Govt cuts fuel taxes by 25c

The Government will cut fuel taxes by 25c a litre for the next three months and halve public transport fares.

The change for petrol took effect at 11.59pm last night and is expected to save up to $17 for a tank of fuel.

Road-user charges for diesel vehicles will be cut by a similar amount but this may not happen as rapidly. This will also apply for three months.

Prime Minister Jacinda Ardern introduced the changes as a response to a ‘‘global energy crisis’’ brought on by the Russian invasion of Ukraine, which has sent petrol prices above $3 a litre.

‘‘This affects everything – from the ability to get people to and from work, to the ability to move goods and services,’’ Ardern said. ‘‘The global energy crisis has quickly become acute which is why the Government has stepped in to cut fuel duty. Today’s changes will reduce the cost of filling up a 40-litre tank of petrol by more than $11 and for a 60-litre tank over $17. We cannot control the war in Ukraine nor the continued volatility of fuel prices but we can take steps to reduce the impact on New Zealand families.’’

The cut will actually be worth slightly more than 25c a litre as GST is calculated after other taxes.

This means the cut should be worth roughly 28c.

Finance Minister Grant Robertson said the end of the tax cut would likely come gradually, meaning there would not be a huge spike in prices at the end of the three months. He said the $350 million cost of the petrol

change would be met by reprioritised spending from the Covid-19 response fund – notably the smaller expected spend on managed isolation. The public transport subsidy would cost $25m-$40m and would also be met from the Covid-19 response fund. Robertson said this would not result in new borrowing.

Energy Minister Megan Woods said she had spoken to fuel companies and had some certainty that the change would result in a reduction of prices, not just higher profits. She said the Government would monitor their profits and margins to make it public if they weren’t.

‘‘Our preference is that fuel companies volunteer this information and I am asking them to do that. But under the Fuel Industry Act we passed in 2020, there are options to pursue more data disclosure and further measures to ensure the discounted excise duty is not being absorbed into company profits.’’

The Government collects 77c a litre in direct fuel taxes, as well as a varying amount of GST – 37c currently – and the 10c Auckland Regional Fuel Tax. Fees for the Emissions Trading Scheme also find their way into petrol prices.

Ardern also talked up forthcoming changes to Working for Families and the Family Tax Credit, which will see about 60 per cent of families receive at least $20 more a week.

National Party leader Christopher Luxon said the Government should do more. ‘‘It is good the Government has finally accepted there is a cost of living crisis. But now they need to address it. It is not just petrol prices that are going up. Food prices are up more than 13 per cent and weekly rent is up $150.’’

The Government’s policy goes further than the fuel tax cut that National was suggesting – a removal of the Auckland regional fuel tax of 10c a litre.