RBNZ: ETS price rises won't affect medium term inflation

The Reserve Bank has told the Government it won't take account of an inflation spike caused by the emissions trading scheme.

The first part of the ETS takes effect on July 1, when carbon charges apply to the energy sector and the cost of petrol and electricity are expected to go up.

During a question time dispute today with the Act Party over how much prices would rise, Prime Minister John Key stuck to the Government's previous estimate that they would cost the average household $165 a year, or $3.17 a week.

Act MP John Boscawen wanted to know whether that figure was just for petrol and power or whether it included downstream costs for goods and services that would increase as a result.

Mr Key said the calculation was $2.25 for petrol and power and 92c for other price rises.

When Mr Key was asked about the impact of price rises on inflation, he said he had received advice today from the Reserve Bank.

"The implementation of the ETS should not affect medium term inflation. We expect to be able to look through this inflation burst," Mr Key quoted the Reserve Bank as telling him.

- NZPA