Temporary fuel tax cut rushed through without proper scrutiny

Public Policy / news

Government reacted to high petrol prices like it did to Covid, side-stepping usual processes to rush through a temporary tax cut

18th Mar 22, 5:16pm by Jenée Tibshraeny

Grant Robertson. Press Gallery pool image.

It has been revealed the Government’s policy to both cut fuel taxes by 25 cents/litre and halve public transport fares for three months wasn’t properly scrutinised by officials.

Finance Minister Grant Robertson confirmed the policy, worth nearly $400 million, was rushed through Cabinet without a regulatory impact assessment being completed.

Robertson unveiled the tax relief with Prime Minister Jacinda Ardern and Energy and Resources Minister Megan Woods on Monday, as petrol prices soared and National’s popularity overtook Labour’s according to a 1 News poll released last week.

“The Government at times has to act quickly to support New Zealanders,” Robertson said in a statement.

He then likened the Government’s response to volatile fuel prices, due to the war in Ukraine, to its response to Covid-19.

“Just as it was our job to get New Zealand through the Covid-19 health crisis it’s also our job to get us through the global energy crisis too. We acted swiftly to provide relief for New Zealanders feeling pain at the pump,” Robertson said.

While a fulsome regulatory impact assessment wasn’t completed, the Ministry of Transport drafted a supporting cabinet paper, which Treasury, Customs, the Ministry of Business Innovation and Employment, and the Ministry of Foreign Affairs were consulted on.

The Ministry of Transport and Treasury also agreed to do a “post-implementation assessment”.

The Government has been clear that if petrol prices remain elevated, it would consider extending the tax cut and equivalent cut in road user chargers. These discounts come at a cost of $350 million over three months. What’s more, it said that the discount would be gradually removed.

The saving to motorists is expected to be between $11 and $17 per tank of petrol.

The policy to halve public transport fares is expected to cost taxpayers between $25 million and $40 million.

Woods earlier in the week hinted usual processes had been side-stepped to implement the policy.

Asked by interest.co.nz whether it had received the thumbs up from the Treasury, she said, “You’ll need to talk to the Minister of Finance about that in terms of any advice he might’ve got from Treasury. I’m just not privy to it.”

The policy didn’t meet the sniff test of the economists interest.co.nz spoke to, who characterised it as political, reactionary, poorly targeted, short-termist and interventionist.

Nonetheless, ANZ economists expected it to shave 0.5% off annual inflation in the June quarter.

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62 Comments

by HouseMouse | 18th Mar 22, 5:25pm 1647577534

Well, analysis from officials is no guarantee of good policy or legislation, that's for sure! (sadly)

by Zack Brando | 18th Mar 22, 7:14pm 1647584092

Exactly, I'll take the discount thanks.

The policy didn’t meet the sniff test of the economists interest.co.nz spoke to, who characterised it as political, reactionary, poorly targeted, short-termist and interventionist.

I don't like the word "targeted". I prefer universal-economic-policies. Who wants to be "targeted" by the government? - no thanks.

by Independent_Observer | 18th Mar 22, 5:31pm 1647577865

There are no free lunches when it comes to an economy...you can't load up with debt so that people can be locked down in their homes during covid (without consequences), and you can't cut taxes and expect to be able to fund infrastructure.

by agnostium | 18th Mar 22, 8:28pm 1647588511

100% correct. Just listened to interview with Nicole Rosie, Waka Kotahi NZTA boss who said they are going to be facing a massive funding shortfall from less RUC and fuel tax. We're currently facing huge disruptions to our transport system brought on by EVs, uptake of other transport modes, higher fuel prices, less overall travel due to WFH and higher urban intensification (people need their cars less if they live close to amenities). To find this they will just be taking money from other areas. Do we really want to continue to support the very thing that we need to transition away from?

by GV 27 | 19th Mar 22, 10:14am 1647638086

Well yes because NZTA themselves are part of the problem and locking people into financial pain purely on principal when credible alternatives are years/decades off is somewhat sociopathic? Like seriously, what's the alternative here? Should I do what the AT journey planner suggests and leave the night before to get to work just so someone on a well-paid public sector role can make vague allusions to 'saving the planet' at a conference overseas every five years that gets nothing done? How much more family time would you see lost on top of our already punishing working hours just because 'driving = bad' even though for many there simply isn't an alternative?

by fortunr | 19th Mar 22, 11:33am 1647642800

You are right.

