Home > Dollars & Sense, Social Issues > How to lose $5.3 billion dollars without any effort at all.

How to lose $5.3 billion dollars without any effort at all.

The latest in the on-going saga of our land alienation to overseas interests…

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Full Story

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The eight farms mentioned in the above story are located here,

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Meanwhile, Monaco and Israeli investors have increased their shareholding in the Walter Peak Station Trust,

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Source

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By September of this year, the Aquila Group had increassed their holdings from eight to eleven South Island farms, with stated intentions to buy more,

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Full Story

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Since the start of 2006, the Overseas Investment Office (OIO) has approved the sale to foreign buyers of 300,400ha of freehold land and 239,600ha of other interests in land, such as leases.

Those figures are for land passing from New Zealand to overseas ownership, and does not include the  sale of land already in foreign hands.

Which brings us to this latest news,

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Source

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A record payout – $10.6 billion – going to New Zealand farmers.

Or… will it?

As more and more dairy farms are sold into foreign ownership, more and more of Fonterra payouts will also end up in the bank accounts of offshore investors. Not only will we be faced with higher prices for milk, cheese and other items containing dairy products – but the profits from the sale of those products will not come to New Zealand.

We will have lost income as well as dairy products.

Imagine if, eventually, half our dairy farms end up in foreign ownership; German, Chinese, American, etc. Then imagine half of Fonterra’s payouts ending up in offshore bank accounts.

Imagine – losing $5.6 billion.

We have already solds many former State assets to overseas investors. The profits from those assets now flow overseas, which will continue to impact negatively on our Balance of Payments account – pushing us further into deficit.

Quite simply put; we are importing more than we are exporting. That makes it more expensive to borrow capital from overseas markets (eg; for our home mortgages), and will eventually affects the interest we pay on those borrowings.

End result; triple whammy;

1. Higher dairy prices

2. Lost earnings

3. Higher interest rates

Now can anyone remind me – what, precisely, is the long-term benefit to New Zealanders to sell our productive land to overseas interests?

Something else to bear in mind when voting this year. The only ones who can stop the further alienation of our own land is us – the citizens of New Zealand. Because, my fellow Kiwis, no one else will do it for us.

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***

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Email sent to the Prime Minister of New Zealand, John Key,

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————————————————————————–
from:    [email]
to:    john.key@parliament.govt.nz
date:    Sun, Sep 11, 2011 at 12:32 AM
subject:Purchase of farmland

Sir,

At a recent public meeting in the Hutt Valley, in answer to a question from
the audience, you responded that purchases of farmland, by overseas buyers,  
would be restricted to ten farms per purchaser.

Can you confirm that this restriction is in place, and when the regulation was
enacted?

Regards,

– Frank Macskasy
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As of the publication of this piece, no response has been received from the Prime Ministers office.

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+++ Updates +++

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Full Story

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Full Story

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The Fay-led bid for the Crafar farms has failed because it is lower than the Chinese bid. This raises two issues,

  1. If a multi-millionaire such as Sir Michael cannot outbid overseas investors who are hell-bent on buying our farms – then what hope is there for ordinary kiwis, who do not have Sir Michael’s deep pockets, on competing against foreign investors? The answer is obvious; we cannot compdete. We would be outbid every time.
  2. If, as Sir Michael suggests, that over a certain price these farms are not economical, then why are the Chinese willing to pay more ($40 million?) than the farms are worth, from a viability-prospect? Could it be that the Chinese are not interested in profitability as much as securing food-production sources over the next few decades?

This is the clearest example yet as to why only New Zealanders should be permitted to own New Zealand farmland. As the world’s population passes the $7 billion mark, and is heading toward 9 billion by 2050, farmland will be the most important, strategic asset on this planet. Perhaps that is why the Chinese are willing to pay over-and-above what the Crafar farms are worth: they are buying into the future.

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Further Information

Save The Farms

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  1. Gosman
    23 September 2011 at 9:44 am

    What a ridiculous view.

    By your logic all foreign investment results in a loss so therefore no foreign investment should be encouraged.

    That would mean the cost of our capital would become more expensive and the risk of new investment would be that much greater.

    But leftists were never very good at thinking through the implications of their wrong headed policies.

