Spiralling fuel costs have prompted calls for the Government to temporarily cut its petrol tax to ease the pain on household budgets, staggering under a slew of mounting costs.
Global fuel prices have eased slightly from the almost $US140 ($NZ182.50) per barrel struck late last week.
However, motorists are nervously anticipating a price hike, propelling fuel well beyond the present $2 per litre.
Neither Labour nor the National Party were enthused by the call to cut petrol excise and had little to say on the issue when contacted yesterday.
ANZ economist Cameron Bagrie has suggested the Government cut its petrol excise to mitigate "the extreme nature of the squeeze on disposable incomes" for households, noting the Government received both 12.5% in GST and a further 25% in petrol levies.
"While we would not normally condone tinkering with `sin' taxes to achieve other objectives, we also need to be realistic; exceptional times call for exceptional measures," he said.
Transport Minister Annette King declined to comment on lowering the levy, referring all questions on the issue to Minister of Finance Michael Cullen - who labelled any cut to Gov-ernment road excise a "gimmick".
"New Zealanders understand what is going on here. They know that a one-off cut to excise duties, which would threaten road building and transport projects, would be a gimmick.
"It would not solve the problem of rising oil prices due to forces beyond our control such as Middle Eastern political tensions and the behaviour of speculators in oil markets," Dr Cullen said in a statement yesterday.
From July 1, all excise duty on petrol collected would be used on important transport projects up and down the country that New Zealanders demand, he said.
National Party spokesman Gerry Brownlee was contacted for comment, but a party spokesman returned the call and said any a reduction in petrol tax was "unlikely" and "was not being looked at".
However, Mr Bagrie said Reserve Bank monetary policy had only one tool, the OCR, a "blunt instrument" which in such exceptional times required "a mate in fiscal policy".
With escalating food, energy and fuel prices, the highest mortgage interest rates in the developed world, a slowing economy and rising business compliance costs, this was "the most challenging time for the economy in 40 years", Mr Bagrie said.
"With petrol at $1.90 per litre (91 octane), if we temporarily cut the tax component by 10c per litre, at a fiscal cost of $350 million per year, it is hardly going to reflate the economy, and hence alter the medium-term inflation outlook," Mr Bagrie said.
The move would help the Reserve Bank by taking some pressure off immediate near-term inflation, considering predictions of annual inflation were running to 5%, he said.
"Policy-makers can ill afford to stay on the sidelines and expect monetary policy to run solo," he said.
The Reserve Bank is steadfastly holding the interest-driving official cash rate at 8.25% in its bid to get inflation back below its extreme 3% target, but holding the OCR at 8.25% means thousands of New Zealanders resetting mortgages are paying increased rates, often 3% beyond earlier rates.
