NZ Reforms Foreign Investment Rules to Boost Growth, Jobs and Productivity

New Zealand is set to modernize and liberalize its foreign investment rules in a bid to unlock economic growth, attract international capital, and boost productivity. Associate Finance Minister David Seymour has announced the introduction of the Overseas Investment (National Interest Test and Other Matters) Amendment Bill, calling it a vital step in reversing a decade of lost opportunities.

“New Zealand has been turning away opportunities for growth for too long,” said Seymour. “Our overly restrictive foreign investment regime has held us back, contributing to low productivity growth and stagnant wages.”

Current State of Foreign Investment in New Zealand

Despite its open-market reputation, New Zealand ranks among the most restrictive countries in the OECD when it comes to foreign direct investment (FDI). In 2023, the nation’s stock of FDI was just 39% of GDP, far below the OECD average of 52%. Investors have looked elsewhere, leading to lower capital inflows, minimal technology transfer, and sluggish economic dynamism.

The productivity figures speak volumes. From 1993 to 2013, productivity growth averaged 1.4% annually, supported by capital deepening in the form of new machinery, buildings, and technologies. However, between 2013 and 2023, this growth plummeted to just 0.2% as the capital-to-labour ratio in key sectors stagnated at 0.7% annually—a significant drop from the 2.2% seen in the previous decade.

Key Reforms in the Amendment Bill

The new legislation proposes several substantial changes aimed at simplifying and accelerating the investment process:

1. Simplified Screening for Less Sensitive Assets A modified national interest test will replace the previous "benefit to New Zealand" and "investor" tests. This streamlined framework allows the regulator to fast-track low-risk applications, while reserving enhanced scrutiny for potentially sensitive transactions.

2. Retained Protections for Sensitive Land and Assets Investments involving residential land, farmland, and fishing quotas will continue to undergo rigorous screening under the existing framework, acknowledging the special status of these assets.

3. Expedited Decision Timelines For non-sensitive investments, decisions must now be made within 15 days—a dramatic improvement over the existing 70-day statutory maximum and current average of 30 days for benefit test applications. This positions New Zealand more competitively against faster-moving investment jurisdictions.

4. Updated Ministerial Directive Letter New guidance will define which assets merit heightened scrutiny and outline criteria that could signal a threat to national interest. This will provide investors with clear expectations and support a responsive, risk-based regime.

5. Greater Certainty for High-Value Sectors The reforms focus on facilitating investment in significant business assets, forestry (excluding farmland), and other high-value assets, which collectively represent around $14 billion of annual gross investment. The goal is to significantly grow this number by removing unnecessary regulatory friction.

Aligning with Global Best Practices

Minister Seymour emphasized that the reforms align New Zealand’s regulatory framework with those of other advanced economies, many of which have already optimized their investment regimes to attract foreign capital without compromising national security or sovereignty.

"These countries benefit from both the capital and the ideas brought in by foreign investors,” Seymour noted. “We can’t afford to be left behind in a global economy where knowledge and capital cross borders with increasing speed and frequency.”

Expected Outcomes and Implementation Timeline

The Bill is expected to be passed by the end of 2025, with the new investment regime, including the updated Directive Letter, taking effect in early 2026.

Government officials believe the reforms will:

• Increase FDI inflows

• Improve capital access for Kiwi businesses

• Enhance productivity and innovation

• Boost wages through more competitive business growth

• Send a strong signal that New Zealand is open for business

The Bottom Line

With the Overseas Investment Amendment Bill, the government is signaling a shift toward a pro-growth, pro-investment agenda. It is an ambitious yet pragmatic attempt to remove self-imposed roadblocks to prosperity. By cutting red tape, speeding up approvals, and providing investor clarity, New Zealand aims to unleash its economic potential and climb the OECD rankings in productivity and living standards.