'One more hurdle' for struggling people

The end of the fuel tax cut after more than a year will be "one more hurdle" for people struggling to make ends meet, and the impact may extend beyond the pump.

Petrol prices are set to jump by about 29c a litre from tomorrow following the end of the Government’s subsidy on petrol excise duty and road user charges.

Automobile Association Otago chairman Malcolm Budd said after more than a year of lower fuel costs the sudden rise could be difficult to people to adjust to.

It would have been better if the end of the subsidy had been staggered over a period of time, so the "massive increase" would not have such an impact on their income.

The Government has indicated the fuel tax cut will be eased out gradually to avoid more price...
Petrol prices are set to jump by about 29c a litre. Photo: RNZ

However, the Government had put a lot of money into the subsidy, which was introduced in March last year and continued as part of the Government’s cost of living relief package, and it was not intended to be there for ever.

"The subsidy has certainly been good for motorists, but people did have to expect it would end," he said.

The 25c-per-litre discount on petrol will be added at the pump, and by the time GST is added the reinstated tax will add nearly 29c per litre to the price.

Road user charges will also revert to full price after a 36% reduction, as will public transport for users aged over 25.

The fuel discounts were initially introduced after Russia’s invasion of Ukraine led to a spike in fuel prices.

University of Otago department of economics senior lecturer Dr Murat Ungor said the the good news was prices were now more stable and were unlikely to spike as high as they had done last year unless there was another international crisis.

"I do not expect fuel to go back up to $3 unless something happens internationally."

"I’m not expecting additional bad news from the international market."

The subsidies had provided people with short term relief, but now there would be additional pressure on inflation, he said.

The return of full-cost road user charges might lead to price increases across many goods and services because of higher freight and transport costs.

Food costs in particular could be set to rise.

It was not clear how extensive this would be, but it required a "careful and cautious" approach.

Presbyterian Support Otago Family Works practice manager Deb Gelling said the escalating cost of living had serious implications for people.

"The removal of the fuel subsidy will only exacerbate the situation as these people are already struggling to pay their bills, alongside the challenge of paying for food, and other vehicle costs," she said.

"Our financial mentors will continue to work with our clients, but the removal of the fuel subsidy is just one more hurdle for struggling whānau to try to overcome in these very difficult times."

The Society of St Vincent de Paul pastoral co-ordinator Sarah Strang said the fuel subsidies had been "one less stress" as people struggled with the cost of living.

Fuel was a big issue, and it was becoming extremely difficult for people on a low income to run a car.

The new policy for Community Services Card holders to get 50% off electronic bus tickets would provide some help, she said.