30 Jun 2010

New Zealanders face 'relentless' price rises

5:43 am on 30 June 2010

The Labour Party says New Zealanders are facing relentless rises in the cost of living, and can expect little relief from the Government.

The next phase of the Emissions Trading Scheme (ETS) comes into effect on Thursday, when electricity and petrol prices increase to pay for greenhouse gas emissions.

Also taking effect on Thursday are significant price increases for car and motorbike registration, and in some areas, local body rate rises.

The tax cuts due in October will be accompanied by a rise in GST from 12.5% to 15%. According to economic forecasts in the budget, wage growth won't outpace inflation until 2013.

Labour's leader Phil Goff says the pressure on families will be unrelenting.

"There's no doubt about it, the inflation is going to be close to 6% and that's going to take away any of the benefits of the tax cuts."

Labour says New Zealanders are going to be hit time and time again by looming price rises, including GST increase, which will easily cancel out the tax cuts.

People better off despite price rises - PM

However Mr Key says he still thinks people will have more money in their pockets, particularly with projected wage growth over coming years.

"Wages are likely to rise at a faster rate than overall inflation in the economy. So the expectations of the Treasury, despite rises that take place in the economy, overall consumers will be better (off)."

Mr Key estimates families will pay an average of $3 a week more, and he acknowledges households are shouldering a disproportionate burden of the ETS.

But he argues that if businesses and farmers were required to pay their share at present, jobs would be lost.

Mr Goff says the public won't put up with that for long, and pollution will keep increasing because the burden is not on those causing it.

Brownlee warns companies over ETS price rises

Energy Minister Gerry Brownlee says the Government will be watching closely to see how power companies react to the introduction of the emissions trading scheme on Thursday.

Electricity prices are expected to increase by about 5% as a result of the ETS.

Mr Brownlee says he'd encourage people to check providers in their area and look for the best power prices.

He says power companies must not use the ETS as an excuse for raising power prices, and the Government will be watching carefully.

Mr Brownlee says there is some evidence of companies overstepping the mark, though he would not name those involved.

Meanwhile Mr Key is rejecting a call from Mr Goff to accept lower dividends from state-owned enterprises - such as publicly owned power companies - as a way of easing the costs of the emissions trading scheme.

Mr Key says the Government doesn't enforce a 9% dividend.