  2. 23 September 2011 at 9:58 am

    Your response is predictable. Yet again you’ve missed/ignored every point I raised.

    I could say that you right wingers/libertarians “were never very good at thinking through the implications of their wrong headed policies”.

    As I wrote,

    “1. Higher dairy prices

    2. Lost earnings

    3. Higher interest rates

    Now can anyone remind me – what, precisely, is the long-term benefit to New Zealanders to sell our productive land to overseas interests?”

    Do you actually have a response to the points I’ve raised or do you dismiss everything without due consideration?

    • Gosman
      23 September 2011 at 10:07 am

      You haven’t explained the mechanism for how this will lead to higher dairy prices. Please explain how this works?

  3. Gosman
    23 September 2011 at 10:05 am

    By the way you misunderstand the Balance of Payments deficit. I think you will find NZ exports far more than we import. We don’t have a problem in that regard. It is the other inflows and outflows of capital that cause the deficit.

  4. Gosman
    23 September 2011 at 12:21 pm

    This entire posts seems to highlight your confusion over economics.

    Not only do you mistake a deficit on the Balance of Trade with a deficit on the Balance of Payments you also don’t seem to understand the main way prices for dairy products in NZ are determined.

    However that is not the worst of it. Your title of the post is “How to lose $5.3 billion dollars without any effort at all.”. It is seemingly based on a hypothetic situation where 50% of farm land is owned by foreigners, (although on what basis you think NZ farm land is being alienated that 50% is a realistic figure is not mentioned at all). Even if we hit this level of foreign ownership it wouldn’t lead to 5.3 Billion dollars of the payout being sent offshore.

    You have seemingly mistaken Income with After Tax Profit and Dividends and have simply arrived at the 5.3 Billion figure by dividing 10.6 billion in half.. If I own a business and I receive 100,000 revenue I will have to pay all my costs out of that revenue PLUS any taxes on profits made. Only then can I decide what to do with the surplus. It would be a foolish business indeed that withdrew all the revenue as soon as they received it.

    So you see the only way you could arrive at 5.3 Billion dollars disappearing from NZ is if Foeigners owned far more than this arbitary amount of 50% of Dairy farms that you have pulled from the air.

    • 23 September 2011 at 2:04 pm

      No, I have made no mistakes. You simply assume as much.

      “It is the other inflows and outflows of capital that cause the deficit.”

      Correct! They are referred to as “invisibles” and consist mostly of outgoings such as insurances, dividends remitted to shareholders, etc. Which is why the ownership of farmland is so critical; profits made are remitted back to offshore investors.

      “…(although on what basis you think NZ farm land is being alienated that 50% is a realistic figure is not mentioned at all)…”

      As you yourself said, it was a hypothetical situation that, given current laws and regulations, is quite possible.

      Question: Feel free to tell us why such a hypothetical situation could never occur? What is the legislative mechanism to prevent 50%, 75%, or 100% of our best productive farmland from falling into overseas ownership.

      As for the rest of your comments – you have posted nothing that contradicts my facts. You may claim that I have made “mistakes” – but everything I have posted is based on sourced information.

      • Gosman
        23 September 2011 at 2:45 pm

        Invisibles are not imports or exports Frank. They are capital flows. Imports and exports are tangibles. You stated quite plainly that NZ has more imports than exports. This is plainly inaccurate.

        I have yet to see how you get that there is going to be higher dairy prices if there are increased foreign ownership of NZ farm land. Please explain this or at least provide a reputable source, (as you claim it is based on), that backs this view up.

      • Gosman
        23 September 2011 at 2:54 pm

        I have to correct my defiinitions slightly here. Most exports and most imports are tangible however trade in services are intangible. However that does not detract from the fact that the problem in NZ is not with the Balance of Trade but with the Balance of Payment on the Current Account. This is to do with the flows of capital. In short there is more money leaving NZ than is arriving. While trade in tangible and intangibles impact on this our problem is not really in this area.

      • Gosman
        23 September 2011 at 3:07 pm

        You have also not dealt with the fact that your whole scenario falls down at the 50% ownership level as there is no way foreigners could repatriate 100% of the revenue they revceived. Do you acknowledge that this part of your post is grossly inaccurate?

