Minister mum on possible fuel tax hike

Transport Minister Michael Wood said the first public draft of the Government’s next three-year transport budget would likely be published “approximately in the next month”.

Treasury warned at the Budget that rising costs in the transport sector, and a large loan granted to Waka Kotahi NZ Transport Agency, may force the Government to hike fuel taxes as early as July 1 next year. Such a hike would need to be signalled in the forthcoming budget.

When asked whether such a hike was on the table, Wood said he did not want to foreshadow Cabinet consideration of the transport budget, known formally as the Government Policy Statement on Land Transport, or GPS.

“Obviously it is important that we appropriately fund our transport sector. Everyone knows there is a real need there in terms of maintenance, in terms of resilience, in terms of growth, so we will consider that — but I won’t get ahead of the process.”

Wood had tried to release another version of the GPS, which budgets for the period 2024-2027, earlier this year, but was forced to retreat after outrage at a proposal to allow councils to install cycleways and remove carparks while they were maintaining roads — all funded from the road maintenance budget.

Treasury recently reiterated a prior warning to the Government that fuel taxes may need to go up as soon as July 1 next year to continue to fund the transport budget. This would come on top of the 25 cents-a-litre hike to fuel taxes coming at the end of next month, when the Government’s “temporary” fuel tax relief policy comes to an end.

“There is a risk that fuel excise duty and/or road user charges will need to be increased in order to manage pressures on the National Land Transport Fund and enable repayment of a $2 billion loan, which is being provided to support delivery of the 2021-24 National Land Transport Programme,” Treasury warned in the Budget Economic and Fiscal Update forecasts, released with the Budget.

Land transport in New Zealand is primarily paid for by fuel taxes and road user charges, with help on some roads from councils. Occasionally, the Government also steps in. Fuel taxes are charged as a flat levy per litre, rather than as a percentage of the total price of fuel, as with GST.

This means that fuel taxes must constantly be adjusted upwards to take account of rising inflation.

During the 2020 election, Labour committed not to hike fuel taxes this term after raising them 3.5 cents a year from 2018 to 2020. Since then, fuel taxes have been frozen, despite the cost of maintaining the roads skyrocketing due to high inflation.