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Asian governments are split on ways to cope with record oil prices, with some subsidizing costs for consumers to contain inflation and others raising energy prices to lower the effect on their budgets.

Indonesia and Taiwan both pledged payments to low income families to help them cope with planned fuel-price increases and New Zealand's Finance Minister Michael Cullen today announced tax cuts designed to help workers struggling with living costs. China, suffering the deadliest earthquake in 32 years, said this week it has no plans to lift fuel-price caps.

“We see fiscal positions deteriorating in countries that subsidize the local cost of oil,'' said Robert Subbaraman, chief economist at Lehman Brothers Asia Ltd. in Hong Kong. “If oil prices stay persistently high at these levels, these kinds of measures can do more damage than good.''

Oil has more than doubled in the past year, and prices of grains such as rice, corn, wheat and soybean reached unprecedented levels in 2008. The increases have stoked social tensions and led to wider fiscal deficits as governments subsidize food and energy expenses for their people.

Indonesia's President Susilo Bambang Yudhoyono, facing elections in 2009, is raising fuel prices for the first time in almost three years to reduce subsidies. The government would have to spend 190 trillion rupiah ($20 billion) on subsidies if fuel prices were not increased, Finance Minister Sri Mulyani Indrawati said yesterday.

Social Unrest

The government expects to save 34.5 trillion rupiah by raising fuel prices, she said. About 14 trillion rupiah will be used to compensate the poor for the increase in energy costs and to thwart social unrest. About 12.2 trillion rupiah will help narrow the government's budget deficit.

Taiwan, which plans to increase fuel prices on June 2, will distribute NT$20 billion ($659 million) in subsidies to middle and low-income families to offset higher energy costs, Premier Liu Chao-shiuan said today, two days after being sworn in.

New Zealand's government handed the nation's 2.2 million workers income-tax cuts worth NZ$10.6 billion ($8.2 billion) over the next four years.

“Food and oil prices have soared far higher and faster than we've seen for a long period,'' Cullen said. “Our budget delivers tax relief for workers who are struggling with rising cost of living. Families are finding it tougher to make ends meet.''

China's Fuel Caps

In China, the government said today that speculation that it may lift curbs on fuel prices as early as next month is “baseless.'' China caps fuel prices to limit their impact on inflation in the world's most-populous nation payday loan guaranteed approval cash advance loans.

Malaysia's fuel subsidy bill may reach as much as 53 billion ringgit ($16.5 billion) this year, Second Finance Minister Nor Mohamed Yakcop said today. The government, which had its worst electoral result in March after higher living costs angered voters, has avoided increasing local fuel prices.

Malaysia's government will announce new subsidy arrangements in two months, Nor said, adding that the cost of providing fuel subsidies was the biggest problem for the nation and that inflation was not a “major issue.''

Vietnam will keep gasoline and oil prices at current levels from now until June to tame inflation and continue to cover company losses caused by rising crude levels, Tuoi Tre newspaper reported today, citing Deputy Prime Minister Nguyen Sinh Hung.

Interest Rates

Most Asian policy makers are holding off interest rate reductions needed to boost growth as inflation accelerates across the region.

China's consumer prices rose 8.5 percent last month, close to the fastest pace since 1996. Inflation rates in Sri Lanka and Vietnam have exceeded 20 percent, while Singapore's consumer price gains have reached levels not seen since 1982.

The Bank of Thailand yesterday joined other regional central banks including South Korea and the Philippines in keeping borrowing costs unchanged. Bank Negara Malaysia policy makers meet on May 26 and are expected to keep the key rate unchanged for a 17th consecutive meeting.

In South Korea, rising oil prices may delay any interest- rate reduction by the central bank and make it more difficult to spur consumer spending.

“A rate cut will be needed to help spur domestic demand,'' said Kwon Young Sun, an economist at Lehman Brothers Holdings Inc. in Hong Kong. “The rise in oil prices is likely to delay the reduction in the central bank's rate, but not prompt policymakers to lift rates.''

Rising oil prices are giving a “big shock'' to Japan's economy, Chief Cabinet Secretary Nobutaka Machimura said today. The Japanese government has no immediate plan to deal with crude prices, Machimura said.

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