  5. 23 September 2011 at 10:11 pm

    Gosman :

    You have also not dealt with the fact that your whole scenario falls down at the 50% ownership level as there is no way foreigners could repatriate 100% of the revenue they revceived. Do you acknowledge that this part of your post is grossly inaccurate?

    I notice you have disregarded my question,

    “Question: Feel free to tell us why such a hypothetical situation could never occur? What is the legislative mechanism to prevent 50%, 75%, or 100% of our best productive farmland from falling into overseas ownership.”

    Care to answer that before I address yours? Or is this a one-way street?

    • Gosman
      23 September 2011 at 11:27 pm

      Fair enough. If we are playing a game of Quid pro Quo then I will answer your question.

      We have an Overseas Investment Commission who are tasked with looking at issues such as alienation of NZ farm land.

      While there is no legislative limit on the amount of farm land that could theoretically be bought by foreigners it is inconceivable that amounts of that level would be approved.

      You may very well argue that their should be tougher regulation in place but you can’t argue there is nothing.

      Now that I have answered your question perhaps you will answer the ones I posed to you.

  6. 24 September 2011 at 12:35 am

    Gosman :

    Fair enough. If we are playing a game of Quid pro Quo then I will answer your question.

    We have an Overseas Investment Commission who are tasked with looking at issues such as alienation of NZ farm land.

    While there is no legislative limit on the amount of farm land that could theoretically be bought by foreigners it is inconceivable that amounts of that level would be approved.

    You may very well argue that their should be tougher regulation in place but you can’t argue there is nothing.

    Now that I have answered your question perhaps you will answer the ones I posed to you.

    Correct; “there is no legislative limit on the amount of farm land that could theoretically be bought by foreigners”.

    Which means that your following comment is wholly meaningless; that “it is inconceivable that amounts of that level would be approved”.

    Why is it “inconceivable that amounts of that level would be approved”? On what fact, or law, or regulation do you base that on?

    Because Gosman, if you believe that there is some magical rule that prohibits large amounts of land from being alienated from NZ ownership – let disabuse you of that notion right now. There is nothing whatsoever to prevent land from being sold of in portions, until large parts are foreign controlled. Nothing: no legislative limit whatsoever.

    In fact, the OIO (and it’s predecessor Overseas Investment Commission) have declined only a handful of applications.

  7. 24 September 2011 at 12:42 am

    Gosman :

    You have also not dealt with the fact that your whole scenario falls down at the 50% ownership level as there is no way foreigners could repatriate 100% of the revenue they revceived. Do you acknowledge that this part of your post is grossly inaccurate?

    Even if only 99% or 90% is repatriated – that does not mitigate the central issue here; that instead of Fonterra payments accruing to New Zealand, most of the profits would still end up in overseas accounts. Only a small portion would remain.

    You may want to debate the actual numbers – as in how many Angels can dance on the head of a pin – but they are largely irrelevant. We would still lose most of what the land has produced.

    Otherwise, why bother investing? Investors want a return on their capital and they will maximise that return as with any other business. That will be to our detriment.

    • Gosman
      24 September 2011 at 7:32 am

      Frank you are pulling figures out of your backside on a regular basis.

      First up it is the $5.3 Billion figure. Which you now acknowledge is just rubbish.

      Nex it is the 50 % of Farm land owned by overseas. Which you don’t even back up with figures that show how much NZ farmland is currently in overseas hands and the rate of growth over the last few years in this figure. That would be something that might be useful to your case. Please provide this.

      Now you are using 99 or 90 % of the income being repatriated. Don’t overseas people pay taxes and wages and rates and utility bills and a multitude of other costs? Do you think NZ farmers rate of return is in the magnittude you speak of?

      I love how you claim the figures are largely irrelevant here when you were busy arguing over in the Hone Harawira inaccurate story thread that it was a National outrage that TVNZ had used inaccurate ones. Your double standards are simply outrageous.

  8. 24 September 2011 at 12:57 am

    Gosman :

    Invisibles are not imports or exports Frank. They are capital flows. Imports and exports are tangibles. You stated quite plainly that NZ has more imports than exports. This is plainly inaccurate.

