This article was first published in The Australian titled 'Unaffordable, unwelcoming, NZ’s land of the long white cloud now just land of mediocrity'.
The world thinks of New Zealand as the land of the long white cloud. Renowned for its stunning natural beauty and resources, it is considered an island paradise. Or Godzone, as they used to call it, as in “God’s own.”
But that was a long time ago – and not just because most Kiwis have since turned their backs on organised religion.
Instead, today’s New Zealand feels like a country that has conspired to make itself poorer at every opportunity.
If someone had put the devil in charge of New Zealand’s politics, the outcome could have hardly been worse.
This is not a verdict on the current government, or at least not just that. Developments have been going in the wrong direction for many decades, under governments of all stripes, shapes and colours.
There is no better example than housing. To put matters into perspective, let’s calculate a few figures.
For every man, woman and child in New Zealand, there are 52,500 square metres of land. Even if one included the 23 million sheep in the calculation, that would still leave 9,600 square metres per capita.
And though such calculations are, of course, ridiculous, they make one thing abundantly clear: New Zealand is a large country with plenty of land but not many people (or even sheep) inhabiting it.
So how come, then, New Zealand’s housing is among the least affordable in the world?
On the face of it, it does not make much sense. And on further examination, it still doesn’t.
There is no reason why New Zealand should be as unaffordable as it is. It is not as if large parts of New Zealand are uninhabitable (as in Australia). It is not as if the place is tiny and densely populated (as in Singapore). It is not as if New Zealand has a spectacularly rich economy (such as Norway).
No, New Zealand’s housing crisis is entirely self-inflicted. It is the result of a combination of rigid planning rules, ridiculous regulation of building materials, and a lack of funding tools for infrastructure.
Each of these three factors alone would put a dent in housing affordability. But New Zealand applied them all at once. And then some.
New Zealand has ludicrous planning rules which protect ‘heritage’ buildings, some of which are barely a few decades old. It uses “volcanic viewshafts” to protect significant views of Auckland’s volcanic cones (of which there are many). And it limits the ways in which its cities can grow up or out, with the predictable result that they do neither.
It is equally unsurprising, at least to economists, that where supply cannot respond to demand, prices rise. Which is exactly what they have done in New Zealand’s residential property market, for decades.
In the grand scheme of Kiwi self-sabotage, urban strangulation is a masterpiece. But it is far from the only one.
For decades, New Zealanders have wondered why international capital only enters the country to finance mortgages. Some have blamed the country’s Australian-owned banks for making a buck on the back of the crazy housing market.
The real answer to this conundrum, however, is New Zealand’s rigid Foreign Direct Investment regime.
The Overseas Investment Act is a piece of legislation designed to discourage, rather than attract, foreign capital. It is like a welcome mat that says, “Please wipe your feet, but don’t come in.”
Or, in the words of the Act itself, “The purpose of this Act is to acknowledge that it is a privilege for overseas persons to own or control sensitive New Zealand assets.” And note that New Zealanders are highly sensitive when it comes to defining “sensitive assets”. Practically everything is so designated.
The result: New Zealand only attracts between US$ 2-3 billion of investment in a good year – which puts it in a league with countries like Guatemala, Latvia and Uzbekistan. Meanwhile, more welcoming jurisdictions like Denmark, Ireland or Austria receive several times that amount. And several times the business and growth opportunities.
And it is not just companies that will not feel particularly welcome to set up tents in New Zealand. It is people, too.
If you are a foreigner wanting to emigrate to New Zealand, be prepared to wait. The process Immigration New Zealand runs is so slow these days that by the time you get your visa, you might have forgotten why you wanted to go in the first place. No wonder that New Zealand is missing out on international talent. Ambitious people do not have time to wait. Neither, by the way, do the organisations that want to employ them.
On the other hand, the time waiting for your visa would have taught you a vital skill for life in New Zealand: patience. Because good things take time. And bad things, too.
Nothing in New Zealand gets done in a hurry. Yes, the health system is falling apart. Okay, many New Zealand children leave school unable to read, write or calculate. And sure, it would have been nice to build that second harbour crossing for Auckland. Or some decent roads, for that matter.
But regardless of how pressing the challenges are, the immediate response is always to do nothing. Grudgingly followed by a working group. Then garnished with small armies of consultants. Eventually culminating in planning delays and finished with a grand centralisation plan – and even then, rounded off with a botched implementation, a few decades later.
It is a tragedy what is happening in New Zealand. This country, more than almost any other, could have been the rising star of the 21st century. With the world’s economic gravity shifting towards Asia, New Zealand is in a good geographic spot – for the first time in its history, actually.
New Zealand could have built on the good reputation of its education system, which once upon a time was world-class.
New Zealand could have built modern cities with decent infrastructure and affordable housing. It has all the land it needs.
It could have even reformed more quickly thanks to its unicameral system with fewer checks and balances than most countries.
This year, 2023, is an election year in New Zealand. And perhaps this is the country’s last chance to wake from its slumber and try something new. Some policies that use New Zealand’s natural advantages to become a place of ambition, opportunity and prosperity. Even if it means a radical departure from its path to mediocrity.
If the time for that is not now, then when?
Oliver Hartwich is the Executive Director of The New Zealand Initiative