Fuel excise duty cut ‘would send wrong signal’ as Government prepares for potential global supply squeeze, Nicola Willis says

A cut to fuel excise duty is off the table as global supply concerns mount, with officials advising Finance Minister Nicola Willis how high petrol prices could climb and what targeted support might be needed for households most exposed to rising petrol costs.

Willis briefed journalists on Monday about the Government's fuel strategy. She had been explicitly advised reducing fuel excise “would send the wrong signal at this time, and it would not be sufficiently targeted”.

“We're conscious that the the world is in an environment where fuel supplies have been limited by the disruption on the Strait of Hormuz, potentially reducing fuel stocks by up to 20% - so in that situation, dramatically reducing prices in a way that would encourage people to use more of something would not necessarily be prudent.”

Part of the fuel strategy was anticipating; “and to the extent possible, mitigating the impact on the New Zealand economy, including what could potentially be acute cost of living pressures for some households”.

She said from the government's point of view; “we need to ensure that any support we provide to households is temporary, is targeted, and is timely”.

“In this case, my household simply won't need as much help with the cost of living as some other households."

“Very clear in my mind is the mother, potentially living in South Auckland, who has no choice but to use her car each day to get to her cleaning shift at the airport, there is not a bus available for her at that time, and who is facing acute income pressure," Willis said.

“We need to make sure that we have in mind those New Zealanders who face the most acute cost of living pressures, rather than having blanket responses…”

Asked what level prices would have to rise to to consider a targeted response, Willis said prices had not yet reached levels comparable to after Russian invaded Ukraine in 2022.

“I have asked my officials to model what price increases they think we will expect to see over the coming weeks, and to also model what impact we think that would mean for some typical households and families," Willis said.

“I also have in mind the fact that some New Zealanders will, of their own volition, choose to take public transport, to carpool, to walk, and that is not a choice that the government wants to stand in the way of.”

Asked how likely it was that fuel importers would struggle to fill their orders, officials advised Willis moving to any further mitigation measures under the national fuel plan was at least three to four weeks away.

She said they the government was working with importers, looking several weeks ahead to about May, and asking how they were securing future orders.

“Many of them already have orders in that are currently covered, but they don't have orders out into the never, never,” she said.

“And we're conscious as we look out to a world where global fuel supply is far more constrained, particularly out of the Southeast Asian nations from which we import, that there may be a real race on to get those orders fulfilled."

“In the first instance, we would expect fuel importers would compete on price. That is, they will pay more to secure those orders in future. But in the second instance, they may wish to look more broadly beyond the refineries they currently rely on to look at other sources of fuel from around the world.”

They may also ask the Government to give them more options through changes such as broadening fuel specifications.