About 143,000 lower-income working families with children will receive an extra $50 a week from April 7 as the Government moves to cushion the blow of surging fuel prices driven by the war in Iran.
The temporary boost to the in-work tax credit will also expand eligibility to about 14,000 additional working families, who will receive the credit at a reduced rate.
Prime Minister Christopher Luxon and Finance Minister Nicola Willis unveiled the cost-of-living relief package earlier this afternoon.
The increase will last for one year, or until the price of 91 octane petrol drops below $3 a litre for four consecutive weeks, according to the Government.
Willis said the policy had been carefully targeted at families in the "squeezed middle" who were working hard but had modest household incomes.
She ruled out cuts to the fuel excise duty or resurrecting a cost-of-living payment.
"This temporary boost will deliver support to working families who are under significant cost-of-living pressure, without making inflation worse or further driving up Government debt," she said in a media release.
"The policy is carefully targeted to families in the squeezed middle – parents who are working hard for a living, are not eligible for main benefits, and yet have modest household incomes with which to support their children.
"We know these families will be hit particularly hard by the global fuel-price shock. We are delivering them timely relief.
“The Government will implement these changes at pace."
Rising petrol and diesel prices have led to a rapid increase in public transport patronage. (Source: 1News)
Willis said the Government would introduce an amendment paper to the Taxation Bill currently before Parliament tomorrow, so the changes could take effect from April 1.
The tax credit payment will rise from $97.50 a week to $147.50 a week. Families with four or more children get an extra $15 a week for each child after the third.
"Most eligible households will not need to do anything to receive the increase. It will be paid directly into their bank accounts, starting on April 7 if they are paid weekly, and April 14 if they are paid fortnightly," Willis said.
"We are very aware that almost all Kiwi businesses and families are feeling price pressures as a result of the global shockwaves hitting New Zealand, but equally we know that responding with large, untargeted Government spending programmes could make things worse for Kiwis by adding more pressure to inflation and debt.
The Government is drawing up urgent fuel strategies as the Middle East conflict continues. (Source: 1News)
"We are making careful choices in order to protect New Zealand’s economic future"
The policy was estimated to cost up to $373 million if it runs for the full year, with no ongoing cost in future years, according to Willis.
The spending will count against the Government's operating allowance for Budget 2026 and has already been factored into the Treasury's fiscal forecast.
Tax credit to be paid by IRD
The in-work tax credit is paid by Inland Revenue to families where at least one parent is in paid employment and neither receives a main benefit.
Eligibility depends on family income and the number of dependent children.
In the current tax year, the cut-off sits at about $89,000 for a family with one child, $112,000 for two children and $135,000 for three.
Family income is the income from both parents combined - if there are two of them - whether from full-time or part-time work.
According to the government's fact sheet, the largest group of families set to benefit are those earning between $60,000 and $80,000 a year, with more than 41,000 households in that bracket receiving the full $50 increase.
Those who think they may be newly eligible have been urged to check through their myIR account online or by calling Inland Revenue on 0800 227 773.
The Government said the increase had been deliberately time-limited because it was a response to a temporary global shock.
Latest figures show declining stocks
In an update at 1pm yesterday, the Ministry of Business, Innovation and Employment said the country had 49.9 days' stocks of petrol, 45.5 of diesel and 44.7 of jet fuel, as of late on March 18. Combined stock is 46.9 days.
Andrew Harris from Harris Contracting in Ashburton told Breakfast the pressure was being felt across the industry. (Source: Breakfast)
The previous update, which was accurate to March 15, showed there 51.3 days’ worth of petrol, 47.1 days of diesel and 49 days of jet fuel.
Eight more shipments are due by April 1.
"This data does not include shipments more than two weeks away, including cargoes already loaded, currently loading or planned," MBIE said.
PM warned crisis could deepen before it eases
Today's announcement caps a week of increasingly stark warnings about the state of the country's fuel supply.
Luxon said last week the Government was preparing for the worst-case scenario of a prolonged conflict, with officials tasked to plan for eight to 12 weeks of disruption.
Overnight, Brent crude briefly topped $US119, up 60% since the war started, putting the pinch across the board. (Source: 1News)
"I do want to be straight with New Zealanders - things could get worse before they actually get better," the prime minister said, describing the crisis as "one of the most significant oil shocks we've had in history".
He said that even if an unlikely ceasefire were announced soon, the effects on global supply chains would not be immediately resolved.
Willis had earlier signalled the shape of any relief, telling reporters it would be "irresponsible for us to help every New Zealander".
She warned that spending too much could "lead to higher inflation and more price surges across the economy, which could lead us into a vicious spiral".
The Finance Minister said she had a clear picture of who the support should reach.
"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," Willis told reporters.
Govt rules out fuel tax cuts, cost of living payments
She explicitly ruled out a repeat of the 2022 cost-of-living payment, which provided a one-off $350 payment to hundreds of thousands, saying the mechanism "ended up in the back pockets of French backpackers, dead people and many others".
Willis also ruled out cutting fuel excise duty, saying officials had advised it would send "the wrong signal" when global 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, at a press conference yesterday, Willis confirmed Cabinet had signed off on a package focused on lower to middle-income workers and families with children.
Luxon said the approach had to avoid the mistakes of the pandemic, when broad spending delivered "short-term gain, but long-term pain, massive long-term pain".
A warning from credit rating agency Fitch on Friday reinforced that caution. Willis said the agency was watching New Zealand's debt levels.
She said heavy borrowing to cushion the crisis could risk a credit downgrade, further pushing up costs for households, businesses and the government.
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