Government scraps biofuels mandate, increases minimum wage

In News5 MinutesBy NZ Trucking magazineFebruary 10, 2023

The Government has scrapped its biofuels mandate as part of a raft of changes it is making to focus on the cost-of-living crisis.

This week Prime Minister Chris Hipkins announced a suite of programmes that are being cancelled or delayed, including increasing the minimum wage.

“The Government is refocusing its priorities to put the cost-of-living front and centre of our new direction,” Hipkins said.

“I said the Government is doing too much too fast, and that we need to focus on the cost of living. Today we deliver on that commitment.

“This is the first and most significant set of decisions that reprioritises the Government agenda and sets out our new direction. It will help to provide greater bandwidth and resource for where focus is needed most – the cost of living.”

As part of the changes, the biofuels mandate will not proceed.

“The mandate would have increased the price of fuel, and given the pressure on households that’s not something I’m prepared to do,’ Hipkins said.

The move is being welcomed by the transport sector, with Motor Trade Association saying the decision to scrap the biofuels mandate is a win for cash-short Kiwis.

The effect on households was an issue MTA foreshadowed in its submission on the Sustainable Biofuels Obligation Bill last month.

“The obligation, and its implications for the importation of biofuels, at least in the short to medium term, will increase the fuelling costs motorists face. Budget constrained households will be disproportionately affected,” MTA wrote in the submission.

“Such households are more likely to already experience higher fuelling costs as they predominantly own older, less fuel-efficient vehicles compared with the average age of New Zealand’s fleet.

“The obligation is estimated to increase fuel prices by five to 10 cents per litre – adding further strain to budget-constrained households… Reduced energy affordability diminishes New Zealand’s public ability – more specifically the ability of low-income and budget-constrained households, to participate in society, for instance, their ability to commute to work and school affordably.”

Notwithstanding today’s decision, MTA said it recognises the need for pragmatic action to address climate change and that the sector has a key role to play to achieve targets.

Hipkins also announced the minimum wage will increase by $1.50 to $22.70 per hour. It will apply from 1 April 2023. The Starting-Out and Training minimum wage rates will be maintained at 80% of the adult minimum wage.

“In tough times, it’s critical to support those who struggle the most to make ends meet. Those on low incomes make impossible trade-offs between food and medical care, dry homes and a pair of shoes. These families need our support now more than ever and an inflation-adjusted lift in the minimum wage will mean thousands of New Zealanders do not go backwards,” Hipkins said.

Hipkins said analysis from MBIE suggested the increase is unlikely to have a significant impact on unemployment, as it is broadly in line with existing average wage growth across the economy.

“The impact on inflation is negligible. In the 2022 Review, MBIE estimates that an increase of 7 per cent in the minimum wage will have only a minor inflationary impact of 0.1% on the wages portion of GDP,” he said.

“These decisions are a start and show the new direction of our Government. Increased support for business, increased support for those on low incomes and a reprioritisation of our work programme to shift it to the bread-and-butter issues New Zealanders want us focused on.