    I have yet to see how you get that there is going to be higher dairy prices if there are increased foreign ownership of NZ farm land. Please explain this or at least provide a reputable source, (as you claim it is based on), that backs this view up.

    “Invisibles” are not exports or imports. But I’ve not said that – YOU have.

    As I stated above, “invisibles” are profits remitted, insurances, and suchlike.

    As for why higher dairy prices are likely; have you not been taking notice of the price of dairy products lately? Prices were rising until Fonterra and the two supermarket chains instigated a price-freeze.

    Parliament is actually investigating why the price of dairy products is so high.

    So, evidence one: historical precedence.

    Next point; overseas investors will ship their products offshore to where they can maximise their returns. Which means that we either pay the same price that is exported, or go without.

    Historical precedence set on that point as well.

    Next point: as more and more dairy products are shipped overseas, for greater return; there is the likelihood of increasing competition for demand from local consumers here in New Zealand. By comparison, China has a market of 1.2 billion-plus people to feed.

    It is true that Fonterra currently ships much of it’s product offshore – but they are also mandated to supply local needs, or face consumer and political pressure.

    Foreign own companies need not worry about consumer or political pressure.

    The scenario I am describing here will not happen over-night – although as I wrote above; since the start of 2006, the Overseas Investment Office (OIO) has approved the sale to foreign buyers of 300,400ha of freehold land and 239,600ha of other interests in land, such as leases.

    This is a slow, ongoing process. It is slow erosion of local ownership of land. But it is becoming more evident, and, as you yourself have pointed out; there is nothing in law to stop it.

    And we haven’t even touched on the issue of young New Zealanders who might want to take up farming, having to compete with foreign corporations to purchase our own land.

    • Gosman
      24 September 2011 at 7:42 am

      Ummmmm Frank this is wahat you stated “Quite simply put; we are importing more than we are exporting”. Now you are trying to pretend you meant invisibles, which you acknowledge are not Imports or exports. Your statement is quite inaccurate.

      You seem like a person who is a supporter of scientific ideas and thinking. I like that as I am too. However you are falling in to the same trap that many supporters of pseudo-science fall into which is mistaking causation amd corelation. Just because we have overseas ownership of farms does not mean the recent rise in the price of Dairy prices is related .

      Dairy prices in NZ are determined largely by the international supply and demand for the product. Fonterra is trying to maximise it’s return for its members. It would be extremely foolish for Fonterra to not let prices in NZ to keep close to the international price. There would be a lot of angry farmers, and rightly so.

      • Gosman
        24 September 2011 at 4:00 pm

        One further thing about foreign ownership of dairy farms. These farms still largely utilise NZ distribution networks. Hence they are likely to be selling Milk via Fonterra. That blows your whole theory about them somehow selling their produce via some other method that we can’t control or influence out of the water.

  9. 24 September 2011 at 4:06 pm

    Gosman :

    Frank you are pulling figures out of your backside on a regular basis.

    First up it is the $5.3 Billion figure. Which you now acknowledge is just rubbish.

    Nex it is the 50 % of Farm land owned by overseas. Which you don’t even back up with figures that show how much NZ farmland is currently in overseas hands and the rate of growth over the last few years in this figure. That would be something that might be useful to your case. Please provide this.

    Now you are using 99 or 90 % of the income being repatriated. Don’t overseas people pay taxes and wages and rates and utility bills and a multitude of other costs? Do you think NZ farmers rate of return is in the magnittude you speak of?

    I love how you claim the figures are largely irrelevant here when you were busy arguing over in the Hone Harawira inaccurate story thread that it was a National outrage that TVNZ had used inaccurate ones. Your double standards are simply outrageous.

    Bugger. You got me.

    The figure was actually $5,299,999,990.60 (rounded up, Swedish style).

    And I’m very, very heartened by the fact that you’re learning that yes, figures do count – especially on nationwide, commercial media run by professionals – if not blogs. And yes, you’re proved a very good point; when the stats matter, you insist on accuracy. But only when they matter to you.

    However, in this case, I think it fair to say that you’ve totally missed the point, Gosman. You’re so fixated on minutiae to prove whatever point is in your head that you’re missing the Big Picture.

    Think of crossing the road and picking up a coin whilst a bloody big truck bears down on you, and then arguing with the person behind you that that it’s a $1 coin, not a $2 coin.