The unfortunate reality is that the public transportation systems in NZ are quite depressing. When I worked overseas in AU, Europe, Japan, Singapore and even China I did not even need a car to get to work during weekdays, in most cases. Back in Auckland, the poor quality of the existing public transport options, and the massing reliance on cars, was quite appalling by comparison. Things are improving, but there is still way to go before the public transport option becomes a realistic alternative.

by GV 27 | 19th Mar 22, 11:52am 1647643920

It's grim. There is no doubt most commuters have no real alternative that doesn't involve doubling or tripling their journey time, which does not come with out cost. At the same time, there is no reason to have any confidence that the state can provide the infrastructure for credible alternatives. In light of our climate change 'crisis, we are effectively living in a failed state; one that is able to collect taxes and pay out assistance, but increasingly little else. And yet our population in Auckland is expected to continue to sky-rocket.

As soon as I am in a position to leave, I will.

by fortunr | 19th Mar 22, 11:27am 1647642421

100% correct. Unfortunately, this does appear to be something beyond the comprehension of both Mr Orr and Mr Robertson.

by Fluffybunny | 18th Mar 22, 5:35pm 1647578131

Me in 2020 :

"With an outright majority, there is window of opportunity to ram through some strong actions against climate change & fossil fuels etc"

Me in 2022 :

*sigh...*

by HW2 | 19th Mar 22, 6:23am 1647624221

You truly expected more from an idealist who pulls faces to direct what people should think?

by morepork | 18th Mar 22, 5:39pm 1647578376

While Ukraine is being invaded, we cut fuel taxes, this pushing oil prices higher and more money into the hands of the Russian invaders who are one of the biggest oil exporters.

A more supportive policy would have been car free days like we did in the 70s oil price shock.

by thinktank | 18th Mar 22, 6:51pm 1647582674

Does the majority of the work force get paid to not go work on those days? 50 year old policy probably isn’t relevant anymore.

by morepork | 18th Mar 22, 9:45pm 1647593101

Carpooling, catching public transport, cycling or working from home for one day a week feels like a small price to pay to stand in solidarity with those in Ukraine being invaded, rather than incentivising petrol use which helps their invaders. Millions are now refugees and have homes being shelled and are going through a lot worse than a car free day per week.

by Clementé | 18th Mar 22, 8:39pm 1647589198

I reckon the work from home policy hangover from covid has done more for car free days than any government advert on the TV could ever do...

We've gone from about 50ish at the office in CBD each day to a max of 6 and thats maybe one day a week, a monday or a friday.

Everyone's own purchased art at home on the office or lounge wall is the backdrop for each call nowadays.

by xingmowang | 18th Mar 22, 5:42pm 1647578568

these incompetent bunch and all other parties do not talent to make proper plans for NZ for even next 3 years.

by Northern Lights | 18th Mar 22, 5:42pm 1647578571

Why the hate for a temporary petrol tax cut? Is it the instinctive neoliberal reaction to 'giving away' govt money?

Why is it ok to pull the credit levers that make life harder for consumers but not ok to pull the price reduction levers that make it easier for consumers?

This is a popular policy that gives some small relief to lots of people struggling to make ends meet. It is a timely policy that does not reduce consumer demand by making life harder for people (as a rise in interest rates will) but rather enables costs to be kept lower than they otherwise would be.

Fuel price increases feed into everything else. Limiting price rises in other areas for a temporary period by keeping a base inflation generator like fuel prices slightly lower is smart policy. We are dealing with a supply side inflation factor here.

There is also a psychological side to this. Motorists are driving around thinking the prices have come down again. Prices can go up but they can also come down. Maybe I don't have to batten down the hatches, stop all spending just yet.

by Te Kooti | 18th Mar 22, 5:49pm 1647578958

I agree, I don't get the criticism myself. Also, why stop at petrol? The fact that we apply GST to essential basic food items but have for years allowed property investors tax free capital gains is a stain on our country. I notice Te Pati Maori have committed to removing GST on basic food items and that is the best policy from any party over the last decade.

by Hamish | 18th Mar 22, 5:55pm 1647579309

It's very very blunt.

