Inflation and fares two Budget issues causing trouble for Auckland Council

The Budget contains two worrying issues for the Auckland Council — inflation and the end of half-price public transport fares in August.

Extending half-price fares for two months to the end of August and making them permanent for community card holders is good news in the short term and long term for people on low incomes.

But there were high hopes for halfprice fares, or better, to become embedded in the public transport system to get more people out of cars and using buses, trains and ferries.

In the first full week of half-price fares, public transport journeys in the city shot up by 24 per cent. Not only did the cheap fares help the cost of living crisis, they were a step towards Auckland’s bold goal to cut transport emissions by 64 per cent by 2030.

A return to normal fares on September 1 will hit Auckland

Transport hard in the pocket. It will mean higher costs to run public transport on top of falling patronage and fare revenue because of Covid. This adds up to less money for running the city’s transport network and deferring capital projects.

It will slow progress on reducing climate emissions.

Inflation, forecast for 5.2 per cent next year, is the bigger elephant in the room. The cost of running libraries, parks and other services will cost more to maintain at current levels.

The last public forecast for inflation was in December when council finance officers provisionally said inflation would be 2 per cent in the 2022-2023 budget.

They said the financial outlook remained “highly uncertain” and each additional 0.5 per cent of inflation would add about $15 million to the council’s permanent running costs. At that stage, its budget deficit was about $85m. If inflation stays at 5 per cent over the next year the deficit could easily double.

The ramifications for the council are huge and will almost certainly lead to service cuts and hundreds of millions of dollars of capital projects being deferred. There was talk in December of cutting little-used bus services if things got worse, and they have. Much worse.

A report to the audit and risk committee said inflation, along with rising interest rates, labour market and supply chain constraints “are presenting significant risk” to the council’s finances.

And a report on the health of the council-controlled organisations for the first nine months of the current financial year showed Auckland Transport and development agency Eke Panuku struggling to hit financial targets.

Last month, AT said it is running out of money to operate public transport at current levels. And it’s no secret the city’s two biggest transport projects, the $4.4 billion City Rail Link and $1.4b Eastern Busway, face rising costs. At a public meeting this week, mayoral candidate Wayne Brown said Auckland Council is in trouble with a “really, really big nasty balance sheet”.

Given the deteriorating position of the council books, it’s a wonder anyone is putting their name forward to replace Phil Goff as mayor of the Super City.