Media Release Tuesday, November 20th, 2001

Kyoto to undermine investor confidence

Business people attending the consultation briefings on Government's intention to ratify the Kyoto Protocol next year were very concerned this morning to hear Energy Minister Pete Hodgson believes a lower New Zealand exchange rate would compensate local producers for the higher energy costs brought about by the Protocol.

At a breakfast seminar in Auckland Mr Hodgson acknowledged energy costs for New Zealanders would rise, the Employers & Manufacturers Association (Northern) says.

"Mr Hodgson listed the price rises our consumers and producers would likely face under the Protocol," said Alasdair Thompson. EMA's chief executive.

"The price increases come from Government's own economic modelling commissioned from the Australian Bureau of Agricultural Research Economics (ABARE).

"According to the research, the Protocol would cause electricity in New Zealand to rise seven per cent, petrol up 11 per cent, and transport costs overall to go up three to four per cent.

"The figures are dependent on the international price of carbon being set at $US30 a tonne equating to a local price for carbon dioxide of $NZ20 tonne.

"Our export competitiveness would be disadvantaged, whatever the international price of carbon was set at, given our main trade competitors, the United States and Australia, are not signing the Protocol and won't face the same price hikes. Japan too is still to decide whether to sign.

"Minister Hodgson said our floating exchange rate would ensure our export competitiveness was maintained as the value of the New Zealand dollar fell back to accommodate the higher energy prices.

"The Minister's acknowledgement is a major concern to business, and certain to damage investor confidence."

Comments: Alasdair Thompson tel 09 367 0911 (b)

09 303 3951 (h)

025 982 024