No flow-on for fuel price

Petrol prices have fallen 17 per cent in less than six weeks in response to a slide in world crude prices and the soaring kiwi dollar, although the cuts are not yet feeding through to the wider economy.

Petrol and other fuel price rises have accounted for at least a quarter of the 4 per cent inflation rate, which in turn is why the Reserve Bank has refused to cut interest rates this year despite a flagging economy.

Oil companies on Tuesday cut prices for the sixth time in as many weeks, taking the cost of a litre of 91 octane to $1.46.9c compared with $1.77c early last month.

But airlines, taxi companies and freight firms, which have all hiked their prices in response to petrol price rises, say it is too early to drop prices.

Air New Zealand said that, although recent changes in the price of jet fuel had been encouraging, "it is far too early to have confidence that this will be a medium or long-term trend".

Air New Zealand lifted its domestic and international fares 10 per cent in May because of fuel price rises. Freight firm Trans Otway said it had no plans to cut prices. It had taken a long time to negotiate its prices up when petrol costs were rising, particularly with its major customers, "and there is some recovery to be done".

Westpac treasury economist Nick Tuffley said the main effect of lower fuel prices on the CPI could be lowered inflation expectations.

- NZPA