Ministers ditch fuel tax hike
The government has announced it is cancelling the 12c a litre fuel tax hike and increases in road user charges (RUC) that had been planned for January next year.
The move comes days after the Labour Party said it would leave fuel excise unchanged for the next three-year term if it gains power at November’s general election.
Nicola Willis, Minister of Finance, and Chris Bishop, Minister of Transport, say cabinet made the decision on August 31 to help Kiwis with the cost of living and to deliver lower taxes for residents.
“Fuel excise was scheduled to resume annual increases starting with a 12c per litre increase from January 1, 2027, with equivalent increases to road user charges,” explains Willis.
“That has now been scrapped, with the next increase of 5c a litre now taking effect from January 1, 2028.
“Cancelling next year’s fuel excise increase and spreading the change over time from 2028 will give Kiwis more time to recover from the period of post-Covid economic pain and recent uncertainty in the Middle East.”
Bishop says the average cost of transport projects has increased by up to 45 per cent since 2020, but in that time fuel excise has remained frozen and fallen in real terms by about 20 per cent.
“While pausing fuel excise increases was the right choice as New Zealanders weathered an economic storm, unless they begin again soon, the financial foundations of our land transport system will be undermined,” he adds.
“For New Zealanders, that would mean roads littered with potholes, cancelled projects, and an inability to respond when communities are cut off following severe weather events.
“To prevent this, the government has agreed on a new, more sustainable path for fuel tax increases. There will be no increase to fuel tax in 2027, with the next increase taking effect on January 1, 2028.
“Instead of a one-off 12c increase, we have spread these changes over time to make the transition fairer and more manageable for New Zealanders, as the economy continues to pick up and wages grow.”
Fuel tax will now rise by 5c on January 1, 2028, followed by three further 5c increases at six-month intervals.
Annual increases will then resume from January 1, 2030, of 5c per year. RUC will be subject to equivalent increases at the same intervals.
Bishop says the government will top up the National Land Transport Fund to account for the reduction in fuel excise revenue and this is expected to cost $1.476 billion over the forecast period.
