The Government's dialling back of some cost of living relief begins on Wednesday, with the Road User Charge (RUC) discount ending.
The trucking industry expects the additional costs to mostly be passed on to consumers and is calling on the Government to keep the discount until the annual inflation rate drops further.
The AA is also picking petrol prices could jump 40 cents over the next two months as the fuel tax cut is phased out and the impact of rising oil prices is seen at the pump.
Data from Gaspy showed the New Zealand average for Unleaded 91 was $2.47 a litre on Tuesday afternoon and $2.66 a litre for Unleaded 95. A 40 cent increase would mean prices around the dreaded $3 mark.
Cuts to RUC and the fuel excise duty (FED) were first announced last March after Russia's invasion of Ukraine shook the oil market and prices floated to around $3 a litre. FED dropped 25 cents, while RUC was discounted by 36 percent in what was referred to at the time as a "cost of living relief package".
Following several extensions to the expensive package, the Government announced in December that the RUC discount would end on January 31.
FED will increase 12.5 cents per litre on February 28 and another 12.5 cents by the end of March. That's when the Government will lift the Family Tax Credit, Superannuation, benefits and other supports.
After becoming Prime Minister and highlighting the cost of living as his main priority, Chris Hipkins said he wouldn't rule in or out reversing the decision to end the fuel tax cut.
"We will work carefully through the options. We will do that quickly. I am aware there are timing considerations with regard to that particular issue," he said.
On Tuesday afternoon this week, when asked about the potential cost of living impact of the road user charge discount ending, Hipkins said he didn't have any announcement to make.
"The decisions that we took still stand. The trucking industry has been given significant notice that that was going to happen."
Nick Leggett, the chief executive of Transporting New Zealand, which represents road freight companies, is concerned about the "price crunch" as road freight companies return to paying full-price RUC.
"Trucks carry 93 percent of freight," he said. "So all those things that we enjoy in life suddenly are going to get more expensive and those costs will have to be passed on to the consumer.
"We've got lots of compounding costs in the economy at the moment and it's of concern that these costs are going to be lumped back on all at once and it's obviously going to be stressful for the industry, but actually ultimately, it's got to be consumers that pay."
He said for a large 45-50 tonne truck travelling 100,000 kilometres a year, the end of the discount means an additional $20,000 in operating costs.
RUC is purchased by the drivers of light diesel vehicles and heavy vehicles - like commercial trucks - prior to travel.
Those purchasing RUC at the discounted rate had to sign a declaration to confirm they were only purchasing enough RUC to cover the discount period - which ended on Tuesday.
But a statement from the Government in December suggested RUC holders could be benefiting past the end-date.
"RUC is not being extended because it is pre-purchased so RUC holders purchasing in December and January will be receiving the discount for some months afterwards. For example, buying 4,000km in January for $250 would last the average driver until June – longer than the petrol reductions."
Commercial truckers, however, can't stock up, Leggett said. The RUC licence for heavy vehicle drivers expires a month after any rate increase.
Leggett said the industry had hoped for an extension as inflation remained hot at 7.2 percent in the December quarter.
"We don't think it should go on forever. The country can't afford that either. But we do need recognition that, you know, inflation is still roaring and perhaps we consider a situation where until inflation gets below 6 percent, that that support package stays on."
Potential 40c increase
While the return to full-price RUC will hit truckers and other diesel users, Terry Collins, AA's principal policy advisor, also warns of a potential 40c increase for the drivers of petrol cars.
He gets that rough figure by taking into account the end of the FED cut (roughly 29 cents including GST) as well as a recent jump in oil prices.
While oil prices were expected to increase over the Christmas period, Collins said a mild winter in the northern hemisphere meant the price of a barrel dropped, "which was unexpected".
However, since early January, he said Brent Crude had risen from about $77.80 to roughly $84.20.
By the time that flows through to the price at the pump and the extra tax is added on, Collins thinks motorists will be paying an extra 40 cents "minimum".
But the market is very unpredictable, he said.
"Things are still volatile and it is very hard to predict. I thought the price of oil would go up before Christmas, yet it went down," Collins said.
He doesn't believe prices will climb as high as they did early last year.
"The mad rush that occurred when the war between Russia and Ukraine started, they had just come out of winter. Europe had depleted all its energy reserves over the cold period so it was down on gas and on oil and then all of a sudden they were talking about sanctions.
"So they were desperately looking for different markets to replenish their supplies hence the price of all those commodities went up.
"What we had as a consequence in Europe was a really mild winter, so they haven't depleted the reserves to the same degree that they would have. They've now had time to look at some alternative supplies."
Leggett is keeping an eye on future sanctions on Russia from the likes of the European Union which will mean the countries will have to source diesel from elsewhere.
Finance Minister Grant Robertson said in December when announcing the end date that the package had "directly helped people struggling with cost of living pressures" and nudged inflation down by "about half a percent". But it is also expensive, expected to have cost more than $1.4 billion.
"We have to strike a balance between broad ongoing support and careful management of the Government's accounts. That's why we are transitioning to more targeted support for those most feeling the pinch," said Robertson.
The end of the FED cut at the end of March will be followed by planned lifts to the Family Tax Credit, Superannuation, benefits, student allowances and childcare support on April 1.
