Tax rise to follow petrol increases

Motorists paying more than ever for petrol and diesel after 8c worth of price rises in a week can expect more pain as early as tomorrow, as the Government lifts fuel taxes.

Oil companies blamed the latest rises - of 3c a litre on Wednesday and 5c last week - largely on the plummeting New Zealand dollar.

But although the currency picked up slightly yesterday, after slipping below US60c the day before, the cost of refined fuel ordered from Singapore for New Zealand bowsers surged almost US$3 a barrel.

This makes it most unlikely motorists will be spared another price hike tomorrow, of at least 1c, when the Government imposes its first inflation-adjusted petrol tax increase, of 0.796c a litre.

Taxes will then account for 65.891c a litre, raising a call from the Automobile Association for the Government to offer motorists a rebate on a 17.5c GST component.

Road-user charges for diesel-fuelled cars, vans and trucks weighing up to six tonnes will also rise tomorrow, by 74c for every 1000km travelled.

Most main-centre service stations are now charging $1.57c for a litre of 91-octane petrol, and $1.62c for 95-octane - prices which are 1c higher than the previous peak reached in September after Hurricane Katrina shut down Gulf of Mexico oil platforms.

Diesel has also hit a new high, of $1.17c a litre, a price which does not include road-user charges.

Oil companies are not confirming they will pass on the tax hike automatically, but point to a rise in the cost of refined petrol and diesel from Singapore of between US$2.50 and US$3 a barrel since Wednesday, to almost US$73.

BP spokeswoman Diana Stretch said that although this was still lower than in September, the New Zealand dollar had weakened substantially since then.

The dollar climbed by almost US1c yesterday, but UBS merchant bank chief economist Robin Clements said pessimistic economic signals suggested it may have further to fall.

"Now that the defence of a strong currency has been stripped away, we will have to get used to high prices for fuel," he said. AA spokesman Mike Noon said there was no justification for raising petrol tax, particularly since a large proportion was diverted away from land transport funding and into the Crown account.

He said every 5c-a-litre fuel price rise meant a $29 million annual "windfall" for the Government in GST receipts, and he called for some of this to be returned to motorists "in these hard times".

But Acting Transport Minister Pete Hodgson rejected that last night, saying more GST collected on fuel meant less money derived from other goods which motorists may have to do without to keep their cars running.

"The amount of money in society has not changed," he insisted.

Mr Hodgson said the increase in petrol excise, on the first anniversary of a 5c-a-litre rise on April 1 last year, would go directly to the National Land Transport Fund rather than the Crown account.

As it crept up each year in line with inflation, the proportion of tax allocated for transport investment would also rise "inexorably".

Of $1.362 billion which the Government expects to raise this year from petrol excise of just under 42c a litre, not counting GST or levies such as for accident compensation, $614 million will go to the Crown account.

But the Government says it pays more than $1 billion a year from the account towards non-ACC costs of treating victims of road crashes and vehicle pollution.

Although road-user charges for heavy trucks are not increasing, Business New Zealand and the Road Transport Forum say freight operators in this country pay far more than their Australian counterparts after a reversal of plans to raises charges there.