Labour and National not keen to cut petrol tax

Neither Labour nor National are keen to reduce or remove the 5 per cent petrol levy even as yet another hike raises prices.

Fuel companies yesterday increased prices 4 cents a litre putting the cost of a litre of 91-octane at 147.9 cents per litre and 96-octane at 152.9 cents at most pumps.  Caltex stations are charging 153.9 cents for the higher grade.

The price of petrol has gone up about 40 per cent since January and the Automobile Association wants the Government to reduce its tax take on fuel.

Prime Minister Helen Clark said the money from the petrol levy was already earmarked for roads.

"And the AA are also very keen on getting New Zealand moving -- getting the traffic through all of the bottle necks up and down the country," Helen Clark told Radio Live.

"We've got a huge road building and public transport programme going on."

National leader Don Brash said his party couldn't afford to cut the levy.

"If we waive that petrol tax the capacity to provide income tax reduction is that degree reduced. We can't do both unfortunately."

Helen Clark said the Government the Reserve Bank would watch the effects of petrol prices on inflation.

UBS economist Robin Clements this morning said volatile political situations, weather and ever increasing globally were all having an impact on oil prices.

"The problem is, there is a long list of potential disruptions that can impact on the supply of oil around the world," he told National Radio.

"But fundamentally the problem is that there is very strong demand in the world for oil and derivatives, and the ability on the supply side to meet that demand is stretched."

A motorist in an average size car with a 50-litre fuel tank can now expect to pay more than $70 to fill it.

Dr Brash said as prices went up more GST revenue was collected.

"You could argue a case for a little bit of movement there. (But) as soon as the petrol price goes down -- and it's not going to stay up there indefinately -- there would be a hue and cry if you re-imposed the 5 cents."

Finance Minister Michael Cullen yesterday rubbished a plan by New Zealand First leader Winston Peters to remove GST from petrol -- an initiative that would cut the cost of petrol by more than 15 cents per litre.

Dr Cullen said such a move would complicate the whole GST system.

NZ First leader Winston Peters said his suggestion was sensible and would make a big difference to the "average" New Zealander's income.

"This cut will benefit every family and every business," Mr Peters said.

He said cheaper freight costs would reduce the price of produce and create savings worth as much as National's tax cuts.

"It is also worth noting that currently taxes and duties on petrol account for 47 per cent of the price of petrol -- so the GST is merely a tax on a tax."

- NZPA