What Labour's fuel tax freeze means for you and the country's roads
Labour leader Chris Hipkins says fuel taxes will not go up at all for three years if Labour wins November's election. The pledge has upset the road freight industry, which says the money is needed to keep roads in good shape.
At the petrol pump, you pay a fuel excise — a tax of about 70 cents on every litre of petrol. That money goes into a government fund called the National Land Transport Fund, which pays for building and fixing roads. The tax is a flat rate, so it does not go up automatically when prices or inflation rise (RNZ).
The law currently says the tax will rise by 12 cents per litre from January, then another 6 cents in 2028 and 4 cents after that. Hipkins said on Thursday he would scrap all of those increases (RNZ).
Treasury estimates that delaying just the January rise for six months costs about $300 million. Delaying it for three years would cost around $1.8 billion. But that figure does not include the money lost from cancelling the later increases in 2028 and beyond (RNZ).
Labour also wants to take $65 million a year out of the road fund to help pay for cheaper public transport fares (RNZ).
Since the tax last went up in 2020, its real value has fallen by 21 percent because of inflation, while the cost of building roads has gone up (RNZ).
The road freight industry was not happy. Ia Ara Aotearoa Transporting New Zealand, which represents trucking companies, said roads need investment to keep up with a growing economy. If moving freight gets harder or more expensive, those costs show up in the prices people pay at the shops. The group had already warned that cost-of-living pressures were hurting freight operators' profits (Transporting New Zealand newsletter, September 2023).
The group's chief executive, Dom Kalasih, said he was "flabbergasted" by the idea of delaying the tax rise again. He called it a "threat" to economic development and said the country was "digging itself a deeper hole" by putting off the increases. He pointed to a gap between what the tax brings in and what roads actually need (RNZ).
The current government has said a January rise is "unlikely," with a decision due soon. The National Party also wants the increase delayed. So both major parties are now against letting the rise go ahead on time. The argument between them is about how long the delay should last and why, not whether the tax goes up.
Hipkins has said transport spending would be "scaled" to deal with having less money, but would not say which projects might be affected. The Government Policy Statement on land transport — a document that sets out what the government plans to spend on roads and transport — has been delayed until after the election. Hipkins said there was "no fixed plan" for the next three years (RNZ).
The broader picture is that there is now a big gap in transport funding and no public plan for how to deal with it. Treasury's $1.8 billion figure does not even include the later increases Labour would cancel, so the real cost is higher. The freight sector's worry is that the problems are stacking up: the tax buys less than it did in 2020, building roads costs more, and now there will be at least three more years of no change. Neither Labour nor National has explained how they would fix that gap.
What is also unclear is which road projects might be cut or delayed, and whether the road fund can cope with both the tax freeze and the $65 million a year going to public transport. Hipkins has left those questions for after the election.
