- Fuel prices have skyrocketed in the wake of the US-Israel attack on Iran, reaching $4 a litre in some NZ locations.
- Government officials warn prices likely to stay high for another 100 days, even if the war ends today.
- The relief package targets low- to middle-income working families and will be temporary.
- The government has to date insisted NZ still has enough fuel, with more on the way.
- NZ has not committed to helping secure the Strait of Hormuz, despite NATO suggesting it has.
- The Reserve Bank governor is warning of higher inflation and weaker economic growth.
Almost 150,000 families will receive an extra $50 a week for up to a year to help ease the pain from soaring petrol prices driven up by the war in the Middle East.
Prime Minister Christopher Luxon and Finance Minister Nicola Willis this afternoon revealed details of a support package aimed at helping New Zealanders through the fuel cost crisis.
The United States-Israel attack on Iran, which began on February 28 this year, has led to war in the Middle East, which has effectively closed vital shipping lane the Strait of Hormuz, meaning oil prices are volatile.
Willis said relief would come through a boost to the in-work tax credit - part of the Working for Families scheme.
That means only low-to-middle-income workers who have children are eligible. It excludes beneficiaries, superannuitants and those without children.
"The policy is carefully targeted to families in the squeezed middle - parents who are working hard for a living, are not eligible for main benefits, and yet have modest household incomes with which to support their children," Willis said.
"We know these families will be hit particularly hard by the global fuel-price shock. We are delivering them timely relief."
The temporary increase would last for as long as one year, or until the price of 91 octane petrol dropped below $3 a litre for four weeks in a row, she said.
About 143,000 households would start seeing the full benefit in their bank accounts from April 7, if they were paid weekly, or April 14, if paid fortnightly. A further 14,000 households would receive the support but at a lesser rate.
In the current tax year, the cut-off for receiving the tax credit was about $89,000 of annual household income for a family with one child, $112,000 for a family with two children and $135,000 for a family with three children.
The policy was estimated to cost $373 million if it ran for a full year, or less if it did not, Willis said.
The cost would come out of the government's operating allowance for this year's Budget, meaning it had already been factored into Treasury's fiscal forecast, she said.
"Funding the policy this way will not add to forecast debt or inflationary pressures. It is consistent with the government's fiscal strategy which seeks to balance the books and bend the debt curve down."
Willis said the government could not relieve price pressures for all businesses and families who were feeling price pressures. She said "large, untargeted government spending programmes" could make the situation worse by driving up inflation and debt.
"The government is conscious that a careless response to this crisis could have long-lasting and painful consequences. We saw this in the aftermath of Covid, where excessive spending more than doubled debt and sent inflation soaring and mortgage rates skyrocketing. Kiwis are still grappling with the effects of that today."
The government would introduce an Amendment Paper to the Taxation Bill, currently before Parliament, so the changes could be enacted from April 1.
Willis acknowledged that some families would not consider $50 a week enough to ease the pain.
"But what I would say to them is we are doing what we can do responsibly - protecting you now, but also protecting the economic future that you and your kids are depending on us for… They would not thank me if I did so much spending that inflation went higher, because that would affect them every time they pay for anything. That would lead to price increases more broadly across the economy."
While families that missed out would also have welcomed support, Willis said the government was "limited by the big increase in debt that occurred in the aftermath of Covid".
"If it's not you getting the support today, just know it might be your friend, it might be your family member, it might be the person serving you at the cafe today. Working families who cannot easily avoid higher fuel costs."
"I fully acknowledge that there are people who will be feeling the pain at the pump that this package won't provide direct support to ... but our commitment to those people is first we have to do no harm, and if we go on a major spend-up trying to assist every New Zealander impacted by this price shock, we will drive up inflation, we will drive up debt, we will damage the economy."
Luxon and Willis said for beneficiaries, there would be usual increases on April 1 which "working families" did not automatically get. "And I'd also note, working families face the obligation to get to and from work each day. Beneficiaries do not face that obligation," Willis said.
