The government has cancelled a planned 12c per litre fuel excise increase due in January. Labour has promised no fuel tax increases for a full three-year term. National and Labour are now accusing each other of leaving a hole in the transport budget, writes Henry Oliver in today’s excerpt from The Bulletin.

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Yesterday, the government cancelled the 12c per litre fuel excise increase due to come in next January, replacing it with a series of smaller rises phased in from 2028, 1News reported. Prime minister Christopher Luxon said the decision would give New Zealanders “more time to recover from a prolonged period of post-Covid economic pain.”

Instead of the 12c rise from 1 January 2027, the next increase will take effect from 1 January 2028 at 5c per litre, with further increases every six months totalling 20c by the end of 2029, RNZ’s Tuwhenuaroa Natanahira reported.

To cover the lost revenue, the government plans to top up the National Land Transport Fund at an expected cost of $1.5bn over the forecast period, using its $450m fuel crisis rainy day fund and finding the rest somewhere else.

Transport minister Chris Bishop told 1News the increases could not be delayed indefinitely without damaging the transport network: “Unless they begin again soon, the financial foundations of our land transport system will be undermined”.

Labour goes further

Labour has promised to go further, committing last week to freeze fuel excise and road user charges for a full three-year term if elected, RNZ’s Giles Dexter reported last week. Chris Hipkins said “New Zealanders simply cannot afford an extra 22c a litre on their fuel bills.”

Finance minister Nicola Willis said Labour’s plan would leave a $4.6bn shortfall in transport funding and require “significant” cuts to road maintenance, public transport and infrastructure investment, 1News reported.

‘A race to the bottom’

Transport and infrastructure leaders have accused both parties of cowardice. AA fuel spokesperson Terry Collins told RNZ’s Russell Palmer the announcements were “purely political” and a problem of the coalition’s own making. “When they came into power, they wiped the 3c annual increases that Labour had announced. If they had maintained those, they wouldn’t be in the same predicament that they are today.”

Infrastructure NZ chief executive Nick Leggett said the decision was because of “election season” and would end up costing the country more. “I understand the politics, but unfortunately it appears to have become a bit of a race to the bottom,” he said. “The right decision for New Zealand now and in the future would be to let those fuel excise increases continue as planned, and it will take political courage to do that.”

More finger pointing and blaming

Bishop said Labour was being “irresponsible” by ruling out increases for an entire term, while Luxon challenged Hipkins to explain the cuts to the communities who would miss out on that funding. “He needs to go around to local communities, local councils, and local areas and explain to them what he is removing,” he said, warning of fewer bus and train services and “a lot of resilience investments that, frankly, the country needs.”

Hipkins, in response, accused the government of using the rainy-day fund as a “slush fund.” “They said that was for timely, targeted – what was the other thing that they said? – temporary. Doesn’t seem that way anymore, does it? This was their slush fund that they set up for election year … this is how they’ve chosen to spend it.”

So, is this governing or electioneering?

Asked whether the timing was driven by the election, Luxon rejected the suggestion, saying the Government responded “to changing circumstances and changing geopolitics,” 1News reported. In March, Luxon had told Breakfast that the planned increase was “possibly unlikely”. But budget documents released in May listed the potential deferral as a fiscal risk and Treasury estimated a six-month delay would cost about $300m in lost transport revenue.

Both parties are now trying to claim the high ground on fuel costs, while accusing the other of underfunding the country’s transport infrastructure. As Stuff’s headline to Jenna Lynch’s analysis from this morning put it, echoing a criticism of National’s student loan policy discussed here yesterday, they are “taking turns kicking an expensive can down a potholed road.”