Governor confirms role of oil prices in rate rises

Green Media Release 26th July 2007

Reserve Bank Governor Alan Bollard today confirmed the role of oil price rises in driving inflation and interest rates. This underlines the need to reduce our dependence on oil if we are to cut interest rates says the Green Party and that means more public transport not more motorways.

"Rising oil prices accounted for nearly half of the June quarter Consumer Price Index increase, but this is just the beginning," says Dr Russel Norman Green Co-leader and Economics Spokesperson.

"Oil prices will rise further because we are being shielded from high international oil prices by the high New Zealand dollar and once the dollar drops, as it inevitably will, we will face higher oil prices.

"Additionally the latest report from the International Energy Agency predicts that demand will outstrip supply in the next few years, leading to higher international prices. We are asking oral questions in the House today about this issue.

"The Government's balance of spending between new motorways and new public transport is completely out of kilter with the reality of rising oil prices and the projections for future oil prices. Growth in public transport use continues to outstrip growth in traffic volumes but investment in roading continues to vastly outstrip investment in public transport.

"If we want to reduce our interest rates we need to reduce our oil dependence which means prioritising investment in public transport now not more and more new motorways. Which will also reduce our greenhouse emissions.

"We have also consistently pointed to the role of the housing asset bubble in driving inflation. We need policies to stabilise the housing market also if we are to bring interest rates down such as increasing housing supply along public transport routes."

Green oral question number three today on International Energy Agency report on future oil prices.

ENDS

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