Cost of living: Fuel tax cut 'extremely dumb economic policy' - Infometrics' Brad Olsen

The new Prime Minister has made his first move to tackle the cost of living - keeping cheap fuel and public transport.

Chris Hipkins was in Auckland on Wednesday to thank those on the frontline helping with the flood recovery efforts.

"It's been a lot and it's been a lot on top of the last few years," Hipkins said. 

He then headed to the nerve centre coordinating the response on the ground. 

While there, Hipkins announced an extension to relief for another crisis - the cost of living. 

The Government is keeping half-price public transport and the 25c a litre petrol tax cut.

"That will reduce the average 60L tank of petrol by $17.25," he said. 

In a city so devastated by climate change, Hipkins had to tread the line between subsidising fossil fuels and keeping costs down.

"We also have to acknowledge that right here and right now the increase in fuel costs is putting a significant pressure on families who have no choice but to continue to fill up the car."

Not everyone's gassed for it though

"A new leader, same Labour. The same old tired ideas and that's not fundamentally addressing our underlying causes of inflation," said National's Christopher Luxon. 

"This is an extremely dumb economic policy," said Infometrics' Brad Olsen. 

Infometrics has crunched the numbers on the average fuel use of people in different income bands. As higher-income households use more fuel, they save about $64 a month. Households who earn the least and use the least petrol save just $21.

"We've heard time and time again about tax cuts for the rich. This policy is exactly that," Olsen said.

The policy is also a gear shift for Finance Minister Grant Robertson, who, after extending it a fourth time in December said it wouldn't happen again.

"It is not sustainable to continue to subsidise the cost of petrol indefinitely for everyone," he said at the time.

Asked why he was coming back to the policy, Robertson said on Wednesday: "Because we've got a new Prime Minister". 

A new Prime Minister who is keen to be seen to be taking a bite of the cost of living crisis.  

Amelia Wade Analysis

This extension until the end of June will cost $718 million. That's a big chunk of cash to find down the back of the couch.

The Finance Minister said the Government found it after ministers spent the summer thinking about which projects to dump to focus on the cost of living.

This will now tide Kiwis over to June which is just after the Budget. That's a pretty big wink, wink it could be extended again.

Also, whacking up the price at the pump another 25c a litre just before an election wouldn't be a great way to drive up votes.