Fuel tax hike pushed back a year — what it means for you
The government has delayed a planned rise in fuel tax by a year and will dip into a $450 million rainy day fund to help cover the cost.
Transport Minister Chris Bishop announced the decision on 31 August 2026. The tax increase, originally set to start on 1 January 2027, will now begin in 2028. RNZ
Fuel excise is a tax added to every litre of petrol and diesel you buy at the pump. The money goes into a pot called the National Land Transport Fund, which pays for keeping roads in good shape, running buses and trains, and building new transport projects. That pot is running low.
Under the old plan, the tax was due to go up by 12 cents a litre from 1 January 2027, then by 6 cents and 4 cents in the years after, adding up to 22 cents by 2029. The new plan will see the tax rise by 5 cents every six months from 2028 through to the end of 2029, adding up to 20 cents. The tax has not gone up since 2020. RNZ
Bishop said the government will top up the transport fund so road maintenance, public transport and infrastructure projects can keep going. Without the top-up, he said, there would be significant cuts. The top-up is expected to cost $1.476 billion. RNZ
Cabinet agreed to use the $450 million rainy day fund, set up in this year's Budget, to help pay for the top-up. The rest — roughly $1 billion — will have to be found from somewhere else. Bishop said those details will be in the pre-election fiscal update, or PREFU, which is a report the government puts out before an election to show where its finances stand. RNZ
Prime Minister Christopher Luxon said the upcoming election was not a factor in the decision. He pointed to changing circumstances around the Iranian fuel crisis. RNZ
The government has been signalling this for months. In late March 2026, Luxon said the planned 12-cent-a-litre petrol tax hike was unlikely to go ahead. 1News A speech to the Automobile Association Annual Conference, published on the Beehive website on 27 March 2026, laid out the original schedule. Beehive
On 26 August 2026, National Party finance spokesperson Nicola Willis said holding off on the fuel tax was a National Party position, not yet official government policy. Stuff The Cabinet decision and Bishop's announcement on 31 August have now made it official government policy.
The Labour Party said on 27 August 2026 that it would scrap the fuel tax increase entirely if it wins the next election. CarExpert But the government has already pushed the increase to 2028 and changed the schedule, so the two parties are now arguing over a moving target.
The broader context here is that both major parties are trying to keep fuel tax flat through the election period, even though the transport fund is short of money. The government's plan keeps the idea of future increases and fills the gap with the rainy day fund and other money to be found later. Labour wants to cancel the increases altogether. The $1.476 billion cost, and where the money beyond the $450 million will come from, will be under scrutiny when the PREFU is published.
The one-year delay means the revenue increases are squeezed into a shorter timeframe. The new schedule reaches 20 cents by the end of 2029, 2 cents less than the original 22-cent plan, through smaller six-monthly steps rather than bigger annual ones. The announcement does not say how much that 2-cent difference will cost in lost revenue.
