While the cost of living and climate crises continue to bite and New Zealand’s transport infrastructure falls into disrepair, the left and right are both criticising Labour’s fourth extension to its inflationary fuel tax cut, calling it “dumb, election year populism”
Introduced in March 2022 as a temporary three-month measure, the Government has once again extended its “cost of living support” until 30 June 2023 as the cost of living crisis continues. Included in this support package is a 25 cents per litre petrol excise duty cut, discount to Road User Charges and half price public transport fares.
While the action on public transport has been welcomed by other parties, they have been less supportive of the policy’s other measures.
National would not go as far as opposing the policy but did wonder where the money would come from after Finance Minister Grant Robertson said just last month that an extension to the policy would be unaffordable.
The ACT party was more upfront about its views on the policy, with Leader David Seymour calling it “totally incoherent”.
“Reducing revenue while spending up large is Liz Truss-style economics.
“Petrol taxes are hypothecated for road building and maintenance. Anyone who has spent more than a few hours on our roads over the summer will have noticed they’re in desperate need of repair. When petrol taxes get cut the money has to come from somewhere else.
“The Government has decided that all taxpayers will pay for motorists to have temporarily cheaper petrol.”
Fuel prices are now well below where they were a year ago, Seymour says.
“Now is the time to rip the band aid off.”
READ MORE: Fuel tax cut a wasted opportunity
Economist Brad Olsen says that extending the fuel subsidy gives three times as much help to the top income decile compared to the bottom income decile.
“It’s terribly regressive,” Seymour says.
The Green Party agrees, with co-leader and climate change spokesperson James Shaw saying subsidising petrol for everyone, including the highest income earners, is not the answer.
“A fuel tax cut is very poorly targeted. The impact of inflation is not felt equally. It is people living on the lowest incomes who are hit the hardest. And yet, it is the top earners who benefit most from petrol subsidies.”
Both parties had other solutions in mind.
ACT proposes a return of the proceeds of the Emissions Trading Scheme to citizens, which would give families a sizeable refund without reducing a cent from the roading budget.
“ACT’s policy has the advantage of being sustainable, while maintaining the incentive to emit less carbon,” Seymour says.
“A family that used its carbon tax refund for greener solutions would effectively be subsidised by those who buy petrol.”
Shaw wants to provide direct payments to low-income households by increasing Working for Families and the Accommodation Supplement.
Either way, the subsidy is a poor use of the transport budget, he says.
“The money spent on a fuel tax cut would be far better spent making half-price public transport permanent, along with sustained and permanent investment in more reliable and efficient public transport infrastructure.
“Subsidising fuel costs more than $1.3 billion per year. With Auckland’s transport infrastructure damaged so badly from climate-fuelled flooding, now is not the time to be short-changing our transport budget. Auckland has just experienced first-hand the devastating impacts of climate change. It just doesn’t make sense to be extending subsidies for fossil fuels.”