Economical family car or commuter car for the blue collar workers. Thanks a bit.

Tail end of big game fish season with hundreds of liters a day being burnt out on the water and the thirsty guzzler to tow the boat. Thanks heaps.

by kiwikidsnz | 18th Mar 22, 5:59pm 1647579556

Give thanks for all the boaties paying fuel taxes for roads they don't use

by Hamish | 18th Mar 22, 6:27pm 1647581227

The boats that get towed on all those non-roads?

Not all boaties though.

https://www.nzta.govt.nz/vehicles/fuel-excise-duty-refunds/

by Northern Lights | 18th Mar 22, 6:04pm 1647579896

I also have to add that although I agree with such suitable short term measures to target inflation, I don't agree with the neglect of long term planning shown by the govt allowing the closure of New Zealand's only refinery. I don't care if it is currently held by a private firm, it is a strategic national asset and should either be subsidised to ensure a local refining capacity or reconfigured to refine oil and gas from Taranaki.

If the current situation in Ukraine can show the Germans the danger of relying on an unreliable energy supply, then it should also send a clear message to our govt that New Zealand is just as vulnerable to energy supply disruptions and should be making a plan to make New Zealand more energy self reliant.

by Fluffybunny | 18th Mar 22, 6:46pm 1647582385

Bread for the masses. Knee jerk temporary rubbish.

plus... GLOBAL WARMING.

Make the one thing cheaper that we really really really need to start using less off.

by thinktank | 18th Mar 22, 6:53pm 1647582827

Unfortunately lithium isn’t a renewable resource so fossil is here for a while longer whether we like it or not.

by mfd | 18th Mar 22, 7:02pm 1647583332

I fancy our chances of recycling a lithium battery more than our chances of recycling a used tank of petrol.

Far better to use a bike than either an electric or ICE car, of course, where possible.

by GV 27 | 19th Mar 22, 10:16am 1647638198

Global warming is secondary to actually being able to get to work so I can feed my family.

by PocketAces | 18th Mar 22, 5:46pm 1647578789

We should either take GST of essential food and perhaps kids' clothing or drop the rate of it. To have both a high rate AND it on stuff that low income people are most affected by is cruel.

Then get building social, affordable housing like there is no tomorrow till there is no more need for this whole rentier culture that has grown in this country.

People need to be able to afford to live and house themselves. Fuel - meh!

by the way | 18th Mar 22, 6:36pm 1647581811

Maybe Labour could have repealed John Key's GST increase. That would have eased everyone's cost of living crisis.

by Foxglove. | 18th Mar 22, 6:44pm 1647582285

Unfortunately probably not. From a cynical point of view admittedly. Once a price has been established on any one market then regret to say the retailer or whatever will, asap simply re establish it. If Joe Public could pay $3.75 for a loaf of bread before, will he can afford to pay it again. In other words the tax saving just ends up in the supply chain pockets.

by the way | 18th Mar 22, 6:50pm 1647582600

Yes agreed.

I was scoffing at myself even as I wrote it.

by Halfway To Paradise | 18th Mar 22, 6:52pm 1647582773

The same can be said about the property market.

by meh | 19th Mar 22, 12:56pm 1647647780

And fuel on many occasions used to be a 6c increase and a 3c decrease.

Which explains why we don't really ever see real deflation in CPI. Hedonistic adjustments, lower priced alternatives are not deflation, and inevitably reach limits as well.

These "deflationary" forces we've allegedly had the past two decades - has anyone defined/isolated what they were?

Was it good policy or blind luck? Or many factors that can't be replicated this time around, no matter what the experts and their theories say.

by chebbo | 18th Mar 22, 6:02pm 1647579740

It's a silly policy. The taxpayer is going to be footing the bill one way or another anyway, and it does very little to address the cost of living in the mean time. What about the people driving round in those EVs we've all been encouraged to buy?

