The government has cancelled a planned fuel excise increase next year, with the next increase now set to take effect from January, 2028.
Fuel excise was scheduled to increase by 12 cents per litre from January 1, 2027, with equivalent increases to road user charges.
Finance Minister Nicola Willis says the increase has been scrapped to help New Zealanders with the cost of living.
“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.”
She says the decision follows the government cancelling fuel excise increases proposed by the previous government and the Auckland Regional Fuel Tax.
Willis says inflation has fallen significantly from its peak of 7.3 per cent, wages are expected to grow faster than prices each year, and about 220,000 new jobs are expected to be created by 2030.
Transport Minister Chris Bishop says the average cost of transport projects has increased by as much as 45 per cent since 2020 while fuel excise has remained frozen.
He says continuing to freeze fuel excise increases would undermine the financial foundations of the land transport system.
“To prevent this, the government has agreed on a new, more sustainable path for fuel tax increases,” Bishop says.
Fuel tax will increase by five cents per litre on January 1, 2028, followed by three further five-cent increases at six-month intervals.
Annual increases of five cents per litre will then resume from January 1, 2030. Road user charges will be subject to equivalent increases at the same intervals.
Bishop says reducing funding for the land transport system to cover the change would require significant reductions in road maintenance, public transport services and infrastructure investment.
The government will instead top up the National Land Transport Fund to account for the reduction in fuel excise revenue, which is expected to cost $1.476 billion over the forecast period.
Willis says the cost will be partly offset by the $450 million fuel response contingency established through Budget 2026, with the remaining cost to be managed through and reflected in the PREFU.
“Cancelling next year’s planned fuel tax increases is the responsible choice,” she says.
“New Zealand can only afford to do this because of our government’s careful management of the finances, which has ensured the country is on track to return to surplus in 2028/29, earlier than forecast last year.”
