Fuel tax relief needs to stay

We’ll all pay the price if the cost of fuel is allowed to spike in the new year, writes Nick Leggett.

Most Kiwis don’t realise it but, come January 31, the cost to fill their car will go up $10 to $15 overnight, the price of catching a bus or a train will double, and road user charges will increase 36% – at a time when inflation is projected to rise again.

This is because the Government’s transport support package is due to end on this date. It will be the icing on the cake we don’t need as we head into 2023.

The official cash rate is expected to rise to 5.25%, pushing mortgage rates as high as 7.5%. Inflation could rise to 7.5%, and then remain around 7% well into 2023. The Reserve Bank is forecasting a year-long recession in 2023. Unemployment could shoot up as high as 4.5%.

There’s a lot of human pain behind those numbers. The Government has clearly got the message. Grant Robertson has promised an update before Christmas on whether the package will be extended or not.

Now is not the time to end this support. It eases the burden – either directly or indirectly – on every household at a time when people need all the help they can get.

When removed, fuel prices will shoot up overnight, along with the cost of everything delivered by a truck. With 93% of our freight delivered on a truck, that’s basically everything we consume and purchase.

The view of the road transport sector is that fuel price reductions and the public transport subsidy need to remain until inflation is at 6% or lower.

It’s not just families who have been saving 25c a litre at the pump, or those using the half-price public transport, who will feel the difference overnight. It’s the knock-on effects of higher fuel on the cost of everything we buy. Removing the rebate now will hurt in the pocket, even if all you do is walk to the supermarket to buy groceries.

Just look at the immediate extra impact if the road user charge (RUC) reduction is lifted on January 31. For a 45-plus-tonne truck and trailer travelling 100,000km, the restoration of the full RUC will add $21,000 in 2023. That will go straight on to the cost of whatever is being carried by the truck.

Alight diesel vehicle like a ute or SUV, now paying about $686 in RUCs, will pay $1064 in 2023. For a courier paying about $2940 now, the cost will go up to $4560. If you’re planning to head away in the motorhome, expect your RUC costs to go from $520 to $820 overnight. That’s on top of your increased diesel prices.

Small delivery trucks – the types that deliver to your home from the supermarkets – will pay more immediately. From $3210 now, back up to $5010.

The reason that led to the fuel rebate package still exists. High prices that hurt families and businesses. So why not keep it going at least until inflation is under control?

The Government can clear this up today, by letting us know immediately if it plans to extend the package. It undermines confidence to draw this decision out. Extending the package will cost more, but the increased GST raised from rising fuel costs over the past year will offset a good proportion of this package.

Billions of dollars is being found to restructure health, Three Waters and public broadcasting without any real case made that the waka will go faster as a result.

There are many big unknowns in 2023. How quickly inflation will come down. Whether high interest rates will force a recession. And how long Russia’s war on Ukraine continues.

It’s also an election year. Extending the fuel rebate is a real and direct way in which the Government can ease cost of living pressure for everyone. Otherwise, the impact will be felt at the pump, in the supermarket, and on buses and trains.