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It’ll be cheaper to be in traffic and avoid it on the bus. (Getty Images).
It’ll be cheaper to be in traffic and avoid it on the bus. (Getty Images).

The BulletinMarch 15, 2022

Three month cut to fuel taxes, transit fares

Contributing writer
It’ll be cheaper to be in traffic and avoid it on the bus. (Getty Images).
It’ll be cheaper to be in traffic and avoid it on the bus. (Getty Images).

Beehive unveils package to cut transport bills as New Zealanders face soaring cost of living, Justin Giovannetti writes in The Bulletin.

Fuel taxes will be cut by 25 cents a litre for three months.

A “global energy crisis” unleashed by Russia’s invasion of Ukraine has meant New Zealand’s petrol prices have increased by the highest amount on record, the prime minister said yesterday. To help motorists adjust to the volatile situation, the government is cutting the fuel excise duty and road user charges for three months. The cut happened overnight. As The Spinoff’s live updates reports, the changes to the fuel tax will lead to a potential saving of between $11.50 to $17.25 per tank of petrol. That should bring prices back to where they were three weeks ago. The three month cut will cost the Treasury a whopping $350 million and could be extended if the price situation doesn’t improve.

“While forecasters predict inflation will peak and subside over the coming year, there is less certainty around fuel costs due to the volatility of Russia’s invasion of Ukraine,” Jacinda Ardern said at parliament.

Public transit fares will also be halved to give commuter more options.

Unlike the cut to fuel taxes, it’ll take the government some time to negotiate how to cut fares as local authorities are responsible for public transit. The central government will reimburse transit operators for the lower revenues coming into fare boxes. The finance minister told RNZ that he expects councils will welcome the news and work to push it through. The programme is expected to cost between $25 to $40 million for three months. It could be an interesting case study in whether lower fares drive usage. According to Google’s mobility data on Aotearoa, much of the country is close to normal compared to pre-Covid times, except public transit use, which is still down by 54%. After two years of pandemic, the majority of bus and train riders haven’t returned.

Service stations have promised to pass on the savings to the public.

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The government has asked oil companies not to pocket the tax reduction and most have promised to do so. Mobil dropped prices immediately across its network yesterday. Z Energy, BP and Gull told Stuff they’ll pass on the savings to consumers. Trust, but verify, could be the energy minister’s moto on the promises. She said the government will publish the profit data from oil companies, so if any start to dip into the tax cut, the public will know. If you’re not quite sure how fuel taxes work in Aotearoa, Henry Cooke has written an explainer for Stuff. About 48% of every litre is tax, but it’s complicated.

The government’s road building programme won’t be impacted.

All the tax that’s being cut was reserved for the infrastructure fund. There are already more projects than money, so there’s no room to cut back on spending. Instead the government is dipping into what’s left of the Covid fund to fill up the roads budget. This could be a taste of what’s to come. As the government pushes forward with its climate programme, fuel taxes could be phased out in the coming years, according to the NZ Herald. The country will be looking at new ways to fund infrastructure as electric vehicles become more popular and petrol taxes less relevant.

The next few months will be deeply uncertain.

The prime minister quipped yesterday, as questions from reporters shifted from Ukraine to Covid: “That’s fine, we can move between wars and pandemics”. It was grim and a sign of what’s to come. A lot of the new cash being splashed about in the Beehive is only possible because the economy has outperformed expectations month-after-month for most of the past two years. Between the omicron wave which has meant people staying home and spending less, as well as the global wrecking ball of war, it’s likely a recession is ahead. Interest has looked at what could be the strangest recession in some time. The happy finance minister ready to open up the national purse today could have a very different outlook by budget day in May.

Keep going!
The Automobile Association is warning $4 a litre for petrol is possible. (Getty Images)
The Automobile Association is warning $4 a litre for petrol is possible. (Getty Images)

The BulletinMarch 14, 2022

The cost of living crisis

Contributing writer
The Automobile Association is warning $4 a litre for petrol is possible. (Getty Images)
The Automobile Association is warning $4 a litre for petrol is possible. (Getty Images)

The soaring price of petrol is only the latest of many economic troubles coming at us this year, Justin Giovannetti writes in The Bulletin.

After two years of delayed shipping and growing inflation, the worst is yet to come.

The global economy is heading into a hurricane as a series of profound shocks, from the highest inflation in a generation to supply lines disrupted by Covid-19, have worsened with the Russian attack on Ukraine. In only a few weeks most of the Russian economy has been walled off from the rest of the world by sanctions. Oil prices have responded, increasing by half since Christmas, while global commodities are undergoing their greatest shock since the 1970s. As Stuff reports, wheat is now facing its worst disruption since the first world war. Most of the economic chaos seen in stock tickers over recent days hasn’t made it yet to the world’s streets, but unaffordable fuel prices and hungry people don’t make for political stability.

Few scenes are more closely linked to economic disturbance than long queues at petrol stations.

Motorists began forming queues throughout New Zealand on Friday amid a warning from Waitomo that it would need to increase petrol prices significantly that day. After it sold a lot of fuel, the company told RNZ that the warning wasn’t a marketing stunt. While there were some reports that prices remained largely stable, the company said it added 20 cents to the average litre of petrol. The high price of fuel, which is above $3 per litre across much of Aotearoa, isn’t likely to go down soon. Bans on Russian oil have sent prices to well over $100 US per barrel and some shortages are possible before the global market stabilises. The AA has warned drivers to ready themselves for $4 a litre.

Parliament now faces calls to act as many families won’t be able to balance their budgets.

Parliament spent much of last week debating whether to apply the crisis label to the increasing cost of living. It wasn’t a particularly insightful debate and did nothing for families who are struggling. RNZ’s Jane Patterson has looked at National’s idea for a tax cut to help. Economists are split on whether it would do more good than harm, but the government isn’t interested. Labour has so far dismissed price increases as a problem caused by overseas events. Which is true, but that’s unlikely to be a comfort for the public. The NZ Herald reports on Act’s proposal to turn over the proceeds from the sale of carbon credits to taxpayers. The nearly $4.4 billion fund is meant to pay for the country’s climate change programme. A number of governments have unveiled fuel rebates over the past week. Australia’s treasurer is now being urged to do the same, according to ABC.

Petrol is only part of the problem. The UN is warning that food prices could increase by 20% this year, according to Reuters. Russia and Ukraine were some of the world’s largest wheat producers.

A crisis on top of a crisis on top of a crisis.

I suspect that for many readers this morning’s newsletter won’t be a comforting one. The country is exhausted by Covid-19 and hundreds of thousands of New Zealanders are currently dealing with the pandemic in a way that is both deeply personal and unprecedented in this country. A cost-of-living crisis, along with a large ground war in Europe, is a lot to deal with on top of that. Unfortunately, this is also the kind of economic crisis that will likely distract from pressure to move on climate change. As Kevin Norquay writes in the Sunday Star-Times, this is the “big stretch” where we all need to cope. Pace yourselves and make plans to stretch your budgets over the coming year. It’s time to be prepared and the best way for me to do that is to stay informed of what’s coming next.