Budget '07: Regional petrol tax for Auckland, Wellington

Tell us what you think of the Budget Send us your views >> Read your views > Read all our Budget coverage > Full Budget details from the Treasury

Finance Minister Michael Cullen today confirmed motorists in Auckland and Wellington are likely to face a regional petrol tax.

Delivering his eighth budget in Parliament this afternoon, Dr Cullen said a 10c a litre charge would allow both cities to put new transport projects in place more quickly.

These included rail electrification and the Western Ring Route in Auckland, and Transmission Gully in Wellington.

Key points

:

* Regional fuel tax to pay for transport upgrades

* $600m over 6 years for urban rail

* Tax credits of up to $40 a week for Kiwisavers

* Business tax cut from 33 per cent to 30 per cent

* Extra funding for tertiary education

* Stricter auditing of property speculators

* $2m to prevent violence in Maori whanau and communities

Dr Cullen and transport minister Annette King said: "We know there is a great deal of interest in Auckland in the advantages offered by a regional fuel tax."

They said 10c extra a litre would raise about $120 million a year.

Auckland Mayor Dick Hubbard said he was delighted at the announcement.

He said: "The regional fuel tax (of up to 10 cents a litre), in conjunction with direct government funds, will give the green light to the desperately needed electrification of Auckland's train network, along with the completion of major road projects, particularly State Highway 20.

"Today is the culmination of three years' hard work. I've been fighting tooth and nail to get this across the line."

Each region will have to make proposals to the Government for a fuel tax, which will then consider the merits of the plans.

The Government is also considering putting all the money gathered from fuel taxes directly into transport spending, rather than holding it in general funds.

The AA's Mike Noon backed this move and added: "We welcome the requirement that councils must consult with motorists and the local community on both the amount of any proposed regional fuel tax and what it will be spent on."

Bold budget

Dr Cullen told Parliament the Budget was designed to lift savings and investment, create prosperity and help ensure secure retirement.

However, National leader John Key described it as a "hoax" which gave businesses tax cuts but made them pay for the Kiwisaver scheme.

The business tax rate will be cut from 33 per cent to 30 per cent from April next year, and from that date there will be a compulsory employer contribution to employees' Kiwisaver accounts. It will start at 1 per cent of gross income, reaching 4 per cent by 2011/12.

Anticipating opposition to compulsory contributions, he is offering to partially subsidise them with a company tax credit.

The Government is putting its own money in as well -- a dollar for dollar matching of up to $20 a week for individual Kiwisavers.

This credit comes in on July 1, when Kiwisaver starts.

"For a couple on the average household income, with one income earner entering Kiwisaver at age 30, their accumulated savings at age 65 are projected to be $380,000," he said.

"If the same couple each had the same income, accumulated savings at age 65 would be $440,000."

Dr Cullen said his budget, which cancels plans to lift tax thresholds, would not be inflationary and presented "the chance for a new beginning" in savings and investment.

He forecast that the compulsory employer contributions to savings would be taken into account during wage and salary bargaining.

There is significant new spending in the budget as well, although Dr Cullen is aiming to maintain surpluses of about $6 billion each year for the next four years.

* NZHERALD STAFF, NZPA