Fuel tax cut, half-price public transport extended through June

Chris Hipkins in 2021 (file image).

An extension to fuel excise duty reductions and half-price public transport is intended to ease cost-of-living pressures, Chris Hipkins has announced in his first policy move as PM.

That means the petrol excise duty will continue to be discounted by 25 cents per litre - while publicly-run buses, trains, and ferries will continue to be half-price to ride.

The road user charge discount will also be re-introduced - having ended yesterday.

All of the renewed discounts will continue until the end of June.

"I’ve said bread-and-butter issues like the cost of living would be my top priority. This is our first step in dealing with some of the persistent cost pressures on businesses and families," the prime minister said.

File picture.

"This is a start. It's a meaningful step in an ongoing series of measures to help with some of the most persistent cost pressures facing families and businesses.

“The floods in Auckland and Northland are putting extra stress and financial pressure on families. Cutting fuel excise and keeping half-price public transport gives some extra relief as Auckland goes through a difficult period.

The Government says the extension is estimated to cost about $718 million.

"We are paying for the extension from savings identified in the most recent baseline update," Finance Minister Grant Robertson said.

Hipkins made the announcement while visiting Auckland - amid the region's floods.

An unexpected u-turn

Prior to today's announcement, it was expected that the price reductions would have ended by March 31 - with Finance Minister Grant Robertson having confirmed as much in a December budget update.

Hipkins has repeatedly emphasised he will focus on "bread and butter issues" since he unexpectedly became prime minister two weeks ago.

"These discounts were due to be phased out in the coming months, but with global inflation pressure forecast to keep our rate around the 7% mark for longer - it's important we keep providing support to families and businesses," the PM said.

The discounts will now be in place for an additional five months.

Deputy Prime Minister Grant Robertson.

In December, Robertson said he didn't foresee the reductions being extended.

"The Government has invested over $1 billion over the past year to reduce fuel prices. However, it is not sustainable to continue to subsidise the cost of petrol indefinitely for everyone," he said at the time.

"That’s why we are transitioning to more targeted support for those most feeling the pinch."

At the time, Transport Minister Michael Wood said a decision not to extend half-price fares on public transport was based around making "sustainable" decisions.

Metlink buses (file image).

"We’ve got to make sure they are sustainable when that duty and fares help make up the funding we use to fix our roads and invest in public transport, cycling and walking infrastructure."


Trucking industry group Transporting New Zealand said in a statement that it "applauded the decision" to continue discounting road user charges.

"Not extending this scheme would have been inflationary at a time when we all need to be spending less," chief executive Nick Leggett said.

He said the discount should ultimately be "reduced slowly to avoid shocks" to the trucking and freight industry.

Leggett added the measure "should be in place as long as inflation stays above 6%".

Meanwhile, Infometrics economist Brad Olsen said the move to extend the fuel excise duty cuts would disproportionately benefit the top-income decile.

"It’s extremely dumb economic policy from the new prime minister," he said in a tweet.

"Extending the fuel tax subsidy gives three times as much help to the top income decile, who don’t need it, compared to the bottom income decile, who need the help the most."

Green Party co-leader James Shaw said in a media release that extending the fuel tax cut was a "very poorly targeted" move.

"It is the top earners who benefit most from petrol subsidies... there are better ways to help families struggling with high inflation than subsidising harmful fossil fuels," he said.

"Auckland has just experienced first-hand the devastating impacts of climate change. It just doesn’t make sense to be extending subsidies for fossil fuels."

He said the money spent on the fuel tax cut would be better spent on making public transport more reliable - alongside permanent half-price fares.

A 1News Kantar Public Poll in December showed an overwhelming majority of voters support permanent half-price public transport. Seventy-nine per cent said it was worth keeping around permanently, while only 14% said no.

Meanwhile, ACT leader David Seymour released a statement calling the move "dumb, election year populism" and "totally incoherent policy".

"World oil prices are now well below where they were a year ago. Now is the time to rip the band-aid off," he said.

ACT leader David Seymour.

Seymour added that the money spent on extending the discounts could've been better used to repair and maintain roading infrastructure.

"Anyone who has spent more than a few hours on our roads over the summer will have noticed they’re in desperate need of repair."