Mortgages, rents and exports bear cost of oil dependence

Green Media Release 6 December 2007

The Reserve Bank’s decision to not cut the Official Cash Rate this morning will impact badly on exporters, manufacturers, renters and those with mortgages, says the Green Party. And a major contributor to our high interest rates is our national dependence on ever more costly oil imports.

“The Reserve Bank made it clear in its Monetary Policy Statement this morning that it underestimated oil price rises by 30% in its September statement, and hence underestimated the impact oil prices would have on the New Zealand economy. Rising oil prices are acting as an inflationary stimulus in the economy making it harder for the Reserve Bank to cut the OCR,” says Dr. Russel Norman, Green Co-leader.

“New Zealand’s very high dependence on imported oil for the transport sector makes our economy particularly vulnerable to the ever increasing price of oil. And, as global oil demand continues to reach the limits of global supply, oil prices will only continue to increase. The Government and the Reserve Bank are still in denial about peak oil.

“This means that people with home mortgages will continue to pay a fortune in interest payments to overseas owned banks just to have a roof over their heads. This will also flow into higher rents making it harder for families to pay the bills.

“And it means that exporters and New Zealand manufacturers will face an over-inflated dollar making it harder to export and harder to compete with imports into New Zealand. Both of these factors will add to our chronic current account deficit.

“We need the Government to urgently take measures to reduce the oil dependence of our economy. These measures include investing in alternatives to road freight, such as rail and coastal shipping.

And it means investing in alternatives to private car use in our cities and towns, such as much greater public transport.

“The Government’s obsession with motorway building is only increasing our oil dependence and hence our interest rates.”

ENDS

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