Fuel tax return: Petrol to rise 25 cents from end of summer, half-price public transport to end

The Government's 25 cent cut to fuel excise duty (FED) has been extended and will now be phased out from February 28, with the Government's entire package of transport subsidies to end by March 31.

The cut to FED was scheduled to end on January 31, but the full reduction has now been extended a month. 

On February 28, the FED will increase 12.5 cents per litre and then rise another 12.5 cents at the end of March. That means Kiwis will be paying at least 25 cents more per litre of petrol by the end of March than they are currently.

There's no extension to the cut in road user charges (RUC), which will still come to an end on January 31, while half-price public transport fares have been extended to the end of March.

The extension to the FED cut and half-price public transport is being labelled "cost of living support" by the Government. Inflation is expected to climb again in coming months and peak at 7.5 percent, according to the Reserve Bank.

In a statement on Wednesday, Finance Minister Grant Robertson said FED and public transport discounts have "directly helped people struggling with cost of living pressures, while also helping to take the edge off inflation by about half a percent".

However, Robertson also made the point that the package of subsidies, which first came into effect in March, are expensive. 

The Ministry of Transport estimates the cost until January 31 to be $1.3 billion. The additional extensions are expected to cost about $116 million.

"We have to strike a balance between broad ongoing support and careful management of the Government's accounts. That's why we are transitioning to more targeted support for those most feeling the pinch," said Robertson.

The end of the FED cut and half-price public transport fares at the end of March will coincide with the Government's lifts to the Family Tax Credit, Superannuation, benefits, student allowances and childcare support on April 1.

Kiwis who hold a community service card will permanently have half-price fares from the end of March. There will also be half price fares from April 1 for those who use the Total Mobility Scheme, which provides subsidised taxi services for people who cannot use public transport because they have a disability.

The Government explained the cut to RUC isn't being extended past January 31 as it is pre-purchased. That means RUC holders purchasing in December and January will still be receiving the discount for some months afterwards.

Energy Minister Megan Woods said the impact of the global fuel crisis has eased "to some degree" in New Zealand. 

The subsidies were first implemented in March off the back of rising prices due to Russia's invasion of Ukraine. They were then extended at the May Budget and then in July until January 31.

"Since we brought in the 25 cent per litre cut, retail prices for regular 91 have dropped by about 76 cents per litre (including the excise cut)," said Woods. "People are still feeling cost of living pressures though so we're pleased we're able to do a bit more to help motorists".

Transport Minister Michael Wood said it is important to strike a balance between helping Kiwis with their transport costs and keeping costs in check.

"We've got to make sure they are sustainable when that duty and fares help make up the funding we use to fix our roads and invest in public transport, cycling and walking infrastructure," he said.

The FED goes towards the National Land Transport Fund, which we use to fund transport infrastructure and maintenance. Wood said the Government's topped it up to reflect the shortfall caused by the cuts.

The Government's Crown Accounts for the year to June 30, 2022 showed tax take from petroleum fuels excise and duty fell from $2.1b in 2021 to $1.7b in 2022, while road and track charges decreased from $1.9b to $1.8b. This was attributed to the FED and RUC cut.

A Newshub-Reid Research poll last month found New Zealanders back the Government to extend the subsidies. The results show 81.4 percent of Kiwis believe the fuel tax cut should be extended, 12.7 percent said it shouldn't be and the rest didn't know.