The government would strive to keep delivering effective public services, she said, and was "prioritising the things that New Zealanders would expect us to prioritise."
"Operations in our hospitals, frontline police on the beat, ensuring that our schools have the resources they need to teach our kids well. Those will remain priorities, but as any prudent government should do in a time like this, we will also be making sure that there is not wasteful or inefficient spending happening in other areas of government."
Later this week, Willis was expected to give an update on the national fuel plan and what the various alert levels would practically mean for New Zealanders.
Public transport already subsidised - Willis
Free public transport, as the Green Party has asked for, will play a "very important role" over the coming months, Willis said.
"That's why yesterday the Minister of Transport met with the public transport authorities to make sure they have enough capacity so that people can keep making that choice. He also was assured they're not intending to increase fares in any way.
"The government provides generous subsidies in the order of hundreds of millions of dollars a year for public transport. And our commitment is that we will make sure public transport remains an option for New Zealanders during this crisis."
People in rural areas who do not have access to public transport would be eligible for the tax credit.
"Rural communities typically in doing their work, whether that's running harvesting machine or getting to and from work, do tend to use a lot of diesel. What we have been told to expect is that that will mean that for some of those rural contracting businesses, they will likely start charging their customers more for those services, imposing fuel surcharges and the like.
"What I have been mindful of is that while in time farmers may have to meet those greater costs, right now for some contractors and others they might face an immediate cash pressure.
"I have rung each of the chief executives of the major commercial banks in New Zealand to seek assurance that at a time like this they will stand alongside their customers to ensure they can be helped through this period. They have given me that assurance and I think it's really important that if rural contracting businesses or others are feeling immediate challenges, that they do know they can talk to their bank and that their bank will work to assist them where possible."
Willis said the same went for shift workers who might not have good public transport available.
Fuel supply first priority: Luxon
Luxon said the world was "facing the greatest disruption to fuel supply, I think, in a generation".
"New Zealand is in a good position with healthy stocks of fuel in the country and more on the way, and the market is operating as normal. But of course, we are actively planning for a scenario where obtaining future supply becomes more difficult.
"Hundreds of thousands of Kiwi jobs and incomes rely on fuel. Our entire economy relies on fuel. A shortage of fuel supply could affect thousands of livelihoods, so that is why we are continuing to ensure that we have sufficient supply, and that must be our first priority.
"At the same time, we are conscious that the increasing price at the pump is eating into household budgets."
The Prime Minister said it had been a tough few years, with the Covid-19 pandemic, inflation, recession, tariffs and now a fuel crisis.
"Higher fuel prices are a direct result of the conflict in the Middle East, which New Zealand has no part of or control of. But because of those higher prices, many Kiwis are making sacrifices and changes to their household budgets in order to get through this period.
"Some people are choosing to take public transport instead of driving their car. Others are having to put off other purchases in order to prioritise getting petrol in the car so that they can get their kids to school.
"Good government means looking after your people, and that means two things. One is recognising when government support is required to help people when times are tough. And two is ensuring that we protect New Zealand's economic future so that our kids and our grandkids have higher incomes and better job opportunities and don't have to pay for mountains and mountains of government debt.
"So we're very conscious of bending the debt curve down and making spending decisions that are affordable for taxpayers now and also into the long term.
"It is a hard reality that we cannot alleviate the pressure of rising fuel costs for everyone. And as we have learned from the Covid response, seeking to do so would do more damage to our economy, which has just started growing again."
Singapore to keep sending fuel
Luxon said he spoke to Singapore Prime Minister Lawrence Wong overnight about maintaining fuel supplies and the two nations have an informal agreement.
He said that ensures that, in a crisis, Singapore would continue fuel and pharmaceutical shipments to New Zealand, while New Zealand would provide food to Singapore.
New Zealand gets 31% of its fuel from Singapore, he said.
- additional reporting by Allied Media
