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Petrol tax hikes needed to balance Government books

Published: 10:43AM Tuesday December 18, 2012 Source: Fairfax

Filling up before hitting the road for the summer break is painful enough, but by 2015, motorists will be coughing up another nine cents a litre.

The Government is to syphon money off motorists in a bid to help get its books back in the black.

Over the next three years, petrol taxes will increase in a move designed to raise an extra $1.1 billion dollars in revenue.

More than 40% of the listed price of a litre of petrol consists of Government taxes, with the rest going on things like shipping and import margins.

Now the Government is tapping motorists for more to meet a funding shortfall in its major road building programme.

"We want to bring forward the start dates for a number of those major projects," says Finance Minister Bill English.

However, Greens transport spokesperson Julie Anne Genter said: "Actually, we should be deferring these projects and spending our transport dollar on smarter projects."

Roads of national significance

In each of the next three years, the Government will impose a three cent a litre rise to the excise tax component of petrol.

Each one cent added to the pump price of petrol adds around $15 to the running cost for the average motorist.

"The Government is keen to keep overall costs down for households and business. The cost of living, as measured by consumer inflation, is at a 13-year low and interest rates are at 50-year lows,'' Transport Minister Gerry Brownlee said.

"This announcement allows businesses and motorists to plan for the increases." he said.

Brownlee said the excise tax rise, which will be matched by higher road user charges on diesel, were required to deliver the roads of national significance (RONS), and maintain the value of the Land Transport Fund.

"These latest increases will also achieve that, and allow for continuing investment in the Government's state highway building programme and other transport projects.

Brownlee said the funding could be used towards four projects in the 2013/14 financial year, namely:

- The Rangiriri and the Tamahere-Cambridge sections of the Waikato Expressway
- The Mackays to Peka Peka section of the Wellington Northern Corridor (subject to consents)
- The four-laning of the Groynes to Sawyers Arms (Johns Road) section of the Western Corridor in Christchurch (subject to consents).

Back in black

But the new petrol tax also serves another purpose. English acknowledges that, without it, the Government wouldn't get the books back in the black by 2014/15.

"Without the changes, we would have fallen short of the surplus track," he says.

"Merry Christmas from Mr Key," quips Labour opposition leader David Shearer. "Nine cents a litre more on your petrol prices in order to scrape across the line into surplus."

According to latest forecasts, the Government will only have a $66 million surplus in 2014/15. That's $130 million less than forecast just six months ago.
Growth will be weaker than previously thought at 2.5% in coming years, although still better than many of our trading partners. And unemployment is expected to drop below 6% in two years.

"There's no doubt that the employment market is weaker than we would want to see it," says English.
So while motorists take a hit now from the tax hike, they may yet benefit next year, with the Government confirming that it has put some $800 million aside for new budget spending.