And the motivation is blind ideology.
This troupe of ideologues know they are a third term government that will never again enjoy current levels of popular support. Yes, the opposition remains weak. But they know that delicate balance will change in time.
They believe in the private market, they know what they represent, and they are desperate to create an ownership and services market so private interests can become the primary providers of governmental social services.
We now know the Government is well on its way toward implementing this once-hidden master-plan – to disestablish New Zealand’s social safety net, its welfare framework, and to disinvest itself of those governance responsibilities that have long been the burden of almost a century of successive New Zealand governments.
The question lingers… once this radical National Party plan concludes, or exhausts itself, will private social investors embrace the moral-ethos to provide a sustaining safety-net, or will they seek to profit from their investment?
You be the judge.