Labour dismisses economic sabotage claims over power plan

Photo / NZ Herald

The war of words over the Opposition's electricity market reform plan flared again this morning as Economic Development Minister Steven Joyce and associate finance spokesman Shane Jones traded fire over the plan's economic impact.

The Labour/Green plan to curb wholesale electricity prices by replacing the current spot market with a single state buyer of power was announced just days after the Mighty River Power share offer - the first partial privatisation under the Government's mixed ownership model - opened last week.

The Government was forced to amend the prospectus for the Mighty River offer and allow investors who had already committed to buy shares to back out.

With its flagship economic policy directly affected by the Opposition plan, the Government has responded aggressively.

This morning Mr Joyce said the plan was "nothing more than deliberate economic sabotage for attempted political gain".

He pointed to recent condemnation of the plan by sharebrokers and fund managers including claims it would "cut the value of every New Zealanders' KiwiSaver account and lead to rolling blackouts".

"Investment in new power generation would suffer as would wider investment in the New Zealand economy" Mr Joyce said in a statement.

"The National-led Government is focused on attracting investment in new business and jobs for New Zealanders. Labour and the Greens would do the exact opposite."

But Mr Jones this morning pointed to the estimated $450 million boost to the economy and additional 5000 jobs which Business and Economic Research Ltd said the plan would produce.

"That's just the start" said Mr Jones.

"These reforms will cut bills to commercial and industrial users by 5 - 7 per cent. Lower energy costs have the capacity to transform New Zealand businesses. Our economy's Achilles heel is our inability to turn enough of our resources into high-value goods that sell for a premium overseas.

"We need to improve the returns from those resources by manufacturing them into quality products. The cost of power here is one reason we struggle to compete with other manufacturing countries."

Meanwhile Labour's finance spokesman David Parker downplayed the impact of the policy announcement on listed energy stock and the KiwiSaver and other fund managers who held those stocks on behalf of investors.

"I would say that stockmarkets react to news every day. I'm not going to comment on whether a stockmarket has overreacted or under reacted. They'll make those assessments for themselves."

He said the impact across the portfolios of shares held by KiwiSaver fund managers and large investors such as the NZ Superannuation Fund "wouldn't be large".

However the fact that energy stocks such as Contact and Trustpower had fallen since the announcement suggested the market believed Labour's policy would achieve its aim.

"We're saying that generators will still be paid a fair return. If on that basis (share) prices go lower, that in itself suggests that market analysts think the change to this new pricing model will bring down (power) prices."