Should taxpayer money fund fuel tax cuts, road user charges, half-price public transport?

On Monday morning, the Tova team looked at two sides of the Government’s fuel extension and whether or not it was the right decision, and the right use of taxpayer money.

Finance minister Grant Robertson says extending cuts to fuel taxes, road user charges, and half-price public transport fares for another five months will give households certainty ‘in the face of volatile prices at the pump’. 

There’s no doubt it will help households hammered by the cost of living crisis but there are mixed views on whether the petrol tax cut is the best use of Government money.

While the AA’s Principal Policy Adviser, Terry Collins, isn't sure it was necessary for the Government to extend the 25-cent petrol tax cut, he told Tova they probably did it because of the inflationary effect the high price of fuel and diesel has had on a variety of goods.

"Everything that comes from the farm to the factories to the store all requires diesel to operate it and that was just adding to the cost of everything," Collins said.

"I think they just tackled that root cause of inflation by maintaining the reduction in fuel excise duty and the road user charges."

Collins told Tova O'Brien the question of whether the money would have been 'better spent' on making half-priced public transport permanent is 'moot'.

"Not everybody has access to public transport.

"By reducing the duty off the petrol and reducing the road user charges, that has appeal to all motorists, the use of public transport is reduced to one sector."

While he admitted this may be encouraging Kiwis to stay in their cars, the lack of effective public transport throughout the country means a large portion of those living in rural areas would feel the brunt of expensive fuel and on-road costs.

"There are not good public transport options available for our rural sector," he said.

"They are limited to our urban areas and even then there are some difficulties around that now."

Collins said the question of how long the Government can continue to extend fuel tax cuts and how they might re-introduce it without causing masses rushing to pumps prior to this, is a difficult one.

"The simplicity of the road user charges in that excise makes it very attractive, I don't think long term it's a good idea to reduce it permanently."

Green Party’s spokesperson for transport, Julie-Anne Genter, told O'Brien that keeping the subsidy is a very short-term solution when New Zealand needs to be dealing with medium and long-term problems.

"We are very happy with the discounts to public transport," Genter said.

"That's been very popular and effective and we were going further and saying just start making public transport free which is much less costly than the costs to petrol tax."

She told O'Brien that subsidising petrol and diesel tax is counter-productive given the need to combat the climate crisis and they would have preferred the Government look at direct cash payments which aren't a subsidy to fossil fuel use.

Genter worries if the Government continues to deal with the short-term problems, the medium and long-term problems will never be addressed.

"Ultimately we need to be investing in busses, trains, ferries that make it possible for people to get around and not subsidising fossil fuel use in 2022."

She explained the fundamental oil price is what's driving inflation and the cost of petrol, not petrol taxes and said there is every chance the Government are not going to be able to give people relief if petrol prices go higher.

"As long as we keep saying we need this quick fix, one more motorway, just one more petrol tax cut, we are never dealing with the medium-term issue of climate change and ultimately that's going to be really bad for people on a low income."

Genter told O'Brien that while the best time to invest in public transport was 20 years ago the next best time is today.

"What we are seeing now is the result of successive Governments putting insufficient investment into public transport and sustainable transport options."

She worries if investment into sustainable public transport doesn't start soon, New Zealand may never have effective alternatives.

Listen to the full two sides between AA's Principal Policy Advisor Terry Collins and Green Party's spokesperson for transport Julie-Anne Genter and Tova above.

You can also download the full interview on the Tova podcast, and listen on the go. Check it out on the rova app or wherever you get your podcasts.