The government has announced that the reduction of excise duty on fuel will be extended until January 2023.
Finance Minister Grant Robertson said half-price public transport fares and the extension of road user charge cuts will continue until 31 January 2023.
The initial cut was introduced to ease cost-of-living pressure on households, in March 2022. Robertson’s announcement came a day before Statistics NZ was due to release inflation data for the June quarter.
“We’re doing this because we want Kiwis to have certainty until the end of the year in the face of fluctuating fuel prices and ongoing cost of living pressure,” Robertson said.
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“We can afford this.”
The government produced a Treasury model to suggest its excise duty cuts reduced inflation by 0.5% in the June 2022 quarter.
The extension, which was expected in light of elevated global oil prices, will mean that while petrol prices will remain largely in the range of $3 to $3.50 a litre, they will not rise by another 25 cents.
Without the extension, the government estimated that a 40-liter tank of gasoline would cost an additional $11.
Robertson attributed the reduction in public transport costs to an increase in bus and train patronage in major cities, from 49% of 2019 levels to 65%.
Prime Minister Jacinda Ardern says the Government will cut fuel excise duty and road user charges by 25 cents per litre, as well as halve the price of public transport in three months. Video from March 23.
“This is a targeted intervention where we can get at one of the root causes of the cost of living pressures New Zealanders face.
“By doing this, we’ve actually helped keep inflation under control… We know that we’re directly targeting one of the drivers of inflation here.”
Extending fuel excise and road user fee cuts would cost $589 million, as the Government would have to pay into the National Land Transport Fund to replace the reduced taxes. The funds are used to pay for the construction and maintenance of roads and public transport.
Robertson said that the reduction in excise duty cannot last forever, and the government is working on an “exit strategy”.
Energy Minister Megan Woods said people were not paying as much for petrol with the government’s cut in excise duty.
“One of the things I know from talking to the fuel companies is that people are signing up just as often as before, but they’re investing less each time.
“This is very much about how we can help those overstretched household budgets.
There was another jump in the margin the fuel companies were taking, she said.
She wrote to fuel companies last week asking what was causing the spike, and reiterated the Government’s expectation that excise duty cuts would be passed on to consumers.
“Our expectation is that over the next few days we will start to see some of those lower crude oil prices trickle down to consumers at the pump.”
There were projections that the price of crude oil would fall in 2023, she said.
National Party finance spokeswoman Nicola Willis said the government’s second extension of tax cuts was more “safety tape economics” and was cynically timed ahead of an inflation update.
“The government cannot spend or get out of inflation and a troubled economy. They need to do serious work removing bottlenecks to growth, such as addressing labor shortages through better immigration pathways and restoring discipline to their own consumption,” she said.
Green Party transport spokeswoman Julie Anne Genter said the Government was giving people direct payments instead of cutting fuel taxes and public transport should be completely free, permanently.
“Subsidizing fossil fuels by making gasoline and diesel a little cheaper in half a year makes no sense in 2022, when we need to make the transition to cleaner transport.
“Direct payments would mean people could choose how to spend them, including on petrol – but would still provide incentives to switch to green options for those who have them.”
ACT Party Leader David Seymour said the Government had not considered the “chaos” that would ensue as people queued to avoid a future 25 cent rise in fuel costs when the tax cut came through.
“The labor policy is also creating chaos for public transport service providers. Auckland Transport, for example, had promoters in shopping centers selling discounts designed to smooth the eventual return to full fares. That marketing effort is now worthless.
“What he should have done was put in place a permanent solution, returning the proceeds of the emissions trading scheme to citizens.”
Greater Wellington Regional Council transport committee chair Roger Blakeley said Robertson’s data on increased public transport patronage was consistent with what had happened in Wellington.
“It would be great if it could be extended beyond January 2023 to permanent half-price fares, as already decided for community service card users.”