The Government has announced the cut to the fuel excise will be extended until January 2023.

Finance Minister Grant Robertson says half-price public transport fares and the extension to the Road User Charges cut would also continue until January 31, 2023.

The initial cut was brought in to reduce cost of living pressures on households, in March 2022.

'We are doing this because we want Kiwis to have some certainty for the rest of the year in the face of volatile fuel prices and ongoing cost of living pressure," Robertson says.

'We can afford to do this.”

The Government produced Treasury modelling to suggest that it will reduce inflation by 0.5 per cent in the June 2022 quarter.

The extension, which was widely expected given elevated global oil prices, will mean that while petrol prices largely remain in the $3 to $3.50 per litre range, they will not go another 25 cents higher.

Without the extension, the Government estimated that a 40 litre tank of petrol would cost an extra $11.

Robertson attributed the cut to public transport costs as boosting patronage on buses and trains in major cities, from 49 per cent of 2019 levels to 65 per cent.

'This is a targeted intervention where we can get to one of the root causes of the cost of living pressures New Zealanders are facing.

"Having done this, we've actually helped keep inflation under control ... We know we are targetting directly here one of the drivers of inflation.”

Extending the fuel excise tax and road user charges reductions would cost $589 million, as the Government would have to pay into the National Land Transport fund to replace the reduced taxes. The fund is used to pay building and maintaining roads, and public transport.

Robertson says the excise tax cuts could not go on forever, and the Government is working on 'exit strategy”.

Energy Minister Megan Woods says people were not paying as much for petrol with the Government's excise tax cut.

'One of the things that I do know from talking to the fuel companies is that people are filing up about as often as they were, but they're putting less in each time.

'This is very much about how it is that we can help those stretched household budgets.

There had been another spike in the margin the fuel companies were taking, she says.

She would next week be writing to the fuel companies asking them what the cause of the spike was, and reiterating the Government's expectation that its excise cut is passed onto consumers.

'Our expectations are that we would start to see in the next few days some of those decreased prices of crude flowing through to consumers at the pump.”

There were projections that the price of crude oil would decrease in 2023, she says.

Green Party transport spokeswoman Julie Anne Genter says the Government should be giving people direct payments instead of cutting fuel taxes, and public transport should be made entirely free, permanently.

'Subsiding fossil fuels by making petrol and diesel a little cheaper for half a year doesn't make sense in 2022, when we need to make the transition to cleaner transport.

'Direct payments would mean people could choose how to spend it, including on petrol - but would still enable incentives to shift to green options for those who have them.”

ACT Party leader David Seymour says the Government had not considered 'the chaos” that would occur when people queues to avoid a future 25 cent increase in fuel costs, when the tax cut comes off.

'Labour's policy also creates havoc with public transport providers. Auckland Transport, for example, had promoters in malls selling discounts designed to smooth the eventual return to full price fares. That marketing effort is now worthless.

'What it should have done is introduced a durable solution, returning the proceeds of the Emissions Trading Scheme to citizens.”

Luke Malpass/Stuff