Living costs, fuel, open banks, the Reserve Bank

Living costs, fuel, open banks, the Reserve Bank

The Government is now doing everything it can to contrast its efforts to soften the impact of higher prices against National’s policy of across-the-board tax cuts.

But, for the moment at least, it is still scheduled to re-insert the full fuel tax and end half-price public transport at the beginning of the New Year.

NBR presenter Grant Walker notes, though, that Prime Minister Jacinda Ardern says no decisions have been made and the Government is reviewing things all the time. Walker asks whether it is possible that there will be an election-year U-turn.

Will it be a U-turn or just smart politics? There is no way the Government can push prices back up while inflation remains high. Voters would surely punish it at the polls if they started paying more for petrol and public transport because of government action.

Which also means the longer these initiatives stay in place, the more likely it is they become permanent.

Fuel prices

On fuel prices, the Government this week announced it was giving the Commerce Commission powers to set fair wholesale prices if it believed unfair competition was taking place. 

This was a recommendation from the commission’s market study into the fuel market and will provide an added incentive for wholesale fuel companies to ensure they do act in a competitive manner.

Some raised questions about the new powers, given it would take the commission six to 12 months to investigate and determine whether anti-competitive behaviour was taking place before it could regulate prices. 

But Energy Minister Megan Woods said none of the companies would want to be subjected to an investigation into anti-competitive behaviour and she was confident the move would help strengthen competition and benefit consumers.

Energy Minister Megan Woods.

Pressure for competitive prices

Woods said since the market study had been done, fuel companies’ margins had dropped from 33 cents to 17c last week, evidence there was pressure on fuel companies to price competitively.

At the same time, the Government is also putting in place minimum obligations about how much fuel should be held onshore, now Marsden Point no longer refines fuel. It is also delaying by a year the introduction of biofuel obligations for fuel companies, something that would increase the price of diesel by 6-10 cents a litre.

Walker comments it looks like election panic.

Maybe, but again it might just be smart politics. The Government certainly does not want to have any more criticism aimed its way that it is responsible for rising prices as many consumers continue to struggle with inflation.

Putting up diesel costs next year would not be good timing, even though the delay means the Government must find the expected savings in greenhouse gas emissions from other sources now. 

Open banking 

Meanwhile, Commerce and Consumer Affairs Minister David Clark has announced the Government will legislate to introduce open banking, just days after Ardern joined the chorus of criticism about banks’ excessive profits.

Under the legislation, which will take two years to put into effect, someone who wanted to re-fix their mortgage at a lower rate could ask their bank to securely share their transaction information with a competitor.

Clark said open banking already operated in Australia and would introduce more competition to the banking sector here by making it easier for customers to shop around for better deals.

And talking about the bank – this time the Reserve Bank – Adrian Orr has been reappointed for another five years by Finance Minister Grant Robertson, despite National and Act opposing the move.

The reappointment was recommended by the board, with Orr’s current tenure due to end in March next year.

Reserve Bank governor Adrian Orr is grateful to be reappointed for another five years.

Walker suggests Robertson is politicising the appointment by reappointing Orr. Equally, though, Opposition parties have politicised the issue by making personal attacks that no previous Reserve Bank governor has had to endure.

For his part, Orr is grateful to be reappointed and said central bankers around the world were facing attacks, which became “very personal, very quickly”. 

Overseas trips 

Meanwhile, Ardern is off to Cambodia on Saturday to attend the East Asian Summit before leading a business delegation to Vietnam and then going to the Apec leaders’ meeting in Thailand. 

That means she will not be attending the United Nations climate change conference in Egypt. Instead, next week Climate Change Minister James Shaw will be there flying the flag for New Zealand.

Brent Edwards is NBR’s political editor.

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