Government to cut fuel prices with urgent tax cut

Mar 14, 2022

From the Prime Minister, Energy and Finance Ministers - Megan Woods and Grant Robertson.

Details of this afternoon's decision to reduce price of fuel.

  • Petrol excise duty and road user charges both cut by 25 cents a litre for three months
  • Additional reporting to support expectation that the full amount of tax reduction will be passed on to consumers at the pump
  • Public transport fares cut in half for three months to provide cheaper transport options
  • Government to top up lost revenue to Land Transport Fund to ensure all currently funded transport projects will not be affected
  • Temporary measures form part of a cost of living relief package that includes April 1 income increases for majority of New Zealand households
  • Almost 60% of families to get an increase to Working for Families of on average $20, Superannuation to increase $52 per fortnight for a single person and $80 for a couple, and benefits to increase up to a further $35 a week
  • Winter Energy Payment to re-start on May 1 providing $31.82 a week for couples, and people with dependent children – a total of $700 over winter

 

The Government will cut 25 cents a litre off fuel for three months as part of a cost of living package aimed at giving Kiwi families immediate relief through the current global energy crisis triggered by the war in Ukraine, Prime Minister Jacinda Ardern announced today. 

Fuel excise duties and road user chargers will be reduced by 25 cents each and the price of public transport will be halved as part of a package of measures to reduce transport cost pressures on middle and low income households.

“We cannot control the war in Ukraine nor the continued volatility of fuel prices but we can take steps to reduce the impact on New Zealand families,” Jacinda Ardern said.

“Just as it was our job to get New Zealand through the Covid-19 health crisis it’s also our job to put in place a plan to get us through the global energy crisis too.

“There’s no silver bullet that will fix the cost of living, but we have a plan and are implementing a range of measures that together will help to make a difference.

“The global energy crisis has quickly become acute which is why the Government has stepped in to cut fuel duty. Today’s changes will reduce the cost of filling up a 40 litre tank of petrol by over $11, and for a 60 litre tank, over $17.

“We are also making it cheaper for those who catch a bus or a train. In the long term we need to build greater resilience into our transport system so we are less vulnerable to spikes in the price of petrol, but for now halving the cost public transport will provide some families with an alternative to filling up the tank. 

“In addition on April 1 a suite of permanent increases to household incomes will see 60 percent of families earning more from Working for Families, as well as increases to superannuation and benefits. On May 1, one million New Zealanders will also start receiving the Winter Energy Payment which will provide $30 a week extra to many.

“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.

“One thing we do know, is that the extraordinary increases we’ve seen in recent weeks impact on everything – from the ability of people to get to and from work, to the cost of supplying goods and services, and so we must act to support New Zealanders to get through,” Jacinda Ardern said.

Finance Minister Grant Robertson said the fuel excise cut is the most efficient and direct way to help Kiwis now.

“We are amid a global energy shock and a spike in prices at the pump is being felt by the whole world, including more than a 15 percent increase in the cost of 91 here in New Zealand between the start of the year and last week,” Grant Robertson said.

“Reducing FED is the quickest move we can make and it will be confirmed by an Order in Council that will come into effect tonight.

“Due to the nature of RUC, officials are working through a number of options to make sure support flows in a timely way, and the Transport Minister will be setting out the details for how we will support RUC payers in the coming days.

“The estimated cost of this cut over three month period is about $350 million for the fuel tax changes. This will mean reduced revenue for the National Land Transport Fund, which funds our investment in roads and other transport infrastructure. We will be meeting the costs of this through savings and reprioritisation from the COVID Response and Recovery Fund. This means we can continue the Government’s record investment into transport infrastructure without having to cut projects.

“We do need to recognise that petrol prices are expected to continue to rise.  The Russian invasion of Ukraine is continuing to undermine and de-stabilise global energy markets and, added to the other inflationary pressures the world has due to COVID supply chain disruptions, this is sadly not over yet.   

“That is why we will review the situation over the coming months.  We will also outline in the coming days the means by which we will reverse the changes being announced today. It is likely that this will be a gradual phase down in line with global oil prices stabilising and reducing, to keep pressure off families while recognising the need to return to more stable funding for our transport infrastructure.

“Further, in the Budget in May, we will progress work to ensure we are not at the whim of international oil prices in future, through greater investment from the Climate Emergency Response Fund. These investments will boost our plans for New Zealand to increase energy security and independence by decarbonising our transport fleet and reducing our reliance on volatile global energy markets.”  

Minister of Energy and Resources Megan Woods is writing to fuel companies today, setting out an expectation that the full amount of tax reduction from the Government will be passed on to consumers at the pump.

“In addition I am seeking daily information disclosure from fuel companies of their rolling seven-day average fuel margins, to monitor industry profits,” Megan Woods said.

“Our preference is that fuel companies volunteer this information and I am asking them to do that. But under the Fuel Industry Act we passed in 2020, there are options to pursue more data disclosure, and further measures to ensure the discounted excise duty is not being absorbed into company profits,” Megan Woods said. 

 

Background:

From 1 April 2022, compared to 2017:

  • 110,000 beneficiaries with children will be better off by on average $175 per week, increasing to $207 per week during the 2022 winter period.
  • 363,000 beneficiaries will be better off by on average $109 per week, increasing to $133 per week during the 2022 winter period.
  • We’ve worked hard to lift the wages:
    • A new Nurse is paid more the $10,000 more per year. Experienced nurses are receiving $16,000 more.
    • New teachers are being paid more than $11,000 per year more.
    • A new Police Officer is paid more than $12,00 more per year.
    • The average disposable household income increased 4.5% in the year to June 21. 
  • Our policies have increased incomes and reduced costs for families: 
    • We introduced the Families Package, which provides targeted assistance to improve incomes for low- and middle-income families with children. The Families Package has benefitted 330,000 families in its first year, and the Winter Energy Payment provides additional support to a million New Zealanders every winter. 
    • Best Start payment was introduced, and increased from $60 to $65 per week.
    • We increased main benefits by $25 in 2020, and then a further $32 to $55 which will come into effect on 1 April this year
    • We increased Student Allowance by $25 which will come into effect on 1 April this year 
    • We raised the minimum wage by over a third from $15.75 in 2017 to $21.20 as at 1 April this year 
    • We introduced and expanded the Ka Ora Ka Ako Free and Healthy School lunches programme to over 200,000 students
    • We have reduced education costs for parents by increasing funding for deciles 1-7 schools that agree not to request donations, and by removing NCEA fees
    • We have supported parents with health costs by expanding free and low-cost doctors’ visits to children under 14, and expanding school-based health services into decile 5 schools.
    • We announced further Working for Families changes which will increase the incomes of 346,000 families by an average of $20 a week from April 2022
    • We are rolling out­ free period products for all primary, intermediate and secondary school and kura students.
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