Government abolishes public transport tariffs and fuel tax


Yesterday, in the face of soaring gasoline prices the government announced it immediately reduced excise taxes on fuel by 25c per liter as well as reductions for public transport.

The government will cut 25 cents a liter of fuel for three months as part of a cost of living program aimed at providing immediate relief to Kiwi families in the face of the current global energy crisis triggered by the war in Ukraine, it said. Prime Minister Jacinda Ardern announced today.

Excise duties on fuel and road user charging stations will be cut by 25 cents each and the price of public transport will be halved as part of a package of measures to reduce cost pressure transport on middle and low income households.

“We can’t control the war in Ukraine or the continued volatility in fuel prices, but we can take steps to reduce the impact on New Zealand families,” said Jacinda Ardern.

“Just as it was our job to get New Zealand through the Covid-19 health crisis, it is also our job to put in place a plan to get us through the global energy crisis as well.

“There is no silver bullet to address the cost of living, but we have a plan and are implementing a series of measures that together will help make a difference.

“The global energy crisis has escalated rapidly, which is why the government has stepped in to reduce fuel taxes. Today’s changes will reduce the cost of filling a 40-litre tank of gas by over $11, and for a 60-litre tank by over $17.

“We are also making it cheaper for those taking a bus or train. In the long term, we need to build the resilience of our transportation system to be less vulnerable to gas price spikes, but for now, halving the cost of public transportation will provide some families with an alternative to full.

For starters, it’s great that the government is providing some relief by reducing public transport fares – and as a percentage, the fares are falling more than the price of petrol. However, the devil in the detail is that it won’t come into effect until April 1 to give local authorities time to change their systems.

Given that public transit use is down from what we had in the past and the projected cost was only $25-40 million, I wonder if they wouldn’t have had to make the decision to make the PT free. Not only would this have made it more attractive, but it would have had the added benefit that local authorities could simply turn off the ATMs immediately. This, combined with other initiatives such as allowing all-door boarding, could even help speed up the buses.

The cost of change also suggests that making TP free for everyone all year round would cost less than lowering fuel tax for just 3 months

A particular challenge in making the most of this opportunity is simply getting people to use PT again. Many city office workers continue to work from home and the government spent much of the time during lockdown last year designating public transport as something to avoid even when many other activities were allowed or encouraged . Perhaps the government and local authorities should also organize campaigns to emphasize that PT is safe to use.

One thing that caught my attention about the announcement was that during the press conference, on several occasions, the Deputy Prime Minister and Minister of Finance, Grant Robertson, implied that this tariff reduction , or something like that, could be extended or changed in this year’s budget as part of the government’s response to its emissions reduction plan.

“Furthermore, in the May budget, we will advance work to ensure that we are not at the mercy of international oil prices in the future, through increased investment from the Emergency Response Fund. These investments will bolster our plans for New Zealand to increase energy security and independence by decarbonising our transport fleet and reducing our reliance on volatile global energy markets.

As for the fuel tax cuts, to put their magnitude into perspective, the last time the rate was this low was in early 2009.

The government says this is a temporary cut and will eventually be rolled back, but probably only gradually. They also say they will supplement the National Land Transportation Fund (NLTF) which relies on fuel tax revenues to fund transportation projects.

“The estimated cost of this reduction over a three-month period is approximately $350 million for fuel tax changes. This will result in lower revenue from the National Land Transport Fund, which finances our investments in roads and other transport infrastructure. We will cover the costs through savings and reprioritization from the COVID Response and Recovery Fund. This means we can continue the government’s record investment in transport infrastructure without having to cut projects.

“We must recognize that gasoline prices are expected to continue to rise. The Russian invasion of Ukraine continues to undermine and destabilize global energy markets and, added to other inflationary pressures the world is experiencing due to supply chain disruptions from COVID, unfortunately it’s not over yet.

“That is why we are going to review the situation over the next few months. We will also describe in the coming days the means by which we will reverse the changes announced today. This is likely to be a phase of gradual decline, alongside stabilization and lower global oil prices, to keep pressure on families while recognizing the need to return to more funding stable for our transport infrastructure.

I can certainly understand why the government decided to remove fuel taxes for political reasons. However, in doing so and continuing to build a lot of infrastructure that encourages more driving, including projects funded outside of the NLTF, it sends the message that the government is still not serious about its response to climate change, and may To be more worrying still, they are still not ready to have a serious conversation with the public about the need for us to drive less – as their emissions reduction plan demands.

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