Labour leader Chris Hipkins has confirmed his party has worked out what its fuel tax freeze would cost, but he will not put a number on it until Treasury opens the government’s books later this month.
Asked again on Monday whether the costings had been done, Hipkins replied “yes”, RNZ reported. He would not go any further than that.
“When the government open the books, we’ll set out our own fiscal plan,” he said.
“We’re not going to be increasing fuel tax by 25 cents a litre on New Zealanders in the midst of a cost of living crisis, because we know that that means that for many households, they won’t be able to make their own budgets add up.”
The argument is about how the country pays for its roads, and it has become one of the sharper exchanges of the campaign so far. Fuel excise duty is collected at the pump and flows into the National Land Transport Fund, which pays for building, maintaining and upgrading the roading network, along with public transport subsidies. When the tax does not rise, the fund either shrinks in real terms or has to be topped up from somewhere else.
On 31 August the government reset its own schedule. Finance Minister Nicola Willis and Transport Minister Chris Bishop announced that the 12 cents a litre increase due on 1 January 2027 had been scrapped. Instead fuel tax will rise by 5 cents on 1 January 2028, followed by three further 5 cent increases at six month intervals, with annual 5 cent increases resuming from 1 January 2030. Road user charges will move by equivalent amounts at the same intervals, and the increase scheduled for January 2027 has been pushed out to 2028 as well.
“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,” Willis said in that announcement.
Bishop put the case for eventually lifting the tax in blunt terms. He said that since 2020 the average cost of transport projects has risen by as much as 45 per cent while fuel excise has stayed frozen, falling in real terms by around 20 per cent. The government’s note to editors attributes part of that to bitumen, the binder in sealed roads, which it says has gone up 220 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,” Bishop said.
“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 cover the revenue it has given up, the government agreed to top up the National Land Transport Fund at an expected cost of $1.476 billion over the forecast period. Willis said $450 million of that would come from the fuel response contingency set aside in this year’s Budget, with the rest to be managed through and reflected in the Pre-election Economic and Fiscal Update.
Where that money actually comes from is not in dispute. Bishop told RNZ he would not be reprioritising anything inside the transport budget to cover it.
“As a matter of just logic, the government is in deficit, so we are borrowing our way through that, and the country is really aware of that,” he said.
ACT leader and Deputy Prime Minister David Seymour put it more plainly still. “If you’re not going to have new taxes, then borrowing is the alternative,” he said.
Labour’s position goes further than the government’s. It has committed to no increase in fuel excise duty at all for a full parliamentary term, and Hipkins has also ruled out raising road user charges over the next three years. Bishop has costed that promise at $4.6 billion. Hipkins rejects the figure, saying it counts costs that fall beyond the next term.
“It will be a lot less than that $4 billion figure that they’ve put out there,” Hipkins told Morning Report on 1 September.
What Labour has said it would do is trim the spending side rather than reverse what the government has already put in. Hipkins has confirmed he would not undo the roughly $1.5 billion in top-ups, and has said Labour would scale investment under the transport fund to fit the money available, prioritising maintenance and public transport over expensive new roads.
“There are some things that we won’t do. You know, we won’t be shovelling money into a gondola that the current government can’t answer questions about,” he said.
“We won’t be spending $300 million on roads of national significance that then get cancelled.”
He has not ruled out borrowing to fill the gap. Asked repeatedly whether he would commit to not borrowing more for the transport fund, Hipkins said he was not announcing Labour’s fiscal policy.
For drivers, the practical difference between the two positions is small in the next eighteen months and grows after that. Neither party is putting the tax up in 2027. From 2028 the government’s schedule adds 20 cents a litre in four steps through to the middle of 2029, with a further 5 cents on 1 January 2030. Labour’s freeze holds the rate where it is for the term. On a 50 litre tank, each 5 cent step is about $2.50, before GST is applied to the excise.
Both sets of numbers stay untested until Treasury publishes the Pre-election Economic and Fiscal Update on 29 September. That document sets the fiscal baseline every party has to work from, and Hipkins has tied Labour’s release of its own figures to it. Voters go to the polls on 7 November, which leaves about five weeks between the books opening and election day for the two costings to be argued out.
If you want to see where the parties sit on this and other issues before you vote, our voting tool lets you compare policies side by side. We have also looked at what has actually happened to the price at the pump in our breakdown of the real price of petrol.
What do you think, should fuel tax rise again from 2028 to keep the roads funded, or stay frozen while the cost of living bites. Leave a comment below and tell us how you would pay for it.
This article was written by AI, briefed to report the facts, hopefully without some of the bias people bring to the job π
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