OPINION: If you’ve filled your car up lately, bought fruit and vegies or tried to climb onto the property ladder, you would have noticed how expensive it is. Everything is going up.
If you ignore the inflation caused by GST increases, the Government has just delivered the highest inflation since June 1987... back when Funky Town and La Bamba were on the charts.
Relentless borrowing, taxing, spending, regulation, and redistribution - added to global supply chain interruptions – has fuelled inflation, with too much money chasing too few goods.
Petrol prices are at a record high. It’s getting more and more expensive to get the kids to school and sport (if you’re not currently under house arrest), move goods across the country, and get to and from work.
Labour promised to bring the cost price of petrol down. Jacinda Ardern scapegoated petrol companies, saying importer margins were too high and that they were fleecing motorists.
Then Commerce Minister Kris Faafoi said he could bring down petrol prices by 32 cents a litre. That was despite the fact that the average importer margin was only 25 cents.
Did he believe petrol companies were going to work for free?
Fast forward two years, a pointless fuel market study, and new regulation on the sector through the Fuel Industry Bill, importer margins have barely budged.
The importer margin on 95 has flatlined, regular is down slightly, and diesel is actually up.
ACT said at the time that more red tape and regulation wouldn’t make a difference to the price of petrol and could actually make the situation worse. Sadly, we’ve been proved right.
Labour fails to understand the real issue which is that New Zealand’s economy lacks the scale to support more competitors.
Scapegoating fuel companies is brilliant politics, but abysmal economics.
Even if the Government’s regulation of the fuel market cut the importer margin by a quarter – or about 6 cents – it would not make a huge difference to petrol prices. Taking a quarter of retailers’ margin would bankrupt them but would only save consumers 6 cents in the dollar.
New Zealand already has great difficulty with bureaucracy. Too much red tape and regulation prevents us from raising productivity and wages. New regulation will make it harder to do business but won’t make a significant difference to petrol prices.
The obvious solution is to implement ACT’s tax policy removing the 39 cent envy tax rate, and cutting the middle rate of 30 cents, to 17.5. This policy would deliver the average full-time worker around $2000 a year to help deal with the rising cost of living.
This opinion piece was written by ACT’s spokesperson for Associate Finance, Damien Smith.
Damien is originally from Northern Ireland and is an ex-banker, Corporate Structured Finance & Family Office Adviser & Independent Company Director. He has a Master in Business Administration (MBA).
He has worked in Britain, Australia and New Zealand over the past 25 years and been a Director at Macquarie Capital.
Damien believes in the principles of the ACT party where free markets, government fiscal prudence, freedom of thought, small government serving the people and property rights are at the centre of our democracy and vital to protect.
Damien has a Daughter at King's College, Auckland. They share a love for Arts, Sport & New Zealand.