Extending the government’s fuel subsidy is “very stupid economic policy”.

Picture: RNZ / Dan Cook

“Secret” and “pretty stupid” are just some of the ways critics have described the government’s spin on transportation subsidies.

Fuel tax cuts and half-price public transport will be extended until June, despite the finance minister saying the situation was unsustainable months ago.

Critics quickly dismissed it as a bad economic and environmental move. But RNZ voters in Whangārei, Wellington, Christchurch and Dunedin have spoken like it.

“Great, I love it,” “everyone helps,” and “whatever we can do now to support people who are struggling, let’s do it,” were some of the reactions from voters.

The savings are estimated to be $17.25 for a 60 liter tank of gas, $11.50 for a 40 liter tank and bus users who pay two $5 fares a day, $25 a week.

Prime Minister Chris Hipkins touted the extension as a “good candidate” for the first of a series of measures he has promised to bring down the cost of living.

It is a U-turn after Finance Minister Grant Robertson said the continuation of such subsidies was “unsustainable” in December last year.

“That has changed. We have a new prime minister who has asked us to redouble our efforts on cost of living,” Robertson said yesterday.

Advisers from government agencies have consistently called for the government to end subsidies, and Brad Olsen, chief economist at Infometrics, agrees.

Brad Olsen

Brad Olsen, chief economist at Infometrics, says the government’s non-targeted approach doesn’t make sense.
Picture: Tom Furley

Extending an economic policy is very stupid; “It gives three times as much support to those on the highest incomes who don’t need much support, compared to those on the lowest incomes who need more support.”

Olsen calculated that the highest earners could save $64 a month, while the lowest earners could only save $21.

James Shaw, one of the leaders of the Green Party, was also concerned about this non-targeted approach and strongly criticized the environmental impact.

“Given that we’ve just had these massive floods in Auckland… the idea that we’re now subsidizing the root cause of those flood events is kind of heartbreaking to me.

“I think there are ways we can target support for low-income families and people who are struggling without directly subsidizing harmful fossil fuels.”

Hipkins said the government was still on track to cut emissions and argued that fuel tax cuts would likely only subsidize the petrol people were already using.

It is not clear how long the fuel tax cuts will last, but Hipkins has promised that it is just one of several measures he will introduce to reduce the “cost of living”.

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