Friday, June 30, 2023

John MacDonald: Now is not the time to be scrapping the fuel discount

The way things are going, I’ll be paying nearly $15 to fill the tank up.

That’s the tank in the scooter, by the way. And, if I ride it every work day, it’ll be about a week-and-a-half before I need to fill it up again.

Different story, of course, with our cars. Especially after midnight tonight when the Government’s fuel tax discount comes to an end.

And so, tomorrow, we’ll be paying 29 cents more per litre - 25 cents for the fuel tax and about 4 cents more in GST.

Economist Brad Olsen thinks the fuel tax discount is "dumb economic policy".

His big criticism is that it hasn’t been targeted and it’s just another one of these one-size-fits-all approaches that the Government likes. He also says it’s cost the country about $2 billion in lost revenue for the Government.

But, despite all that, I disagree. If you want to find something that pretty much everyone is impacted by, it has to be the cost of fuel.

The price of fuel goes up - the more expensive it is to transport products around the place. Food, manufactured items - you name it.

If it has to be put on the back of a truck to get from the maker to the buyer, then that gets passed on, doesn’t it?

Do you really think Mainfreight, for example, is going to suck it up and pay extra for fuel without trying to cover that extra cost? Of course not!

Road user charges are also going up at midnight. There’s another cost that will be passed-on to consumers. You and me.

So, whether you own a vehicle or not, life is about to get more expensive. Which, to me, shows exactly why the fuel discount wasn’t a dumb idea.

As for the Government’s timing - I don’t think you could pick a worse time to be scrapping the discount.

Because, be honest, are you really feeling any better-off financially than you did when this discount first came in, in March last year? I bet you aren’t.

In fact, I’d put money on you feeling less well-off than you did in March last year. So higher fuel prices from midnight tonight are really going to hurt.

Especially for low income families who, as Brad Olsen himself says, spend a greater proportion of their income on fuel than everyone else.

Which is something budgeting services boss Lara Dolan is concerned about. She works with families who spend between 10 and 15 percent of their weekly income on fuel and transport.

She says any additional increase is going to make their lives even worse.

So I don’t think it was a dumb policy. And, in fact, I think the Government should be sticking with it. Because the middle of winter when the cost-of-living is going through the roof is nowhere near the right time to be adding more expense to our lives.

John MacDonald is the Canterbury Mornings host on Newstalk ZB Christchurch. This article was first published HERE

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