Minister indicates fuel tax break could be extended, as inflation gets political

Thursday, 21 April 2022

Oil is up about US$20 a barrel on its pre-invasion price, which should have raised petrol prices by about 20 cents a litre.

Energy Minister Megan Woods has indicated the Government could consider extending temporary fuel tax cuts that are currently set to expire in June and July.

Asked if and when the Government might consider an extension, Woods said “the policy has only been in place for a month, but we’re continuing to monitor the situation, especially given the volatility in global oil markets”.

The Government cut the fuel tax on petrol by almost 29 cents a litre once GST is included and halved public transport fares for three months on March 14 in response to rising fuel prices caused by Russia’s war on Ukraine and subsequent sanctions.

Diesel buyers will see the benefit of an equivalent cut to road user charges from today.

* Reserve Bank 'not in a great place' with inflation

* Fuel tax cut won't be rescinded early despite sharp drop in oil prices

Finance Minister Grant Robertson expects the official inflation figure to rise when it is released later this week (interviewed on April 19).

The price of Brent Crude for June delivery was sitting at US$107 a barrel on Thursday morning, up about US$20 (NZ$29) on the equivalent pre-invasion price, after briefly peaking above US$130 in early March.

The AA says a ‘good rule of thumb’ is that a US$1 increase in the cost of a barrel of oil increases the price of petrol at the pump by about one New Zealand cent a litre.

Finance Minister Grant Robertson has previously said the end of the fuel tax breaks would likely come gradually, meaning there would not be a huge spike in prices at the end of the three-month periods.

Many economists expect inflation figures due out on Thursday morning will show annual inflation hit 7% in the three months to the end of March.

Reserve Bank governor Adrian Orr appeared to suggest on Tuesday that a changed approach to government spending might be necessary to help bring down inflation, saying the Reserve Bank would need “support” to achieve its goals.

“We are going to have to be very clear with our fiscal authorities around what we are doing and how they could assist with more targeted, effective fiscal policies,” he said.

That comment was seized on by National Party finance spokeswoman Nicola Wills who said Robertson needed to heed what she described as Orr’s “warning”.

“He must do his bit to remove inflationary pressure in the domestic economy: stop adding costs to business, quit wasteful spending and remove bottlenecks to productive growth,” she said on Tuesday.

Robertson has continued to emphasise high inflation is an international phenomenon with annual inflation having topped 8% in the United States and Britain.