Robertson extends 25c/l fuel tax cut and half price bus, train fares from mid-Aug to end of Jan at cost of $652m

Finance Minister Grant Robertson has announced the extension of fuel tax cuts and half price public transport fares until the end of January, 2023, saying the Government wanted to give consumers certainty at a time of elevated prices.

The extension from mid-August to the end of January would cost $652m, although Robertson said it would not represent a loosening of fiscal policy because it would be paid for by reallocating funding unused elsewhere in the Budget. He said Treasury had advised the policy had reduced headline inflation by 0.5 percentage points in the June quarter.

Robertson told a news conference after the announcement that the 25c/litre cut in fuel taxes could not go on forever and the Government was looking at options to phase it out gradually, rather than on a 'D-Day' that could cause disruptions with heavy queuing just before the 'D-Day'. He would not rule out or in whether it would still be in place at next year's election.

“There’s no easy fix for the cost of living, but we’re taking a range of actions to ease the pressure on families. In the case of today’s announcement we know that the rising price of fuel has a direct effect on inflation, and making these changes is a targeted approach to a root cause of the cost of living pressure being faced by Kiwi households," Robertson said.

Extending the fuel excise and RUC reductions until the end of January was estimated to cost $589m, while the cost of extending half price public transport was estimated to be $63.1m.

“In the end of financial year wash up we have identified funding that we can re-prioritise to meet these costs and top up the National Land Transport Fund, in particular from lower than forecast write-offs from the Small Business Cashflow Loan Scheme, and money remaining in the COVID Support Payment allocation,” Robertson said.

Meanwhile, Energy Minister Megan Woods told the Beehive Theatrette news conference that she had written to fuel companies last week for an explanation of a spike in fuel importing profit margins, as detailed here in an MBIE chart.

[chart:oil and petrol]