It's political showcasing. They're only doing this so it looks like they've done something.

by thinktank | 18th Mar 22, 6:56pm 1647582969

Because Labour believe that tax money just re-appears every 12 months out of thin air like magic.

by Let me be Frank | 18th Mar 22, 6:09pm 1647580163

And this is a surprise why?

by Beachbreak | 18th Mar 22, 6:10pm 1647580216

Try having responsibility accountability scrutiny every time you do something. It was quick, hopefully easy and can be tweaked. Me personally the high prices for fuel is a message - using a car is a luxury not a right. Since 2016 petrol has been so cheap that people forget. I came through the late 70's oil crisis as a car owning teen ager lived through carless days, the inflation at the time, and we had to live cheap. Crazily had 4 children and used to laugh about living some weeks on mince and garden grown silverbeet. Out roast was normally corned silverside.

We are now reexperiencing what the forebears called tough times.

by Officebound | 18th Mar 22, 6:36pm 1647581768

Maybe a temporary cut on cigarette tax would have been appropriate at the same time?

I mean, if we're going to financially incentivize activities that we otherwise want to discourage, why stop at one?

by thinktank | 18th Mar 22, 6:48pm 1647582532

Is it just me or is he gaining more chins by the week

by Halfway To Paradise | 18th Mar 22, 6:53pm 1647582838

Definitely more faces.

by Carlos67 | 18th Mar 22, 6:55pm 1647582950

Lifes great at the top you can afford to do and eat anything you want, including eating twice as much as you need to.

by Foxglove. | 18th Mar 22, 7:04pm 1647583456

The old joke. More chins than the Hong Kong telephone book. But more acutely though, here is NZ punching well above its weight, and that’s not figuratively speaking, in terms of global comparison with regard to obesity, and then let’s just think about the examples being set by our leaders, our mps, in parliament, all sides of the house. Obviously not going into names but to my mind some individuals are downright disgusting and a pitiful display to present to our younger generations. Yes that’s unprintable I know, but needs to be said nevertheless.

by hum | 18th Mar 22, 6:51pm 1647582672

Houses go up 30k a month no worries, petrol extra $30to fill up and we freak out.

Also does this tax cut is a disguised way to decrease CPI ?

by thinktank | 18th Mar 22, 6:57pm 1647583057

We freak out because we can’t just use a 5% deposit to buy fuel for our first car.

by Carlos67 | 18th Mar 22, 6:57pm 1647583062

This is all suddenly rushed through to help boost Poll numbers, nothing more. If Labour were still way ahead they would have done nothing, its all sudden panic stations.

by Halfway To Paradise | 18th Mar 22, 6:56pm 1647582963

This has been poorly thought out, still no word on the Road User Charge for diesel vehicles.

by Audaxes | 18th Mar 22, 7:00pm 1647583242

What's the upside?:

New Zealand sanctions Putin

Wellington has imposed its first sanctions against Moscow, targeting President Vladimir Putin personally

Cheaper petrol? I doubt it.

by agnostium | 18th Mar 22, 8:36pm 1647589010

We stand on the right side of history.

by Brutus Iscariot | 18th Mar 22, 7:19pm 1647584347

It beggars belief how poorly governed we are.

by Carlos67 | 18th Mar 22, 7:35pm 1647585328

Its hard work but you can get to a point in life where it doesn't matter what any of these clowns do. The people that are constantly getting kicked in the head are those at the bottom who can least afford it, they get impacted the most when bad decisions are made.

by Foxglove. | 18th Mar 22, 7:35pm 1647585337

I am hoping, not that optimistically, that Mr Luxon is going to take the opportunity to present a candidate in the Tauranga by election that will signal both calibre and integrity.,Having said that, it is acknowledged that Mr Bridges himself, was not bereft of qualifications and experience in his profession.

by meh | 19th Mar 22, 1:21pm 1647649312

Maybe we're ruled very well hence the same government for the past 40 years. And why everyone grumbles in here rather than protesting, because democracy gets a better outcome.

Or is it like carlos says above? Work hard to get yourself in a position where it doesn't matter what the clowns do - it's someone else getting kicked in the head.

