Government poised to announce extension to fuel tax cut, half-price public transport

New Prime Minister Chris Hipkins' first major policy announcement looks like it will be an extension to the fuel tax cut and half-price public transport, Newshub understands.

Hipkins, who was sworn in as Prime Minister last week, will be in Auckland on Wednesday and is expected to make an announcement later in the morning. 

The Government cut fuel excise duty (FED) by 25 cents early last year as prices soared off the back of Russia's invasion of Ukraine. Road user charges (RUC) were also discounted, while public transport fares were slashed in half.

The package was only initially scheduled to last three months but it received several extensions. In December, the Government announced the end dates for the subsidies, with the RUC discount ending on January 31 and FED planned to increase 12.5 cents per litre on February 28 and another 12.5 cents by the end of March.

The cost of living remains difficult for Kiwi families, however. Stats NZ last week announced annual inflation was steady at 7.2 percent, while food prices were up 11.3 percent in December - the biggest jump in 32 years.

Since taking office, Hipkins has repeatedly said the cost of living - "bread and butter" issues - would be a priority for his Government.

"Over the coming days and weeks you will see us put words into action, with policies to support New Zealanders by reprioritising existing programmes to free up resources to help with the cost of living," he said on Tuesday.

He's so far refused to rule in or out reversing the decision to end the fuel tax cut. 

"We will work carefully through the options. We will do that quickly. 

"I am aware there are timing considerations with regard to that particular issue," Hipkins said last week.

New Prime Minister Chris Hipkins.
New Prime Minister Chris Hipkins. Photo credit: Getty Images.

The Automobile Association has warned of a potential 40c increase in fuel prices over the coming months. That accounts for the 25c fuel tax return, GST, and the rising cost of oil.

When announcing the end date of the subsidies in December, Finance Minister Grant Robertson said the package had "directly helped people struggling with [the] cost of living pressures" and nudged inflation down by "about half a percent".

But it's expensive - the Ministry of Transport estimates the cost until January 31 to be $1.3 billion.

"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," Robertson said at the time.

The end of the FED cut was planned to coincide with lifts to the Family Tax Credit, Superannuation, benefits, student allowances and childcare support on April 1.