Should New Zealand follow Australia’s lead on the fuel crisis?

Source: Radio New Zealand

Analysis – Labour says it would be at least investigating following Australia’s lead on the fuel crisis if it were in power, but the circumstances in each country are quite different.

Regardless of whether the government could or should be doing more, it is important to understand the different circumstances and how that affects the response.

Hipkins’ criticisms

Speaking to reporters on Wednesday, Labour leader Chris Hipkins said if he was in power he would be seeking advice on responses already enacted in other countries.

The government should be considering support for diesel users, he said, as well as support for foodbanks and the most vulnerable families; and in the long term, support to keep other families from reaching that point.

He was careful, however, to avoid pitching those solutions as election policy.

“We don’t have access to that advice right at the moment, but were we in government that is the sort of advice that we would be asking for,” he said.

Later in the day, following Prime Minister Christopher Luxon’s media conference on the latest fuel supplies data, Hipkins issued a press release criticising the government for failing to explain the details of fuel rationing that would kick in under higher phases of the national fuel plan.

With a subject line saying the government was “asleep at the wheel”, he said New Zealanders “deserve to know what the plan is, but two months into this conflict, there isn’t one”.

“This is the second update in a week showing New Zealand’s supply of petrol, diesel, and jet fuel have all gone down. Most alarming, there’s now less than three weeks of diesel in the country, which is critical for the economy,” he said.

“Dealing with the fuel crisis should be this Government’s top priority. Instead, they’re sitting back and hoping for the best. Hope is not a plan, and it won’t keep fuel flowing for households and businesses.

“Other countries are already acting decisively. In Australia, they’re pulling out all the stops. Our government needs to step up.”

Australia’s approach

Australia’s Labor government has taken far more extreme measures in response to the fuel crisis than New Zealand has to date.

However, it should be noted Australia also started with a worse supply problem, and a stronger economy – making those interventions more affordable and more urgent.

Australia is at the second point of escalation in its four-point fuel plan, with reports of hundreds of service stations running out of at least one type of fuel every day since late March, and at least six fuel shipments having been deferred or cancelled.

The federal government has already dipped into its emergency national reserve, releasing about five days worth of diesel.

The situation is bad enough that Western Australia has also purchased its own strategic reserve of 4 million litres of diesel owned by the state to address the acute fuel shortages there – though the state’s opposition leader has warned that would last just six hours.

The federal government has also halved fuel excise for three months, reducing tax on fuel by 26.3 cents per litre, while states have also pitched in – shaving off an extra 5.7 cents.

That makes fuel cheaper for consumers and can curb inflationary pressure, but the cheaper prices also mean they are less incentivised to try to save on fuel than they would be otherwise.

Another support measure in Australia is a three-month elimination of Road-User Charges (RUCs) for heavy vehicles.

In New Zealand, diesel vehicles, EVs and hybrids all pay RUCs per kilometre and according to weight. Petrol vehicles are taxed at the pump through excise, but diesel is not.

With diesel costs traditionally being lower than petrol costs, this seemed fair – but the fuel crisis has led to diesel prices overtaking those for petrol.

Electric vehicles had been exempt for several years to encourage uptake, but were brought into the RUC scheme so all drivers would be contributing to transport costs. The government plans to eventually scrap petrol excise entirely in favour of universal RUCs, but that may take a while.

Finance Minister Nicola Willis has ruled out either cutting excise taxes or broad reductions or exemptions for RUCs, saying these did not fit the government’s self-imposed criteria for any supports during the crisis of being targeted, timely and temporary – a recommendation that came from reviews in the wake of the Covid-19 response.

She said those approaches were likely to benefit those on higher incomes more.

However, the government does appear likely to match the moves taken by the state of South Australia to allow heavy vehicles to carry more.

After the government consulted on interventions suggested by the public and industry, the Ministry of Regulation is looking at regulatory changes it can make – and Luxon on Wednesday confirmed that would include “common-sense things like allowing heavy vehicles to carry heavier loads”.

Two Australian states have also offered free public transport, another measure both Labour and the Greens have urged the government to look into – but which has also been rejected as untargeted.

Calls from the Greens to invest in better, more effective bus networks have also gone so far unheeded.

To date, support measures have largely been restricted to a $50-a-week boost to the in-work tax credit, and a 30 percent increase to mileage rates for home and community support workers.

However, more than half of families in material harship will not benefit from the tax credit, and support workers have complained the mileage rate increase is “almost like a joke”.

The Budget on 28 May could include some kind of relief, but even before the Iran conflict Willis was warning there would be “no splashing the cash”.

With the measures it has taken already eating into the operating allowance, there will be little room left for new spending.

Sign up for Ngā Pitopito Kōrero, a daily newsletter curated by our editors and delivered straight to your inbox every weekday.

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand