14 Mar 2022

Public transport fares to be halved, fuel taxes and road user charges reduced

6:06 pm on 14 March 2022

Fuel taxes will be slashed by 25 cents a litre for the next three months - and public transport fares halved - as the government acts to counter soaring petrol prices. One petrol company made changes to its fuel price immediately.

Speaking after today's Cabinet meeting, Prime Minister Jacinda Ardern says the invasion of Ukraine has unleashed a "global energy crisis", with all three fuel types rising for the highest amount on record.

Prices have increased 13 percent in the past month.

"We are in a wicked perfect storm and it's a storm that's impacting many people's lives," Ardern says.

The impact of the invasion is expected to mean "continued volatility" for fuel prices.

Cabinet agreed to reduce fuel excise duty and road user charges by 25 cents per litre, for 3 months, which Ardern says will mean "a potential saving of between $11.50 and $17.25 per tank of fuel".

In addition, all public transport fares will be halved for the next three months. "We hope this ensures that where the option of shifting how we travel is available, this makes it more affordable to take that public transport option up."

Labour has reduced cost pressures on New Zealand families since day one of taking office - what is happening now warrants a specific response, Ardern says.

She says the government has been working on additional policy over the past week, but says current transport projects and legislative changes - expanding public transport, and making public transport cheaper, and supporting fuel-efficient, hybrid or electric vehicles - must continue.

"This must continue and I'm signalling today that you will see in the Budget in May greater investment in this area through the climate emergency response fund."

Finance Minister Grant Robertson says the fuel excise change will come into force from 11.59pm tonight, and it will be reviewed before the three months is up.

"We cannot influence the global oil price and so therefore if we want to relieve some pain at the pump we need to look at the things we can control."

Mobil announced it would make the changes immediately.

Petrol prices are expected to continue to rise Robertson says, and the government will also outline over the coming days the means by which the change will be reversed, but it is likely to be gradual.

It's possible changes to road user charges could include a change to legislation. The three-month period for road user charges would begin from whenever the order comes into effect, he says.

Local authorities in practice set public transport fares, but Robertson says they will be reimbursed. He says the government is unable to set fare reductions but he is confident councils will "welcome this change and implement it speedily".

Fuel excise goes directly into the National land transport fund, which pays for roads, public transport and walking and cycling infrastructure across New Zealand. Robertson says this work cannot afford to be delayed so the fund will be topped up for the expected loss of revenue. This is expected to be $350 million.

"We will be meeting the cost of this through savings and reprioritisation from the Covid response and recovery fund, in particular the reduction in costs related to MIQ."

The public transport fare subsidy is expected to cost between $25m and $40m, which will also be met from the Covid fund. Because it is a reprioritisation from the existing fund, it is already factored into the Budget forecast so can be met without increasing debt.

Robertson says the situation highlights the shift to decarbonising and the importance of support for those most affected by cost-of-living increases, he says.

Energy Minister Megan Woods says she has been speaking to fuel company chief executives and most are indicating they are ready to reduce the price of petrol from midnight tonight.

She says the government wants clear evidence that the 25 cent a litre reduction in fuel excise duty is passed on to consumers and not absorbed into fuel company profits.

She was outlining this expectation to all companies and is seeking daily information disclosure on their rolling seven-day average fuel margins to monitor industry profits.

She intends this information to be publicly available and the companies have indicated they are willing to do this.

Ardern says the New Zealand economy overall is well positioned to recover, and she's confident we will get through.

She agrees the cost of living now "represents a crisis for many families, absolutely".

Asked why it's taken so long to admit we have a cost of living crisis, Ardern says she has "always acknowledged that families have been experiencing pain as a result of the cost of living".

She says after three months, the government will assess where prices are, "and then we'll ease off, so we will be careful to make sure that we don't have a jolt at the pump for families".

Mobil cuts prices immediately

The petrol company Mobil says it's cutting prices immediately following the government's announcement.

The price cuts would be across all grades of petrol, Mobil lead country manager Andrew McNaught said in a statement.

"Our product costs have risen significantly from the middle of December, and continue to rise. These costs on average have more than doubled since the beginning of December, and have increased more than 50 percent in the last two weeks," McNaught said.

Changes apply to stations where Mobil sets the price of the petrol.

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