Prime Minister Christopher Luxon says a planned fuel tax increase for next January is now "possibly unlikely" as the crisis in the Middle East continues to squeeze household budgets.
Luxon conceded the plans to bring in a 12 cents per litre increase from next year were less realistic, amid spiking petrol prices from the US and Israel's war with Iran.
Asked about the economic outlook and whether tax settings would change, the Prime Minister suggested the planned fuel excise duty increase had been effectively shelved.
"We were due to have an increase in fuel excise tax in January next year – I think that's possibly unlikely," Luxon told Breakfast.
It comes after his Transport Minister hinted at scrapping the increases last week.
Earlier in its term, the Government had signalled a 12 cents per litre increase to fuel excise duty from January 2027. It was to be followed by a further 6 cents per litre increase in January 2028 and annual 4 cent increases from 2029.
Refineries in Singapore and South Korea are crucial to New Zealand’s fuel provisions. (Source: 1News)
Past governments had semi-regularly raised the duty prior to July 2020 to fund transport projects.
Scrapping or delaying the January increase would mean less revenue for those initiatives but provide some relief for drivers already paying more at the pump.
But Luxon said the Government had to be disciplined about any support measures, repeating a mantra that assistance had to be "timely, targeted and temporary".
Luxon wants only 'timely, targeted, temporary' support
He ruled out cutting GST on fuel, saying that kind of broad measure would benefit wealthier households more than those doing it tough.
"The people who actually do best out of that, you know, wealthier people," he said.
He also pushed back on calls for free or subsidised public transport, saying only that a "whole range of potential support options" were being discussed within Government.
The Prime Minister said fuel stocks were in "good heart" but warned that even a "quality ceasefire agreement" with Iran would take months to flow through to supply chains.
Jetstar drops some flights as the price of fuel rises daily due to disruptions in the Middle East. (Source: 1News)
An update from energy officials on fuel stock levels was expected later today.
Last week's data was clarified after concerns were raised about diesel supplies.
Speaking to Breakfast, Luxon brushed off suggestions the coalition had been avoiding the Beehive podium and theatrette for its fuel stock updates, with some claiming it was distancing itself from the imagery associated with the Covid-19 response.
"Can I be really honest? We're working 20 hours a day, seven days a week on this issue," Luxon said. "That's not been a deep consideration I'm aware of."
He said other countries had taken notice of New Zealand's crisis response, with some adopting the fuel management framework.
"There are other countries, to be honest, that I've been talking to their leaders, and they're really struggling. Some have now following our four-phase model," he said.
Rising petrol and diesel prices have led to a rapid increase in public transport patronage. (Source: 1News)
National deferred previous increases
The planned January 2027 increase to the fuel excise duty was itself a deferral.
National had pledged on the campaign trail at the last election to not raise fuel taxes during its first term in office. In August 2023, the previous Labour government announced it wanted to hike petrol taxes by 12 cents per litre between 2024 and 2027.
In opposition, the party's transport spokesperson had been one of the loudest critics of that proposal, accusing Labour in a press release of "unleashing pain at the pump" during.
"The Government shouldn’t even be thinking about hiking petrol tax until the cost of living crisis has ended and inflation is back inside the Reserve Bank’s 1-3% range."
Then-party spokesperson Simeon Brown promised National's transport pledged transport projects would not require increases to petrol tax.
The rise is proposed to take place over three years up until 2026. (Source: 1News)
Once in government, Brown kept the promise for the current term but scheduled the same 12 cent increase for January 2027. The coalition's first term ends in November 2026.
Speaking in a speech to the AA last week, the current Transport Minister Chris Bishop said there were "consequences" to those decisions.
"Petrol tax has not risen since 2020 and has not kept up with inflation," he said.
"In 2023, we campaigned on not increasing petrol tax in our first term. This was the right thing to do when there was a cost of living crisis, but we have to be honest about those consequences. It has deferred the issue until later.
"Petrol tax is currently due to go up by 12c per litre in 2027, by six cents on January 1, 2028, and 4 cents in each year after that. I have to be honest with you, the idea that we would put up fuel tax during a fuel crisis seems like a non-starter to me.
"I’m thinking hard about the funding challenge ... and I’ll have more to say soon."
The morning's headlines in 90 seconds, including an Auckland fuel pipe’s cut and left leaking, and the English football heavyweights coming here. (Source: Breakfast)
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