Election silly season bulldozes sensible transport policy (again)

Last week it was deeply frustrating to see major parties of both the government and opposition say they won’t increase fuel taxes and road user charges, including Labour saying they won’t increase them at all for the next three years.

As reported by Stuff:

There are two reasons this is really bad policy-making.

The first is that the transport system desperately needs the funding that steady increases in fuel taxes and road user charges provide, just to keep up with inflation and maintain current programmes.

The second is that this runs completely contradictory to the recommendations of the National Infrastructure Plan from Te Waihanga/ the Infrastructure Commission. Parties across the political spectrum have spent the past year being all ‘high and mighty’ about how much they support this plan, and how they’re finally going to move past silly partisan political posturing on infrastructure.

So what now?

Let’s start with the first reason and dive into a little bit more detail.

Where will our transport funding come from?

Over the past couple of months Transport Minister Chris Bishop has been slowly letting the cat out of the bag about how incredibly stuffed our transport funding situation is.

Firstly he essentially cancelled most of the so-named Roads of National Significance [RoNS] for the foreseeable future. Then he somewhat quietly released a “draft GPS but not really a draft GPS“, which sets out the broader funding situation for land transport. (Document archived here: Ministerial-statement-on-land-transport-13-August-2026)

Here’s the key section:

There’s a lot to unpack here, but basically:

• The total bars show how much money the government as a whole is spending on transport (or plans to, for future years).
• The orange bars show how much money is coming from fuel taxes (Fuel Excise Duty, or FED) and road user charges (RUC).
• The black and the grey are Crown funding and loans from general taxation, respectively. These loans need to be paid back, which presumably explains why 2034 has a slightly random drop in net revenue.

But that’s not the most important thing about the graph above, and the text around it. The two most important things are:

1. The orange bars assume future increases in FED/RUC of 12 cents per litre in 2027, then 6 cents per litre in 2028, and then annual increases thereafter of 4 cents per litre (and RUC equivalents). Otherwise the orange bar would be a lot lower – presumably at around the $4 billion per year mark it is in 2026 rather than the $6b/year mark it is in most future years.
2. All of this money is needed just to cover the basics: completing projects that are already under way; servicing debt; and funding continuous programmes like public transport services, road policing, and road maintenance – and, meeting PPP payments.

If around $6 billion per year is needed just to fund these basics, and funding the basics requires quite big increases to FED and RUC, and now both major parties are walking away from that… we are in really big trouble looking ahead.

It’s hard to work out exactly how much less funding might be available if National or Labour go ahead with their deferrals/cancellations of FED/RUC increases – but we’re probably talking in the vicinity of a $13-15 billion fiscal hole over the next decade if increases planned for the next three years don’t happen.

And, based on the projections of revenue & expenditure from this document received via OIA from MCERT, this really does not look good.

That dark line cutting across the future expenditure is what will happen to transport funding if the government – of whichever stripe – doesn’t raise fuel taxes and road user charges. You can see how it slices across continuous programmes: maintenance, renewals, operations.

What this means is that future trade-offs won’t be about which major new project can or can’t be funded. Forget being anywhere near having a single spare dollar to invest in anything new, no matter how necessary.

Rather, we will be rapidly facing serious compromises on truly fundamental stuff – like whose public transport services get cut, where; or which large parts of the transport system we simply can’t continue to maintain.

Are both major parties abandoning the National Infrastructure Plan?

The second issue with last week’s announcements is that they completely contradict what both major parties have been saying over and over again about the Infrastructure Commission’s National Infrastructure Plan. How much they like it, how proud they are about getting more bipartisan agreement, and how they’re putting short-term petty politics aside when it comes to infrastructure, etc.

Let’s look at what the National Infrastructure Plan says about how the transport system is funded, and what needs to change.

Firstly, the National Infrastructure Plan says transport should return to being mostly user funded – so Crown money from general taxation can be freed up for use on things like hospitals and schools (and emergency recovery events) that are far harder to fund through user charging:

Return to a system funded predominantly by user charges. Doing so will give agencies like NZTA direct feedback on whether users are prepared to pay for investing in and operating land transport networks. There are some possible exceptions, including the ongoing use of rates to co-fund local roads and public and active transport, as well as cross-subsidies for public transport, active transport and rail initiatives that allow for more efficient use of existing networks. Crown funding can also play a role for emergency recovery events. In general, the funding model should shift to a state where Crown loans and grants aren’t required for land transport.

