Finance Minister Nicola Willis says the Government was prepared to offer targeted cost-of-living support if petrol prices keep climbing due to the Middle East conflict, but has ruled out cutting fuel excise duty.
Willis told media earlier today that officials had been asked to model expected price rises over the coming weeks and their likely impact on households.
"I have not taken advice to Cabinet on that yet, nor considered specific options. What I am candidly sharing with you today is that as we look at price and its trajectory.
"We are anticipating that were it to get to levels where we think it was putting acute cost of living pressures on households, then we would consider a timely, temporary and targeted response," she said.
Petrol prices have risen about 50 cents a litre and diesel about 72 cents since the conflict began disrupting shipping through the Strait of Hormuz, adding roughly $23 and $36 respectively to the cost of filling an average vehicle.
Willis told reporters on Monday that officials had advised reducing excise would send "the wrong signal" when the global fuel supply faced potential disruption of up to 20%.
"Dramatically reducing prices in a way that would encourage people to use more of something would not necessarily be prudent," she said.
Instead, she said any government support would need to be temporary, targeted and timely, she said, pointing to last week's Covid-19 Royal Commission report that warned against blanket financial responses during economic shocks.
Willis said lower-income New Zealanders were front of mind when it came to relief.
"Very clear in my mind is the mother — potentially living in South Auckland — who has no choice but to use her car each day to get to her cleaning shift at the airport. There's not a bus available for her at that time.
As the US and Isreal war with Iran continues, Finance Minister Nicola Willis described what a worst case scenario would be for New Zealand if the conflict dragged on and what the Government's plans were. (Source: Q and A)
"[She] is facing acute income pressure. We need to make sure that we have in mind those New Zealanders who face the most acute cost-of-living pressures rather than having blanket responses which tie up a lot of others."
'Highly targeted' and 'temporary' relief considered
The Finance Minister explicitly ruled out relief like the 2022 cost-of-living payment, which provided a one-off $350 payment to hundreds of thousands.
Willis said the Government would be wanting to target "low and middle-income working families, who are most impacted by any acute price changes that we see."
She said officials would present her with options on what existing mechanisms would be suited for delivering that relief, and that was crucially "reliable".
"We would look to use mechanisms that were highly targeted, and that could be temporary, because we are not at this stage envisaging a scenario when fuel prices stay at this level into the future," the minister said.
Prices soar over $3 a litre at many locations and one brand’s a discount day emptied tanks at some sites. (Source: 1News)
"I am mindful that the [2022] cost of living payment famously ended up in the back pockets of French backpackers, dead people and many others. It was a novel mechanism and was not effective in reaching those who were most in need."
She said any options being considered could not add to the country's inflation pressure, as that would be "cutting off our nose to spite our face",
Asked whether the Government was considering discounting public transport, Willis said she was focused on "ensuring the availability of public transport".
"What we have seen in the past is that when petrol prices are higher, more people will choose to use public transport. We just simply want to be assured that that is available to people and is functioning in a way that, where possible, it is a choice."
US President Donald Trump said US forces had “obliterated” military targets on Iran’s Kharg Island — the primary terminal that handles Iran’s oil exports. (Source: 1News)
Air NZ's routes 'non-negotiable' amid fuel crisis
Willis described Air New Zealand's ability to maintain its flight schedule as "non-negotiable", saying the country's airline infrastructure was essential to keeping New Zealand connected to the world.
Last week, the national carrier announced it would cut around 1100 flights from its domestic schedule — a roughly 5% reduction in services through until the start of May.
She said jet fuel prices had risen between 70-100% depending on where it was sourced, and the airline had already responded by increasing fares and rescheduling some flights.
The Government maintains a majority shareholding in the airline.
However, Willis said a natural demand response was emerging, with fewer airlines flying — particularly out of the Middle East — which was reducing global demand for jet fuel.
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