The 25-cent cut in petrol excise duty and half-price public transport fares will be extended into next year, the government has confirmed this afternoon.

Fuel pump. Photo: RNZ / Alexander Robertson

The cut in petrol excise duty, the equivalent reduction in road user charges and the half price public transport fares were due to end next month, but have now all been extended until the end of January.

The decision was announced today by Finance Minister Grant Robertson, Energy Minister Megan Woods and Transport Minister Michael Wood.

Treasury estimates it will reduce headline inflation by 0.5 percentage points in the June quarter.

Robertson said the excise cut would cut the cost of filling a 40 litre tank of petrol by more than $11, while half price public transport saved the average user $25 a week.

The reductions were announced in March as global oil prices skyrocketed and were initially planned for three months, before being extended in the Budget. They were due to end on 15 August.

Wood said since half price fares were introduced in April, public transport use had increased in Auckland, Wellington and Christchurch.

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She said because half price public transport will now be available until the end of January, the Community Connect scheme will now start in February.

"This will also give more time for local authorities to put in place the systems required to efficiently administer the Community Connect scheme that will give those who have Community Service Cards half-price public transport permanently."

Automobile Association principal policy advisor Terry Collins welcomed the extension.

He said, "We are very pleased that we are not only get a reduction in fuel prices but it does not come at the cost of defered maintianence or building of our roading network."

The government said it has identified funding that can be re-prioritised to top up the fund, which pays for building and maintaining roads, and funding public transport, walking and cycling initiatives.

Earlier this week Collins said there would be an "unavoidable rush" when the 25 cents extra tax came back.

"This has got to be a difficult one for the government - if it goes on in one lump then we can expect to have queues at the service stations, and we expect that some of them may run dry," he said.

"It's difficult for those oil companies to fill them [pumps] up quickly, because they've only got a limited amount of trucks and tankers to do that, and if it happened nation-wide, that would put a strain on their logistics."

Brent crude oil prices settled below US$100 a barrel this for the first time in three months.