Then the Plan explains how these user charges haven’t kept up with inflation. This means their real value has declined massively over time, requiring ongoing top-ups from general taxation:

Revenue levels should reflect the cost of operating, maintaining, renewing and improving networks. There is currently no prescribed methodology for setting fuel taxes or road user charges, meaning charges can end up too high or too low.⁷¹For example, the Government may hold user charges down during periods of high inflation even as the cost of operating the network rises. In recent years, revenue collected per kilometre travelled has been about 30% below the historical average despite elevated investment levels, reflecting short-term decisions to cut petrol taxes in response to inflation.⁷² Transport also generates wider costs, like air pollution and the health system impacts of road crashes, that are not currently factored into user charges, but could be considered as part of future revenue-setting approaches.

The plan also notes the dramatic reduction in value (or, “purchasing power”) of the National Land Transport Fund since the last time fuel duty and road user charges were raised:

User charges also need to reflect users’ ability and willingness to pay. Charges may need to increase to overcome price freezes, which contributed to the NLTF’s inflation-adjusted purchasing power falling 21% since the last increase in FED and RUC.

Where does this leave us?

The long and short of all this is that both major parties have basically tossed the National Infrastructure Plan onto the bonfire, so they can revert to their worst instincts of politicking over who is promising to increase taxes and who isn’t.

But the really tough questions about how to fund the transport system won’t go away.

Even with the RoNS now essentially cancelled, the next government will have to face seriously tough choices when it comes to transport. And if they’re going to continue to let the National Land Transport Fund shrink in real value, those decisions just got way harder.

Everyone, from media to voters to advocates and industry, should be asking these questions, and more:

• Will the next government take a huge amount of Crown funding away from hospitals and schools (and emergency response preparedness) and instead spend it on topping up the transport basics?
• Will they underfund maintenance, and let our roads fall apart?
• Will they have the guts to cancel the Warkworth to Te Hana PPP and save the country billions?
• Will they gut public transport services around the country, just when New Zealanders most need options that provide alternatives to driving and reduce our collective exposure to fuel price shocks?

And by the way, if our elected leaders won’t sensibly fund the maintenance and operations to keep going with the transport infrastructure New Zealand already has, there is zero chance of any new major projects  – so get ready to wave goodbye to new rapid transit lines like the NW Busway, let alone a new harbour crossing for Auckland.

Related reading

Henry Cooke, The Post (opinion), 29 August 2026: National’s attacks on Labour’s fuel tax freeze incredibly hypocritical

The last time fuel taxes went up was in July 2020. In the six years since then pouring concrete has got a lot more expensive – civil construction inflation is up a cumulative 36%, so whatever $1 million bought you back then can now only be had for $1.36m. But the amount raised by fuel tax for every litre of petrol has stayed constant.

Of course, New Zealand hasn’t stopped building or maintaining roads in that time – the nation has just stopped paying for them through fuel taxes. The land transport programme has seen $8.9 billion in top-ups over the last six budgets, not including either the Roads of National Significance programme, loans made to the fund from the Crown, or the forward spending forecast in this year’s Budget. Add those in and you get $29.6b – including roughly $20b under [Nicola] Willis herself.

This is not how the “user-pays” transport system is meant to work, and means billions and billions of dollars that could be spent on hospitals or schools or frigates or superannuation is going to roads. And it would get far worse if another three years of fuel tax increases were deferred, as Hipkins has pledged.

Kerre Woodham, Newstalk ZB (opinion), 28 August 2026: Politicians need to stop ruling out raising the fuel tax

The thing with taxes and excise duties, tariffs, whatever you want to call them, they provide an income. Without money coming in, as Transporting New Zealand pointed out, there’ll be no money for new roads, for roading repair and maintenance, and any money saved from not having to pay more for petrol will show up in the cost of living through the increased price of goods because it’s going to take longer for trucks to get places.

…

Because the issue is, if you’re not putting more money into roads, you get potholes everywhere, you get bridges that get washed away in major cyclones that can’t be rebuilt, you get road closures that can’t be fixed up.

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