Government urged to cut taxes on petrol to 'speed up' the economy

The Government is being urged to consider cutting taxes on petrol as the New Zealand dollar hits a 33-month low.

The kiwi has fallen to close to 64 US cents, the lowest since January 2016, and some forecasters say a drop of another 2 cents by the end of the year is likely.

Foreign exchange expert Derek Rankin of Rankin Treasury expects the dollar to keep falling until at least after Christmas, pushing up petrol prices even further.

But the Government could alleviate the pressure on motorists given half the price of fuel at the pump is made up of taxes, he said.

"You can argue that we've got higher petrol prices because the oil price is up and the currency is down.

"That's true, but there's not a lot anyone can really do about that, ultimately.

"But we can do something about the taxes on the petrol."

Mr Rankin said the New Zealand economy would slow if petrol prices continued to go up.

"If you want the New Zealand economy to speed up, then just lower the petrol prices," he said.

Average prices for 91 octane hit $2.41 a litre last month and have been rising since then.

National Party leader Simon Bridges said the regional fuel tax would go under a National government.

The Government was raking in "billions more" in taxes and though infrastructure was needed it could be paid for without new taxes.

"I just don't think they need to pile on new taxes at the moment if they make sure they're careful with the purse at this current time."

National would have no new excise taxes in a first term, he said.

Mr Rankin said the New Zealand dollar's fall was largely due to the strength of the US dollar, backed by an extremely strong US economy and low employment rates.

ONN 1 News at 6 promo image
For more on this story, watch 1 NEWS at 6pm. Source: 1 NEWS

"Many currencies are falling against the US dollar."

A rise in US interest rates and a drop in its corporate tax are some of the other factors.

He estimates the New Zealand dollar will go as low as 62 US cents.

ANZ senior market strategist Phil Borkin said the dollar would remain weak over the next few months.

"At the moment the US dollar is king, and there's no way we want to stand in front of that train at the moment."

rnz.co.nz

AA’s Mark Stockdale analyses what exactly motorists are paying for at the pump.
Source: 1 NEWS

MOST
POPULAR STORIES