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NZ Guide To Financial Freedom

303 EpisodesProduced by Ryan J Melton & Greg MoyleWebsite

Everything you need to know about business, money, and life. https://ryanjmelton.co.nz/

3:01

Soaring NZ Fuel Prices-Will The Tax Cut Be Enough? / Ep 264

Welcome to Finance News, we're going to talk about the soaring price of petrol in New Zealand, which isn't pretty. I mean, a lot of us are already struggling just to live paycheck to paycheck. Now suddenly petrol prices are taking off and people are freaking out, so much so that the government has actually made a drastic change.

What they're doing is they're going to make a cut $0.25 per litre of the tax that they were getting and using that to fund transport costs like roads and that sort of thing. The Treasury has worked out that that's going to cost the government over a period of three months, about $350 million. For a government that's already struggling in terms of printing money, getting into a position where they're using half their annual budget to fund the COVID relief, it's not a pretty sight and sadly I don't have a crystal ball.

But it would make sense that prices keep increasing irrespective of what the government does. You might be thinking the crude oil price increase and petrol at the pump here in New Zealand is being caused by the Russian and Ukraine war. That's not the whole truth. Yes, Russia is one of the largest producers of oil in the world.

Now suddenly it's inaccessible. And what happens when you do a drastic change like that? People freak out, they still need the oil, so they go to different places and there's a lot of competition. So then suddenly the prices go up. The other thing is OPEC one of the major suppliers of oil around the world, on the 10th of March, said, hey, we're not actually going to increase production.

And when you look at, let's say, property, let's say commodities shares, it's just a combination of demand and supply. So right now, there's concerns about supply and people rushing out, buying a whole lot inflating the price. But this is actually a problem that started two years ago with COVID. Suddenly, due to all the lockdowns. There was a huge drop in the demand for crude oil.

And what that means is they dial back production, they eased back. So now what we're seeing is there's not enough supply relative to the demand that we're having now because the global economy is suddenly very thirsty. Airlines are opening. Businesses are opening. Now, suddenly they've got this craving, this thirst that's been built over two years. So now there's concerns around too much demand for the supply.

The other thing that's been happening is greater regulation and scrutiny for the companies that would produce crude oil.

In summary the price changes was caused by:

1. increased regulation

2. huge drop in demand and then suddenly a spike in demand. And then also the Russian and Ukraine, spontaneous bidding is really what's contributing to the global concern, especially here in New Zealand around petrol.

So in conclusion you need to be putting yourself irrespective of petrol into something that is inflation proof. You need to make sure you’re looking at things like KiwiSaver, managed funds, property, something that can hold value because if you're leaving money just in the bank, you're putting yourself in a position where the cost of living is increasing drastically faster than the return you're getting at the bank, still using a emergency fund, still make sure you're paying down debt as fast as you can.

If you pay down your debt, you've got a bit of money, that's when you've got to start looking at property, managed funds, things that hold value in the face of rising prices. That's all from me. Thank you for joining Finance News, New Zealand.

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