When the half price and free fares for millions of New Zealanders end next month, will your tax savings really make up for it?
The National-led coalition government has a strong focus on putting money in people’s pockets. During the election campaign, National launched a “back pocket boost” tax calculator, targeted to the “squeezed middle” – AKA people who have some financial struggles but not so much that they are receiving benefits. Giving solid dollar amounts of extra money to voters is always a popular move, although the calculator doesn’t say which exact tax changes are being factored in.
National’s tax calculations and economic uncertainties have been well documented. Before the election there were allegations of a $1.5bn fiscal hole in its plan; according to the deputy prime minister, the hole is actually more like $5.6bn. However, the government has continued to insist that treats, AKA the government giving you a present of lower tax, will be revealed in May’s budget, probably. What the government isn’t talking about as much is what is becoming more expensive.
The half-price public transport fares are a prime example. The policy was initially rolled out by the Labour government in 2022, in tandem with removing 25 cents of fuel excise duty from each litre sold. Initially, half-price fares applied to everyone. After July 2023, under 25s, Community Service Card holders and Total Mobility users had access to the discount, and children under 13 rode for free. The policy was incredibly popular; over 71% of people surveyed in a November 2023 poll said the discounted travel prices should continue.
The policy followed a period of completely free public transport fares brought in as an economic stimulus and to support councils operating public transport networks following the first Covid lockdown.
From May 1, half-price fares will be removed for most people, although they will remain in place for Community Service Card holders and Total Mobility users – people with long term impairments who can access funding for wheelchair equipment, door-to-door transport and discounts on public transport. Other fare discounts, like tertiary and secondary student fares, will apply to some of those losing the discount. These discounts vary around the country, usually between 25 to 50% off adult fares.
Meanwhile, others will see their public transport costs effectively double overnight. Councils can choose to keep the discounts at their own expense, but will not be supported by the government to do so.
Simultaneously, the government’s new land transport plan is going to increase the costs of transport for everyone. Roads of National Significance don’t come cheap – and the draft government policy statement on land transport will make private transport more expensive, by increasing fuel taxes and vehicle registration fees.
Public transport is becoming more expensive to operate, and the draft policy statement, which will be finalised in June, expects councils to deliver “greater farebox recovery”, which will probably require councils to increase prices.
Councils have been very supportive of the fare discounts; as an example, Otago Regional Council has seen patronage continue to rise as the fare decreases have been in place; meanwhile, Greater Wellington Regional Council has just had its biggest month for public transport use ever. With operating costs high, price increases are already in place; after two years of deferring fare increases, Auckland Transport raised fares by an average of 6.2% in February, and Wellington’s Metlink will be raising prices by 10% in July. In their submissions to the land transport policy, councils said that the funding proposed in the plan would make it necessary for them to keep raising public transport prices.
Using National’s tax calculator and a trawl of press releases and action plans, The Spinoff has done some ballpark estimates of how much people in different demographics might gain or lose from the government transport policies enacted or promised so far, although it’s unclear how much smaller tax breaks will be because of the fiscal holes and coalition situation. This is also assuming that landlords aren’t passing the benefit of their tax cut to landlords, but maybe they’re doing the noble thing?
Twenty-three-year-old on minimum wage, full-time hospo job ($47,000 a year), living in Upper Hutt and taking public transport at peak times to work shifts 10 times a week
According to the tax calculator will be getting: $10.19 extra a week
Weekly travel costs in October 2023 approx: $15.1
Weekly travel costs after all the government’s policy changes are put into place: $30.2
Total: $4.91 worse off
Other factors to consider: Minimum wage increased from $22.70 to $23.15 on April 1. However, the government has been warned that this increase does not keep up with inflation. The current living wage is $26, which is increasing to $27.80 in September.
First-year student, takes public transport in Auckland two or three times a week to get to class or visit friends; income of $15,000 a year from working over the summer
Weekly savings according to National’s tax calculator: $1.35
October 2023 weekly transport costs: $7.80
Weekly transport costs after discounted fares ends (tertiary student fares): $10.50
Total: $1.35 worse off
Other factors to consider: National has also said it will reverse the “First Year Free” policy, so it applies to the final year of study instead. This hasn’t been implemented yet but will change the financial situation for first-year tertiary students, and mean those who don’t finish their degrees have more debt.
Single parent living in Christchurch, income $75,000, has an 11-year-old and a 16-year-old who take public transport to school (ie 10 rides per week); drives a plug-in hybrid 11km each way to work.
Weekly savings according to National’s tax calculator: $43.26
October 2023 weekly transport costs: $10. Paying $0 for their 11-year-old’s transport, paying half price for their 16-year-old’s transport at $10 a week.
After the government’s already implemented and in-progress changes: $24.18. Paying $38 per 1,000km RUC for the hybrid car ($4.18 a week), paying $10 for 11-year-old’s public transport and $10 for 16-year-old’s transport (Christchurch’s Metro is maintaining cheaper prices for youth, at the discretion of the council).
Total: $29.08 better off.
Other factors to consider: $25 increases in motor vehicle registration charges have been proposed for 2025 and 2026. The clean car rebate ended in December 2023; a new plug-in hybrid bought before this deadline would have received a rebate of $4,025. This calculation doesn’t take into account petrol prices and excise taxes – the short distances travelled mean that any PHEV wouldn’t need to use petrol.
Public servant in Invercargill, income $125,000, driving a petrol car to work five days a week, two dependent children aged 2 and 8 who walk to school/daycare with their other parent (working part-time and earning $20,000)
Weekly increase, according to National’s Tax Calculator: $84.70
October 2023 travel costs: exactly the same as now, give or take fluctuations in petrol prices.
Total: $84.70 better off
Factors to consider: future increases to the motor vehicle registration charge and the fuel excise tax, as indicated in the draft land transport policy
Car dealer who sells electric cars
After the change to the Clean Car Rebate: less money
Car dealer who sells petrol cars
After the change to the electric car subsidy: more money