Reserve Bank confirms ETS to Lift Prices, Boost Inflation

Dr Allan Bollard, Governor of the Reserve Bank today confirmed what ACT has said all along; that the new ETS tax will lift the price of electricity and petrol from July and will push inflation to the top end of the Bank’s 2-3 per cent band, ACT New Zealand ETS Spokesman John Boscawen said today.

"The Reserve Bank confirmed they had accepted Treasury estimates of a 5 per cent increase in the price of electricity and 4 cents a litre increase in the price of petrol in calculating their inflation estimates.

"However, the real impact on inflation is likely to be much greater than the Reserve Bank's 0.4 per cent calculation as the Bank has only taken into account the expected electricity and petrol increases and their indirect consequences.

"In addition to electricity and petrol, industrial processes will also be included in the ETS from the 1st of July although the Bank has failed to allow for this. Processing of basic food stuffs, like milk and bread, will be captured by the ETS and will percolate through the economy.

"The Labour Party continues to pretend to be concerned for those on low and middle incomes. If they were really concerned, they would be joining with ACT in it's call to have the introduction of this extra tax delayed indefinitely.

"With none of our three major trading partners - Australia, USA or China - likely to adopt an ETS in the foreseeable future, it is time for the Government to join in our call to halt this expensive experiment," Mr Boscawen said.