    For example, in my 24 September 2011 (at 12:35am) reply to you I fully explained the nature of our regulatory framework that governs (non-existant) “restrictions” on land sales to overseas investors. And despite you finally realising that no such “restrictions” exist – you’ve now decided to utterly ignore it – and instead focus on trivia.

    You really are unwilling to consider the realities of this (and other) issue(s), aren’t you? Any fact that doesn’t meet your ideology you ignore – or in a particular case regarding the BSA’s decision on TVNZ, you twist and create your own spin.

    I think you need to consider if, just maybe, your ideological position is so set-in-concrete as to be restricting your analytical abilities. Trying to “score points” on this (or any other) blog is utterly meaningless and futile. The outside world is passing you by in the meantime.

  10. 24 September 2011 at 4:15 pm

    Gosman :

    One further thing about foreign ownership of dairy farms. These farms still largely utilise NZ distribution networks. Hence they are likely to be selling Milk via Fonterra. That blows your whole theory about them somehow selling their produce via some other method that we can’t control or influence out of the water.

    No, they are not “likely” to use Fonterra. They are “likely” to do whatever suits their commercial interests.

    And even if they DO decide to use Fonterra, it’s the PAYOUTS that we are discussing here; the P.A.Y.O.U.T.S.

  11. Red
    28 September 2011 at 12:25 pm

    Gosman :

    Frank you are pulling figures out of your backside on a regular basis.

    First up it is the $5.3 Billion figure. Which you now acknowledge is just rubbish.

    Nex it is the 50 % of Farm land owned by overseas. Which you don’t even back up with figures that show how much NZ farmland is currently in overseas hands and the rate of growth over the last few years in this figure. That would be something that might be useful to your case. Please provide this.

    Now you are using 99 or 90 % of the income being repatriated. Don’t overseas people pay taxes and wages and rates and utility bills and a multitude of other costs? Do you think NZ farmers rate of return is in the magnittude you speak of?

    I love how you claim the figures are largely irrelevant here when you were busy arguing over in the Hone Harawira inaccurate story thread that it was a National outrage that TVNZ had used inaccurate ones. Your double standards are simply outrageous.

    you do realise your nit-picking is a turnoff? I get what Frank is saying but you just seem to want to switch the issue to everything but. If I get it why don’t you?

    • Gosman
      28 September 2011 at 12:42 pm

      You miss one of the points I was making here with the nit picking beyond pointing out that Frank doesn’t really understand economics that well.

      On his thread regarding a story about Hone Harawira having incorrect figures but essentially being fair he got in quite a tizz about how could it be fair if it was inaccurate. This is similar to Frank’s post here. It may very well be fair, (I obviously disagree with that assessment), but his figures are incorrect.

      But the guts of this debate is that Frank fails to quantify the rate at which NZ Farmland is being alienated to overseas owners. This may very well be an issue but we don’t know because it is not mentioned. All that is mentioned is that farmland is being bought by overseas investors. However that doesn’t give the net position. Farmland can equally be bought by NZer’s from overseas investors. Also Overseas investors can become NZ residents.

      If Frank cared about giving a true position of the potential ‘dangers’ of overseas ownership, as opposed to scare mongering with wacky ideas on the price of dairy products rising, he should be trying to find out and present that information.

    • Gosman
      29 September 2011 at 6:30 am

      Frank,

      The only figures related to the rate at which farmland is becoming alienated overseas, (and this is what is critical to this issue), is the number of farms being sold overseas. That is only one side of the equation as I have pointed out. What you should be interested in is the amount of the total NZ farmland that is becoming owned by overseas interests and what the trends are related to this. I mean it becomes critical to your post later on when you pull this magical 50% figure out of thin air so why don’t you provide links to this information to STRENGTHEN YOUR ARGUMENT?

      • fmacskasy
        29 September 2011 at 8:16 am

        I mean it becomes critical to your post later on when you pull this magical 50% figure out of thin air…

        Magical 50% out of thin air?

        Gosman, do you not understand hypothetical scenarios? I stated, quite clearly;

        Imagine if, eventually, half our dairy farms end up in foreign ownership; German, Chinese, American, etc. Then imagine half of Fonterra’s payouts ending up in offshore bank accounts.

