1 Feb 2023

Chris Hipkins confirms fuel excise cut, public transport support to be extended until June

1:04 pm on 1 February 2023

Prime Minister Chris Hipkins, who is in Auckland today, has confirmed the cut to the fuel excise tax and half-price public transport will be extended until the end of June.

Half-price public transport and Road User Charge (RUC) reductions will also continue to the end of June.

"These discounts were due to be phased out in the coming months but with global inflation pressure forecast to keep our rate around the 7 percent mark for longer, it's important we keep providing support to families and businesses who need it," Hipkins said.

"This is a start - it's a meaningful step in an ongoing series of measures to help with some of the most persistent cost pressures."

The subsidies were first introduced in March last year as a temporary measure, to help New Zealanders facing rising costs due to international fuel prices which spiked after the Russian invasion of Ukraine and other inflation pressures.

Hipkins said the changes were a good candidate for early action because it was a major cost for nearly everybody and could be done quickly.

"It's also important for those experiencing the flooding here in Auckland which is putting extra stress and financial pressure on families. This policy alone won't solve the cost-of-living crisis that we face but it will make a difference and right now I know that every little bit helps."

Asked what could be done to bring down food prices, Hipkins said today's announcement would have an impact because it would stop prices rising further due to the cost off moving goods around.

Finance Minister Grant Robertson who was also at the briefing said he took seriously Hipkins' request to think about what could be done to reduce the cost of living.

"Went away with the minister of transport and others and came back to the prime minister with this proposal. It's important that we do as the prime minister's just said - deal with the here and now as well as the long term.

"When we think about what's the best thing that we can do quickly, this is it."

Robertson said sufficient funding was found to be able to afford the extension and the government would take a look through the budget process at further ways to support New Zealanders with the cost of living.

"We've got to strike a balance here ... we want to make sure that we keep the fiscal picture strong, that we support monetary policy with our fiscal policy. We also want to make sure we support New Zealand families and households to be able to take the hard edges off the cost-of-living crisis.

"Bear in mind this actually reduces the rate of CPI [the Consumer Price Index, one measure of inflation]."

Advice from government agencies has consistently urged the government to bring these subsidies to an end, and Finance Minister Grant Robertson noted in December it "wasn't sustainable to continue to subsidise the cost of petrol indefinitely for everyone".

Asked if he had "got it wrong", Robertson instead said things had changed.

"We've got an issue in the here and now. Inflation, it's steadied but it hasn't come down significantly. We know New Zealanders are facing this cost of living crisis every day, we've taken another look. We have changed our decision, we're not denying that at all but we have taken another look, and we acknowledge the circumstances New Zealanders are in and we're doing everything we can to help."

Transport Minister Michael Wood said public transport providers all welcomed the support that ha been provided and the government would be determined that people using public transport would see the effects.

The Auckland Transport board approved a 6.5 percent fare increase at their meeting in December, subject to approval by Auckland Council's council's governing body. If the increases are introduced, they are due to take effect at the end of this month.

Wood said the setting of fares at the local level was a matter for councils and local public transport authorities.

"The step that we are taking here is a really significant one and it halves the cost of what people are paying, whatever the baseline fare is."

After yesterday's Cabinet meeting where he also announced his reshuffled Cabinet, Hipkins said "the decisions we took still stand, I acknowledge that the trucking industry's been given significant notice that that was going to happen".

Auckland flooding response

Hipkins was speaking to media after further heavy rain in some areas of the city overnight. He said he was shown around the Moana-nui-a-kiwa Hub this morning and was impressed with the support it is providing to the people of South Auckland.

"It's an incredible effort and it's so heartwarming to see the community rallying around to help others."

Prime Minister Chris Hipkins, centre, Emergency Management Minister Kieran McAnulty, left, and Finance Minister Grant Robertson at the Moana Nui A Kiwa Hub, for the south Auckland response to the flooding, in Māngere, 1 Febraury 2023.

Kieran McAnulty, left, Chris Hipkins, centre, and Grant Robertson, right, at the Moana-nui-a-kiwa Hub which they visited before the briefing. Photo: RNZ / Samuel Rillstone

He acknowledged the volunteers and workers across Auckland and New Zealand who have shown care to people who "in many instances have lost most of their stuff, and are in desperate need".

He says the events of the last week highlight the importance of his decision to refocus his new Cabinet on the cost of living, which he signalled when he was named Jacinda Ardern's successor as Prime Minister.

"It's been a lot. And it's been a lot on top of the last few years - first with Covid and then with the economic tail that was caused by that - so I get that households are thinking hard about their budgets and businesses about their costs."

He confirmed the government will extend the 25-cent cut to petrol excise, to 30 June, saying it "reduces" the cost of an average 60-litre tank of petrol by $17.25. With the subsidy already in place however, it's not so much a reduction as it is a refusal to see those costs go back up.

Wood thanked the city's bus drivers "who have gone over and above to keep people connected through what's been a crisis period for our city. They've done an extraordinary job under real pressure as they have for the past couple of years".

Hipkins said insurance companies were cooperating well together and working to provide timely resolutions for people, and he and Robertson had both been in contact with the companies to ensure they were providing as timely a response as possible.

"I'm never in the rule-in, rule-out, forever for all time category [on] just about anything, but actually I think right now the focus has to be on making sure New Zealanders can get through the economic situation we're in."

Robertson said the Auckland flooding was probably the most significant non-earthquake event New Zealand had needed to deal with in terms of insurance, and the newer process that saw property owners dealing first with insurers who then deal with EQC is working very well.

"While the EQC fund is one element, as I say governments always have topped that up if they need to do that. Our job is to look after people, help people recover. Insurance is a very important part of that."

As part of the flooding response, schools were shut down for a week to avoid having too much traffic on the roads.

Hipkins said that would be kept under review on a daily basis, but likening it to a Covid lockdown was "simplistic and not really appropriate in the circumstances".

He said right now the emergency response was still going on, and the time would come for going back and ensuring a thorough review at all levels is done afterwards.

"Now is not the time."

Trucking industry and public transport campaigners welcome changes

Road freight transport industry association Ia Ara Aotearoa Transporting New Zealand's chief executive Nick Leggett told Midday Report the road user charge discount was particularly important, because the cost of transport affects everything from groceries to medical supplies.

"That will assist easing the burden on the trucking industry which carries 93 percent of freight but also all diesel vehicle owners.

"We've certainly supported the total package. It was actually RUC that was the least likely to be discounted by the government because of course that came off at midnight last night.

He said how roads were funded was a different matter, and he was sure it would come up in the coming election this year.

"For now, we know that the cost of transport impacts everything and the cost of groceries, the cost of medical supplies. We're very pleased that we're not going to see RUC added back on at a time when New Zealanders and the trucking industry can least afford it."

Free Fares Coalition spokesperson Kate Day said they were pleased to see the extension for public transport, but wanted the government to go further and make the half-price fare policy permanent.

"A really great way to help people see family more often, access health and jobs and education opportunities they wouldn't otherwise be able to afford to while also bringing down our carbon emissions - the policy's been shown to get people switching out of private cars and into public transport which is exactly what we need to be doing in a climate emergency.

"Research by Waka Kotahi shows that of people using public transport a third were using it more often because of the subsidy and when people are switching out of other forms of transport that was around 7 percent with half of that coming from people in cars and taxis."

She said it was definitely something that helped all New Zealanders including those on lower incomes.

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