This week, The New Zealand Initiative released its first report: New Zealand’s Global Links: Foreign Ownership and the Status of New Zealand’s Net International Investments.

The report contains 84 tables of statistical information relating to New Zealand’s inwards and outwards investments, and is accompanied by a spreadsheet on the website.

The report gives an explanatory overview of these statistics, puts the latest figures into a historical context, and explains the relevant accounting relationships.

The Initiative’s aim in producing this report is to better inform the public debate. Recent public furores over the sale of shares in Auckland airport to a Canadian pension fund and the purchase of the Crafar dairy farms by Chinese interests reveal a public fear of foreign direct investment (FDI).

It plainly demonstrates the significance of FDI for New Zealand’s economic development since colonial times. FDI benefits New Zealanders as it gives access to capital, know-how, markets, and jobs with direct international career opportunities.

The dominant sources of FDI have always been friendly trading partners. Today, Australia accounts for 56% of New Zealand’s FDI stock. ASEAN countries contribute only 3.1%, and Japan contributes an additional 2.9%. Any claim that Asians are taking over New Zealand is ill-informed.

A substantive concern – expressed by the International Monetary Fund (IMF), rating agencies, and monetary authorities – is that New Zealand’s net external liabilities are too high, at above 70% of GDP. In March 2013, however, the report shows that New Zealand’s current net external debt is a legacy of a cumulatively large excess of imports over exports from 1974 to the mid-1980s.

This legacy has produced an average deficit of 5.8% of GDP on international investment income since 1987. The overall current account of the balance of payments has remained in substantial deficit as a consequence.

To reduce the net external debt as a percentage of GDP, exports need to be raised relative to imports and/or the rate of economic growth relative to the rate of interest being paid on net external debt needs to be raised.

This suggests focusing any policy response on improving international competitiveness and raising the rate of economic growth.

While ‘increasing savings’ is the popular focus of policy at present, this research suggest that policies aimed specifically at increasing productivity, the rate of economic growth, and international competitiveness would be more apposite.