Govt slashes fuel tax, halves public transport cost for 3 months

Sweeping changes to ease the price of transport are being rolled out, with the Government slashing fuel taxes and halving the cost of public transport for three months, as the price at the pump skyrockets.

Many were trying to beat the pain coming at the pump.

The fuel tax decrease will come into effect at 11.59pm tonight and public transport from April 1.

Prime Minister Jacinda Ardern made the announcement on Monday, as she faces pressure over the high cost of living for Kiwis.

"We are in the midst of a global energy crisis. Last week prices for all three fuel types rose to the highest amount on record”.

"We are in a wicked, perfect storm and it is a storm that is impacting people's lives," Ardern said, in relation to the fuel volatility caused by the Russian invasion of Ukraine and the pandemic.

Motorists will see a 25 cent per litre cut on their fuel excise and road user chargers for petrol and diesel for three months.

"This unprecedented move, the reduction of 25c a litre is us making sure we are responding quickly to the pain at the pump," Ardern said.

The nationwide fuel tax, which mainly goes to the transport fund to maintain and create roads, sits at 77 cent per litre for unleaded petrol, with Aucklanders paying 10c more. GST at 15% is charged on top of that. Various excise, levies and duties make up almost half the cost of petrol for customers.

The Government will put money into the transport fund to ensure promised projects could still go ahead. It is estimated to cost $350 million for the fuel tax decrease and between $24 - 40m for the public transport costs.

Fuel companies will need to do additional reporting to show they are passing that savings onto customers.

Finance Minister Grant Robertson said that petrol prices are expected to continue to rise.

He said due to the nature of road user charges, the way in which it would be decreased will be announced in coming days.

"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."

He said the Government would work to ensure New Zealand is "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.”

The Automobile Association warned consumers to prepare for prices to hit almost $4 per litre, as global fuel shocks continue due to the Russian invasion of Ukraine.

National's Christopher Luxon said that "petrol tax tweaks will provide some relief but don’t address the wider cost of living crisis that Kiwis across the country are facing".

“It’s good that the Government has finally accepted there is a cost of living crisis in New Zealand. But now they need to address it. It’s not just petrol prices that are going up. Food prices are up more than 13 per cent and weekly rent is up $150. And rampant inflation means Kiwis are paying more income tax, despite going backwards under Labour."

Luxon said people deserve a break.

"The best way to do that is to adjust tax thresholds to return the extra tax Labour are grabbing through inflation."

Following Monday's announcement, Mobil reduced its prices immediately.