Petrol price rises to balance books
Motorists will be stung with a 9-cents-a-litre petrol tax increase over the next three years to help the Government meet its promise of a return to Budget surpluses.
Just hours before Treasury revealed a wafer-thin forecast surplus of $66 million for 2014-15 - the year the Government has promised to have its books back in the black - Transport Minister Gerry Brownlee announced hikes in excise on petrol and road-user charges.
Finance Minister Bill English conceded he would have posted a deficit without the price rise, forecast to rake in more than $300m in 2014-15.
"Without the changes in transport, we would have fallen short of our target," he said.
The move is despite Prime Minister John Key's claim earlier this month that the Government would not be "buggerising around" to ensure a forecast surplus.
The first 3c rise will cut in next July, with 3c rises in each of the next two years. Cabinet approved the rise on December 3.
The Government takes duty of 50.5c on a litre of 91 unleaded petrol. That does not include ACC, GST and other charges.
But, despite the late excise move, Mr English said the Government was not totally wedded to its surplus target.
"I wouldn't regard it as slavish at all. Slavish is what you see in other countries where there is all sorts of pushing and shoving of the numbers to try and get there."
The Treasury's half-year economic and fiscal update forecast a deficit in the current financial year of $7.3 billion, down from $7.9b picked in the May Budget.
But it has cut growth forecasts from 3.4 per cent to 2.9 per cent next year and down from an average 3 per cent to 2.5 per cent over the next five years. That is still better than the OECD average of 1.5 per cent. The Treasury has warned the risks to its forecasts are more negative than positive.
However, it is forecasting unemployment to fall below 6 per cent by 2015 and to 5.1 per cent by 2017, which, along with a forecast 131,000 extra jobs by March 2016, will help lower the welfare bill.
Immigration is tipped to turn around from a net loss of 3000 last year to a net gain of 12,000 by 2015.
Mr English said the main cause of that would be the narrowing gap between growth in New Zealand and Australia, although it would remain slightly stronger there.
Meanwhile, the cost of the Canterbury rebuild continues to climb. Treasury estimates the total capital investment needed could reach $30b, with $13b coming from the Government.
Labour finance spokesman David Parker said National was trying to focus attention on the Budget deficit. But the forecast rise in the current account deficit - the balance of New Zealand's transactions with the world - to 6.5 per cent of gross domestic product was evidence its economic plan was failing.
"Above 5 per cent of GDP is the ‘danger zone', the point at which international creditors get really worried."
The Government's Budget Policy Statement signalled further tight controls on spending to help build a "buffer" against further global shocks.
BREAKDOWN OF FUEL PRICE HIKE
The Government's 9c fuel levy hike will equate to drivers forking out for about one extra tank's worth of petrol a year.
For each of the next three years, the Government will increase the excise on petrol by 3c, meaning owners of big cars may pay about $150 a year extra in 2015. According to the AA, the average New Zealand car travels about 14,000 kilometres a year.
As the price stands now, it costs about $1840 a year to fuel a small family car such as a Toyota Corolla. After the excise rises, it will cost almost $1920.
Less fuel-efficient cars - such as a Holden Commodore V8 - currently cost almost $3600 for 14,000km of petrol. That figure would rise to about $3750.
* Examples based on the Energy Efficiency and Conservation Authority's Energywise fuel economy website.
The Dominion Post