How will a cut in fuel taxes impact Kiwis amid Russia-Ukraine war?

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How will a cut in fuel taxes impact Kiwis amid Russia-Ukraine war?

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 How will a cut in fuel taxes impact Kiwis amid Russia-Ukraine war?
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Highlights 

  • The NZ government will slash fuel taxes by 25 cents per litre from Monday midnight.
  • The Government will also cut public transport fares by 50% from 1 April.
  • Ardern has planned a gradual phase-down of petrol prices in NZ in line with global oil prices.

The NZ government has announced that it would slash fuel taxes by 25cents per litre from Monday midnight and cut public transport fares by 50% from 1 April. Motorists will see the tax and fare cut for 3 months.

Petrol prices had risen to NZ$3 in most of the regions in NZ.

The move comes as NZ PM Jacinda Ardern faces pressure over the high cost of living for Kiwis. Ardern stated that prices for all 3 types of fuels increased to the highest amount on record last week, impacting Kiwi households significantly. She called the present situation a global energy crisis that has come due to Russia’s invasion of Ukraine.

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Finance Minister Grant Robertson stated that lower public transport fares would give some relief to Kiwi families that are facing increased costs. The move will cost $350 million in fuel taxes and $24-40 million in public transport costs. These cost reductions are likely to be met by reprioritised spending from the COVID-19 response fund.

Also Read: Will NZ economy be insulated from impact of Ukraine war?

The NZ Government collects 70 cents per litre in fixed excise while Auckland motorists paid an extra 10 cents. Customers paid 15% GST on top of this.

Russia-Ukraine clash to be blamed for a hike in petrol prices, says AA

Automobile Association (AA) policy advisor Terry Collins stated that though NZ did not depend on Russian oil, global scarcities could increase pump prices and impact Kiwis. The excise duty and taxes paid by Kiwis on fuel make up for 45% of the cost, adding to a rise in pump prices.

Also Read: NZ consumer confidence dips to lowest, will it bounce back soon?

Petrol companies cannot be blamed for the price hike and have not increased their profit margins beyond the historical norm, as per Collins. He stated oil availability, its price and the Russia-Ukraine war are the main factors that are creating problems.

Government to review situation in few months

Some Kiwis may be fortunate to not get impacted much amid a WFH environment, others may have to look for other options like wage hikes or getting compensation for the same.

Supply chain disruptions leading to high inflation and destabilisation of global energy markets due to the Russia-Ukraine clash continue to affect the market overall. NZ is planning a gradual phase down the line with stabilising and diminishing global oil prices to keep pressure away from families.

DO READ: FRE & AIA: 2 transportation stocks to watch as petrol gets pricier

Over 1 million people will get the winter energy payment on 1 May. The move is taken to give Kiwis more energy security in the long term. She also discussed changes to Working for Families and the Family Tax Credit, where 60% of families will get a minimum of $20 more per week.

(NOTE: Currency is reported in NZ Dollar unless stated otherwise)

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