Government rejects calls to cut tax on petrol

The Government has no plan to cut the tax on petrol despite the price rising again this week to crack the $1.50-a-litre mark.

And a bank economist believes inflation could hit 3.8 per cent in the next nine months from the petrol hikes.

Act and New Zealand First yesterday repeated their calls for tax on petrol to be reduced after the latest 5c-a-litre price rise by oil companies. The increase means petrol prices are at their highest since the mid-1970s.

Act leader Rodney Hide called again for the 5.6c-a-litre petrol excise increase introduced on April 1 for road-building to be abolished.

"The Government says it can't do anything about the world price of oil. This is true. But it certainly can do something about the tax it heaps on petrol, and it should."

NZ First leader Winston Peters repeated his party's policy of removing GST from petrol.

The Maori Party revealed it wants to cut both GST and the 5.6c petrol excise increase.

A spokeswoman for Finance Minister Michael Cullen said he had not asked for any special reports from the Treasury on the impact of rising oil prices on the country.

She said the April 1 excise increase had already been allocated to roading projects by Transit NZ. Taking the excise off would mean having to wind projects back.

National finance spokesman John Key said it was unlikely National would cut excise off petrol.

"The moves that are taking place are dwarfing any of these minor changes that have occurred around the 5c increase in petrol tax and the like. Secondly, we have committed that revenue to building roads."

He denied petrol prices hitting the economy - and therefore the tax take - would impact on National's tax cut as it had been budgeted "conservatively".

"We will ride through the revenue constraints that we may or may not have."

ANZ National Bank chief economist John McDermott said the last time he looked, the petrol increases would take $500 million out of consumers' wallets.

That meant the economy slowing by 0.6 to 0.7 per cent of gross domestic product. "When we are already slowing down, that's quite a significant slowdown."

Mr McDermott also warned that petrol price increases would feed inflationary pressures.

He was picking inflation could top out at 3.7 to 3.8 per cent in the next nine months, which would be "uncomfortable news" for the Reserve Bank.

The Government stood to gain extra revenue at the petrol pump but, he said, it also stood to lose from a slowing economy hitting GST and income and company tax revenue.

PARTY STANCES

Labour
Keep petrol excise tax, most of which goes on roading.

National
Keep petrol excise tax.

NZ First
Keep petrol excise tax, but cut the GST levied on petrol.

Greens
Keep petrol excise tax.

United Future
Keep petrol excise tax.

Progressives
Keep petrol excise tax.

Act
Reverse the most recent 5.6c a litre rise in petrol excise, which occurred on April 1.

Maori Party
Remove both GST and 5.6c rise from petrol.