It turns out "somewhere else" is property investment. We have here no capital gains tax, we are one of the last developed nations that hasn't yet put capital gains in place.
Another issue is that overseas based investors seem to be entering the property market further driving up market prices. In some areas like Auckland, prices are inflated because of lack of land approved for residential development.
All this creates big problems in the New Zealand economy. First home buyers are increasingly being locked out of the market and the latest suggested move that banks tighten lending criteria to cool the market only makes this worse. More over Auckland is becoming a city in which it is too expensive to live in, the transport system is under pressure, as local bodies debate the inner city rail loop and traffic congestion flood main arterial routes in to and out of the city on a daily basis.
Seeking to position itself for the election in November 2014 the New Zealand Labour Party is offering to pass legislation to block real-estate sales to parties resident over seas. This may remove some portion of 7% of the market. Labour has also reaffirmed its position that will bring in a capital gains tax.
The responce from our Primeminister is pretty slimey, calling the proposed block on foreign real-estate investment "racist" particularly pointing to Asian investment. However the policy offered is blind to nationality or ethnicity. It would block Bono, or Bill Gates as it would block the CEO of Foxxcon. Neoliberals will of course hate this policy because it defeats the progress of globalization. Globalisation is of course, a con. It inflates corporate profits by making the 1st world middle class compete with the 3rd world. This has devastated the US manufacturing sector over the last forty years. New Zealand's manufacturing sector too has been adversely affected, Today we continue to lose manufacturing jobs, 40,000 in the last five years. And with the failing fortunes of the manufacturing sector, so fortunes of the middle class who rely on manufacturing have suffered.
The effect of these policies will be two fold. Reducing speculators in the property market will reduce inflated property pricing and busts leading to mortgagee sales. Also the policy will make it more possible for first home buyers to enter the market. New Zealand will never be competitive as long as it is content flip real-estate among its 1%ers.
The second major effect is that manufacturing becomes a more attractive investment. We have people researching and developing new technologies. New Zealand is poised to do very well exporting clean energy technology. Such technology will need investment to help bring it to market. More over these new technologies will add up to a brand new major industry sector.
The sector already has players. For example Zero Emission Vehicles manufactures electric busses. ZEV recently made headlines when it provided Kapiti Counsel with an electric rubbish truck.
Like America, New Zealand needs a plan to grow our manufacturing sectors. What we don't need is a failing ideology that's only successful at making the super-rich richer while making everyone else impoverished and livid.
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