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  • rmacculloch

Cutting gasoline taxes was a strategic mistake for Labour

It seems that the primary purpose of the PM's fuel tax cut was for a quick news headline that attracted positive PR. It was driven by perceived good "optics", was done in a panic partly arising from a drop in popularity in the polls and most likely was influenced by her communications team, not competent economic advisers.

Why? That fuel tax cut is an ideological disaster for Labour. It is an acknowledgment that, in spite of supposedly putting the environment at the heart of what the party stands for, now it seems Labour has suddenly recognized that NZ's energy security (and being able to obtain cheap oil) are fundamentally important to the country. So why did the party then go and ban oil and gas exploration several years ago? And why cut fuel taxes when it will lead to greater fuel consumption & higher carbon emissions?

Interestingly, when we invited the founder of well-being economics, Professor Richard Easterlin, out to NZ several years ago, he flatly disagreed with Green MP Chloe Swarbrick during a debate I organized on the topic of how to increase well-being. Swarbrick tried to bring the ban on oil & gas exploration under the "well-being" banner.

However Easterlin's view is that high levels of well-being are driven by three main factors - one's physical health, a strong social security net should one lose one's job and having a close supportive family. Oil & gas exploration don't figure. Furthermore, let's say NZ had discovered oil & gas reserves these past few years - then it would have meant way more money for our health system as well as having fuel supplies on hand so we weren't reliant on overseas production.

Yes, the fuel tax cut that Labour introduced in a panic - and which was a stolen National Party idea - may have seemed like a clever thing to do for them - but actually undermines everything for which the party stands.


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