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Fuel tax cuts way too tentative

14 March 2022

by Chris Leitch, Leader

The reduction in fuel taxes announced by the government today are welcome but are an incredibly tentative step given the enormous increase in fuel prices in the last few weeks due to the Russia - Ukraine war and general inflation.

The government could easily have doubled the cuts it has made if it had wanted to make a meaningful dent in the extra costs being faced by fuel users rather than just looking like it had.

More importantly Road User Charges for transport operators should have been cut by substantially more because these feed into the price of every item on shop shelves.

It should have stopped charging Road User Charges from midnight for all commercial vehicles and agricultural contractors and refunded all Road User Charges for those vehicles unused at that point.

It could also have provided a rebate scheme for off road farm machinery and a complete removal of petrol taxes for couriers and taxis.

To justify that treatment a regulatory regime to ensure those sectors held their prices, or even reduced them would be required.

If it was serious about getting commuters out of their cars and onto public transport there has never been a better time to do it than now.

Consequently it should have made public transport completely fare free.

The cuts announced today are only costing $350 million, and that's peanuts in comparison to the $55 billion that the Reserve Bank has created in the last 2 years.

The government could have used that credit creation capability to fund these much bolder cost reduction moves.

All up the cuts we’re suggesting may have cost around $1 billion which could have been funded from the Reserve Bank and paid to the Land Transport Fund.

They would have made a substantial difference to the cost of transporting goods to wholesalers and retailers, easing the pain for motorists and keeping prices on shop shelves down.