The Labour Party says the Government has created problems at a Southland smelter through its partial asset sales programme.
New Zealand Aluminium Smelters has been negotiating for cheaper power prices with Meridian Energy to cope with a downturn in the aluminium market, but the parties appear to be at a stalemate.
Clayton Cosgrove. Photo: LABOUR PARTY
The Government says it has offered a modest amount to the Southland smelter's owner Rio Tinto to help bridge the gap.
Speaking on a TV3 current affairs programme on Saturday, Labour's state-owned enterprises spokesperson Clayton Cosgrove said Rio Tinto had set a trap which the Government had walked into.
"Because of (Prime Minister) John Key's political vanity and pride and bloodymindedness to just move ahead, they've just disregarded the risk.
"The point is ... if they had not proceeded, signed this off, then Rio Tinto wouldn't have them over a barrel."
Mr Cosgrove said the Government shouldn't be writing a blank cheque to the Australian mining company, but should be more transparent about what the options are.
He refused to say whether Labour thought the Government should make payments to Rio Tinto or not.
'Worthwhile gamble' for Govt
An energy analyst says it is a worthwhile gamble for the Government to subsidise electricity costs at Tiwai Point.
Bryan Leyland says $100 million a year for two or three years would be a small price to pay to keep the smelter at Bluff open and believes there would be far greater economic losses if it closed.
"It would be a big pity if the smelter shut down and I think there would be some serious overall economic losses to New Zealand.
"A whole lot of people in Invercargill would be without work (and) we would lose the overall income and benefit of the taxes from the smelter."
Mr Leyland says the deal could be tied to aluminium prices with the Government's support ending when prices recover.
The Engineering Printing and Manufacturing Union says the smelter represents 3200 jobs and its closure would be devastating.
Director of organising Alan Clarence is urging the Government to continue working with the parties to secure a deal.
"It's really important that the Government continues to work with those companies to get a deal across the line. But it needs to be a long-term one and needs to supply security of income and jobs for workers."
