24 Apr 2013

Warning over 'spectre' of intervention

7:05 am on 24 April 2013

First NZ Capital economist Chris Green said the plans are likely to be interpreted by those in the financial markets as a worrying development, signalling the parties could make other interventions in the economy if they succeed in forming the next government.

Mr Green said it elevates concerns about the regulatory risks to listed companies such as Sky Network Television, Auckland International Airport, Sky City Entertainment and Fletcher Building.

He said that, as a result of the electricity announcement, investors will increasingly base their decisions on the likely composition of the next Government in the lead-up to the election, expected to take place towards the end of 2014.

Mr Green said that while Labour has claimed falling retail electricity prices will mean a lower inflation rate, that does not take into account the risk that greater government intervention in markets will push the New Zealand dollar down, raising the cost of imports.

Although a lower New Zealand dollar may be welcomed by exporters, he said, the prospect of increasingly heavy-handed government intervention is likely to dampen the appetite of foreign investors for New Zealand assets.