National's Key hints at petrol tax cut

John Key

National's finance spokesman says he may consider tax relief for motorists if petrol prices stay high for too long - echoing an overwhelming plea from the public.

A Herald-DigiPoll survey of 801 people has found 77.1 per cent in support of a cut in petrol tax, compared to 18.3 per cent prepared to see motorists keep paying tax at current levels.

The poll was conducted over six days to Wednesday this week, when prices increased yet again, by 3c a litre, to an unprecedented $1.559 for 91-octane petrol and more for higher grades at most city pumps.

This means petrol is 40 per cent costlier than at the end of last year, prompting National's John Key to indicate yesterday he may consider a temporary reduction in petrol tax if he becomes Finance Minister.

"You'd obviously have to put it back when oil prices fell, but if they stayed up there forever or for a sustained period of time, I think you can't rule out that you'd look at it," he told the Weekend Herald.

His concession represents a softening of a stance taken by National leader Don Brash a fortnight ago, when he told concerned Grey Power members that his party could not afford to wipe a 5c a litre petrol excise rise imposed in April, while also cutting income tax.

Petrol has risen a further 8c a litre since Dr Brash held that line, saying there was a pressing need to invest fuel tax into building more roads.

Mr Key said he also still wanted to use the money for roads, but he would not want the Government to keep "profiteering" from rising oil prices, on which goods and services tax now exceeds 17c a litre.

The Government's overall tax take from $1.559 a litre is just under 65c, or 41.7 per cent of the retail price.

Of a 47.665c pre-GST tax take, just 22.5c is earmarked specifically for the National Land Transport Fund, although the Government says it will return $1.225 billion from its general account in the next three years to roads and other transport spending.

Finance Minister Michael Cullen questioned Mr Key's concession, saying it contradicted Dr Brash's position and was another example of the spokesman's "penchant for making policy on the hoof".

Dr Cullen said the latest 5c increase had already been allocated to the national transport fund, and any reduction would mean the cancellation of some roading projects.

A spokeswoman for the minister denied the Government was gaining a big windfall from costlier petrol, because declining fuel sales reduced the tax take and people were left with less money for discretionary spending on other items on which GST could be collected.

Mr Key denied being influenced by the Herald's poll, saying his second thoughts were a response to the 50 or so emails he gets a day from people hurting from high petrol prices. "There's a lot of concern in the community."

Only New Zealand First and Act have until now called for petrol tax cuts, and Green Party co-leader Jeanette Fitzsimons yesterday re-affirmed her opposition to any let-up.

"If we could ease the pain for people by cutting the tax now, knowing that prices would go down in the future, then, yes, I would be in favour of that," she said.

"But all our information suggests this is a long-term problem, that prices are going to continue to rise and the very worst thing you can do for New Zealand's fuel security in the future is to try to keep petrol artificially cheap when it isn't."

Ms Fitzsimons said cutting the tax would slow the rate at which people adapted to diminishing oil supplies.

"We need a bit of honesty about this - I know people don't want to hear that prices are just going to keep on rising but that is what they are going to do and we actually are not helping people by hiding that from them."

Automobile Association spokesman Greg Hunting said the poll result came as no surprise.