        Imagine – losing $5.6 billion.

        The figures are not meant to reflect a current situation. They are hypothetical.

        The only figures related to the rate at which farmland is becoming alienated overseas, (and this is what is critical to this issue), is the number of farms being sold overseas.

        Correct! It’s nice to see the 10 cent piece drop. I think you really need to read things more carefully before engaging in spurious questions.

        You’re welcome.

  12. fmacskasy
    28 September 2011 at 7:09 pm

    Gosman :

    You miss one of the points I was making here with the nit picking beyond pointing out that Frank doesn’t really understand economics that well.

    On his thread regarding a story about Hone Harawira having incorrect figures but essentially being fair he got in quite a tizz about how could it be fair if it was inaccurate. This is similar to Frank’s post here. It may very well be fair, (I obviously disagree with that assessment), but his figures are incorrect.

    But the guts of this debate is that Frank fails to quantify the rate at which NZ Farmland is being alienated to overseas owners. This may very well be an issue but we don’t know because it is not mentioned. All that is mentioned is that farmland is being bought by overseas investors. However that doesn’t give the net position. Farmland can equally be bought by NZer’s from overseas investors. Also Overseas investors can become NZ residents.

    If Frank cared about giving a true position of the potential ‘dangers’ of overseas ownership, as opposed to scare mongering with wacky ideas on the price of dairy products rising, he should be trying to find out and present that information.

    It’s a shame you don’t bother to actually read what I’ve written before coming to a conclusion (on your part) that I don’t “really understand economics that well” or that I “failed to quantify the rate at which NZ Farmland is being alienated to overseas owners“.

    Try re-reading what I wrote above. The figures are actually mentioned.

    Trying to dismiss what I’ve written as “scare mongering with wacky ideas” without actually addressing any of the points I’ve raised is a cheap way to prove whatever point I assume is in your mind.

  13. Red
    30 September 2011 at 12:44 pm

    Gosman :

    Frank,

    The only figures related to the rate at which farmland is becoming alienated overseas, (and this is what is critical to this issue), is the number of farms being sold overseas. That is only one side of the equation as I have pointed out. What you should be interested in is the amount of the total NZ farmland that is becoming owned by overseas interests and what the trends are related to this. I mean it becomes critical to your post later on when you pull this magical 50% figure out of thin air so why don’t you provide links to this information to STRENGTHEN YOUR ARGUMENT?

    I think Frank posted quite a bit of good information. I had no idea we have already sold so much land. This is not a good idea at all and its shocking that John Kwey is letting this happen. NZ land should be for NZers only!

  14. Frank Macskasy
    30 September 2011 at 4:31 pm

    Red :

    Gosman :

    Frank,

    The only figures related to the rate at which farmland is becoming alienated overseas, (and this is what is critical to this issue), is the number of farms being sold overseas. That is only one side of the equation as I have pointed out. What you should be interested in is the amount of the total NZ farmland that is becoming owned by overseas interests and what the trends are related to this. I mean it becomes critical to your post later on when you pull this magical 50% figure out of thin air so why don’t you provide links to this information to STRENGTHEN YOUR ARGUMENT?

    I think Frank posted quite a bit of good information. I had no idea we have already sold so much land. This is not a good idea at all and its shocking that John Kwey is letting this happen. NZ land should be for NZers only!

    Indeed, Red.

    It should be noted that the offer from a NZ consortium, led by Sir Michael Fay, was rejected by the receivers of the Crafar farms, KordaMenthe because it was lower than the Chinese bid.

    http://www.stuff.co.nz/business/farming/5688311/Fay-group-sticks-with-Crafar-farms-bid

    This is a clear example of overseas investors outbidding local New Zealanders who want to enter the farming industry.

    Consider that Sir Michael is a multi-millionaire – and he was still out-bid.

    Consider how ordinary kiwis, who do not have deep pockets like Sir Michael, could possibly compete against foreign investors.

    The answer, of course, is that New Zealanders cannot compete with overseas buyers. We would be outbid every time.

    The purchase of New Zealand farmland has to controlled or else, one day, we’ll wake up as tenants in our own country.

  1. 27 January 2012 at 12:05 pm

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