The report of the prime ministerial task force into Y2K readiness said that the government needed to act as a catalyst for action to ensure that Y2K risks in the private and public sector were well-managed.

"Although there is a reasonable level of awareness of the year 2000 technology problems, our review indicates that it is not matched by an adequate understanding of the complexities of the problems, or the consequences of failing to address them in time," taskforce chairman Basil Logan, said.

"It is also apparent that some public and private organisations in vital parts of our infrastructure are not well prepared to manage the risks posed by year 2000 problems," Logan said.

Prime minister Jenny Shipley said the government would implement key recommendations of the report but would not offer tax breaksto companies which brought forward spending on remedial action.

"The key areas of concern include providers of electricity, water, sewage disposal and health services, while the banking and finance, oil and rail sectors appear to be managing the risk well," prime minister Jenny Shipley said in a statement in response to the report.

She said that the report confirmed that if remedial action was taken now, the risks of serious disruption could be significantly reduced.

"There is still sufficient time for organisations to put contingency plans in place to cope with failures if and when they arise" she said.

"The major risk is that failures may occur when computers fail to recognise the transition from 1999 to 2000 and shut down. This could involve any machine from the family video player to a city's sewage disposal system."

The government has set up a Y2K readiness commission to raise understanding and awareness of the problem, and has said it will strengthen government department chief executives' andboards' accountability and develop risk assessments in the wider public sector.

The task force recommended the government consider limiting liability of those sharing information in good faith, but the government rejected so-called "good Samaritan" laws.

It also rejected recommended tax breaks for Y2K costs to encourage firms to bring forward spending on remedying problems. Shipley said there were strong commercial incentives for organisations to rectify problems. Many were not public and therefore paid no tax and would receive no benefits, and a tax break would be unfair on those who had already taken action on Y2K issues, she said.