Or do we no longer understand or have any real vision on the role of Government?

by Nzdan | 18th Mar 22, 7:58pm 1647586705

They caved under the pressure of the whinge brigade, moaning about how much tax goes behind a litre and how much of it is a tax on a tax (GST). Now the whinge brigade is moaning that the cut isn't enough.

by EpsomArtsandCrafts | 18th Mar 22, 8:49pm 1647589763

While I think there is too much tax on petrol compared to Australia, Its a bit of concern to democracy how quick and easily they can get a law through. I hope it doesn't go to their head and think they can get all manner of laws through without due process

by solardb | 18th Mar 22, 9:28pm 1647592080

Well, they've got 3 months to figure out a better policy, rather than extending it.

by solardb | 18th Mar 22, 9:39pm 1647592768

I'd favour retaining the public transport extra subsidy. Subsidising the tallow to diesel plant. Cash for bangers scheme , providing there are newer cars available. Education on driving economically. Subsidy on taxi and uber, providing it is a ride share service, to provide a public transport option in less populated areas . Promote electric lawnmowers and other garden tools. Finance solar for those running on petrol generators .

by solardb | 18th Mar 22, 9:42pm 1647592924

All the above I have costed at $399 million, saving the country a cool million.

by agnostium | 18th Mar 22, 10:26pm 1647595586

Agree with most of these but newer cars doesn't solve any of our problems, we need less driving. Ubers and taxis - increase congestion and emissions.

The solutions are well established and proven, increase costs of driving to remove driver subsidies and ensure the full costs of driving are covered by drivers (infrastructure, safety, environmental, health, etc...)

Reallocate funding towards sustainable modes Public transport, walking and cycling to provide people more attractive alternatives

Prioritise freight over private vehicles on our roading network

Remove barriers to housing intensification near our town centres and public transport nodes

Support bike share, car share (each car takes the place of betweeen 7-12 cars), electric bike uptake etc....

by solardb | 19th Mar 22, 9:33am 1647635583

Fair comments, I'm thinking more of semi rural areas like where I live . Lots of older women driving big cars, from when their husband was alive, or family was home. They would buy a smaller car if they could afford it.

With the taxis, I was thinking a shared service, instead of running full size buses with 2 people in it. Like the bush taxis in Africa, or I believe it is called jitney service in the usa

by agnostium | 19th Mar 22, 7:39pm 1647671979

Got ya, semi-rural is a challenge. My grandmother had similar issue, fortunately in the town where she lived in Northern Ireland they have flats for elderly people right in the centre of town. She got to downsize, keep her independence and because she was in the centre of town she could easily walk anywhere she needed to. My other grandmother relied on a volunteer minibus service but it limited her independence and then when she downsized the apartments in her town were just a little too far away from the centre to walk and she relied on lifts from family. On demand shared service could work in that situation.

by Squishy | 19th Mar 22, 6:32am 1647624741

To be fair I don't think government had much choice, with the Reserve Bank letting inflation run way above target for so long (even non-tradable inflation) they have to protect consumers from a rapidly falling standard of living.

Unfortunately their intervention with fiscal policy risks relaxing the Reserve Bank from taking appropriate policy action. The lag between OCR changes and the economic impact of those changes means government are unlikely to be able to back out without some collapse in energy prices.

by kpnuts | 19th Mar 22, 8:52am 1647633121

its Knee jerk reaction to a bad poll --- poor legislation and not well thought out --- remember the gun crime legislation rammed through in a couple of weeks --- untold pain for farmers - loss of a hobby for responsible gun enthusiasts -- and a 300% increase in gun crime !

Fast legislation is never good legislation -- plenty of the most impoverished with no cars - or already travel absolute minimum and wont benifit - GST on food should be the first target - everybody has to eat and its a bigger % of spend for poorer people than wealthy.

by GV 27 | 19th Mar 22, 10:10am 1647637838

People with no cars or who don't travel aren't being hit by rapidly increasing fuel costs, so it's targeted relief at the people who are actually being affected by the problem.

And good luck getting quick turnaround on exempting 'food' from GST. It took other countries years to define what is and isn't food and it creates a compliance minefield. You aren't pushing that out quickly in response to a crappy poll fast enough to get credit for it.

Also, local research suggests that if you restrict it to fruit and vege then well-off healthholds will get a disproportionate benefit than low-income households, who tend to buy more processed foods. The fact that it seems like such a screamingly obvious solution but hasn't been done should be the giveaway that it's not as simple as some people like to make out.

by Nzdan | 20th Mar 22, 12:17am 1647688626

Ironically taking GST off food would be a knee jerk reaction that gives the supermarkets another 15% wiggle room in their margins.