Government's fuel tax cut doesn't fix wider cost of living crisis - National, ACT

The Government's announcement to reduce fuel excise duties doesn't fix the wider cost of living crisis that Kiwis are facing, National leader Christopher Luxon says.

On Monday, the Government announced it will cut 25 cents a litre off fuel and road user charges for three months and halve the price of public transport for the same amount of time to help ease the financial pressure at the petrol pump.

It will come into effect on Tuesday and save motorists $11-17 per average fill-up, depending on the type of vehicle. The cost of cutting the fuel tax is about $350 million, while halving public transport will cost between $25 million to $40 million. 

Prime Minister Jacinda Ardern says it will be under constant review and the changes will "ease off" rather than be immediately cut to give people time to adjust. 

"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."

But Luxon says while the excise tax tweaks will provide some relief, they don't address the wider cost of living crisis in New Zealand.

"It's good that the Government has finally accepted that there is a cost of living crisis in New Zealand. But now they need to address it," he says.

"It's not just petrol prices that are going up. Food prices are up more than 13 percent and weekly rent is up $150.

"And rampant inflation means Kiwis are paying more income tax, despite going backwards under Labour."

Christopher Luxon.
Christopher Luxon. Photo credit: Getty Images

Luxon says people deserve a break, and the way to do this is by adjusting tax thresholds to return the extra cash to Kiwis that Labour is "grabbing through inflation".

"Until now, all Labour has done since they came into office is increase taxes. There's the regional fuel tax, the brightline extension, the removal of interest deductibility on rentals, the new 39 percent income tax rate, the proposed light rail tax and the latest jobs tax proposal," he says.

ACT leader David Seymour says the excise reduction is "a fraction" of what the Government could've done.

"We congratulate Labour for finally listening after ACT first dubbed this a crisis three months ago. The dominos have fallen since then, with National, Carmel Sepuloni, and now Jacinda Ardern admitting there's a crisis," he says.

"Yesterday ACT released a plan that would provide much stronger support to Kiwi families. A family of four would have to buy 3000 litres a year to match our policy under Labour's temporary trim to petrol taxes."

Seymour says Kiwis are struggling with not just a cost of living crisis, but a tax crisis too. This is why ACT says it is proposing to give the $1 billion a year collected through the Emissions Trading Scheme (ETS) back to Kiwi families in the form of Carbon Tax Credits to help with the cost of living.

"Based on Treasury's latest forecasts, that would mean a $749 payment in the next fiscal year to a family of four ($187 per person)," Seymour says.

"The Carbon Tax Refund would take each year's revenue from ETS auctions and divide it by the population. Every adult would receive a reduction in their tax bill by that amount, plus their dependent children's share. For people whose tax bill was lower than this credit, any remaining amount would be paid directly to them by Inland Revenue."

David Seymour.
David Seymour. Photo credit: Newshub.

He says ACT's Carbon Tax Refund would offset much of the impact on the cost of living due to the ETS, but it would retain the incentive to reduce emissions since the ETS tax would remain on every litre of petrol purchased.

"The benefits of this policy would be felt most strongly by those on low and middle incomes. $749 makes a much bigger difference to someone on $30,000 than $180,000," Seymour says.

"This is yet another positive proposal from ACT to help Kiwis who are being squeezed from every direction."

The Green Party says direct payments to New Zealanders would have provided better support than a temporary cut in fuel tax.

"Providing direct payments to people through the welfare system or via a tax credit would have given people the support they need to pay the bills, whether it's putting petrol in the car or feeding their whānau,” says co-leader James Shaw.

"Everyone should have what they need to make ends meet. But right now, far too many are shouldering the burden of rising prices for the basics, especially those on the lowest incomes."

James Shaw.
James Shaw. Photo credit: Newshub.

He says urgent action is needed to address the worsening inequality crisis in New Zealand.

"We are delighted at the move to halve public transport fares for the next three months. This will give hundreds of thousands of New Zealanders cheaper options to get around," Shaw says.

"We also recognise that cutting fuel tax will be a welcome relief to a lot of people. While some Government systems are so cumbersome they can't move quickly enough to deal with what is a very pressing need, boosting people's incomes would have had the same impact while also helping to meet the costs of other essentials, like food."

He says that New Zealand has some of the lowest petrol taxes in the OECD, but some of the highest prices of fuel excluding tax, meaning "fuel tax isn't necessarily the problem". He adds there's no guarantee the petrol companies won't absorb the tax reduction into their profit margins.

"Over the long-term, the most effective way we can ease the pressure people face at the pump is to move away from our heavy fossil fuel dependence," Shaw says.

"We will keep working to build a future where vehicles are powered by electricity; towns and cities connected by affordable public transport; and there are safe options to walk and cycle."