5c petrol tax rise to fund better roads

Petrol will rise 5c a litre from April 1 as the Government increases petrol tax to pay for better roads.

The money will go towards a $2 billion spend-up on transport infrastructure throughout NZ over 10 years, 35 per cent of which will be spent in the Auckland region.

The increase brings the total portion of taxes, levies and other charges on petrol to about 60c a litre - the rest going to the oil companies and retailers.

Petrol excise itself will rise from 36.2c to 41.2c a litre, with all of the 5c rise going on roading.

Confirmation of the increase yesterday puts paid to a suggestion by Finance Minister Michael Cullen last October that the rise might be deferred because of high oil prices.

Customs Minister Rick Barker said yesterday petrol prices had fallen since then and were now "stabilising somewhat", so it was prudent to avoid delaying the increase.

He said retail petrol prices had fallen from a peak of $1.27 a litre in October to $1.17 a litre in mid-February.

Mr Barker told Parliament last year that the rise could add about $1.60 a week to the average household's weekly spending on petrol, or about $83 a year.

Road-user charges are also increasing. They will rise an average of 24 per cent for light diesel vehicles weighing less than five tonnes.

Both rises were announced in December 2003 to provide $207 million a year more for roading.

The money is being allocated on a population basis.

"Some have suggested that the country should borrow the money for improving the roading infrastructure, obviously thinking these loans don't have to be paid back and that somehow loan money is free - in other words voodoo economics," Mr Barker said.

"While road users will be paying more for petrol, the benefits of transport improvements are vast, bringing wide-ranging improvements to the average household's living standards."

As well as the April 1 rise, motorists can expect an increase every year on April 1, as a bill passed into law last month indexes petrol to inflation.

Mr Barker said that at expected average inflation rates, each annual increase would be about half a cent a litre.

Automobile Association spokesman George Fairbairn last night attacked the increase.

"The petrol price has not dropped. You had the example of BP last week trying to push it up by 5c a litre and the others wouldn't play ball."

The rise, although financing new roads, would just increase costs right across the economy.

Mr Fairbairn said the Government still continued to take 18c of the petrol excise for general Government spending, not transport needs.

"So, in effect, the motorists are being asked to pay a tax for general revenue when, if there was a need for additional tax, it should be across the board and not simply on motorists who use petrol."

National Party transport spokesman Maurice Williamson said there was no need for such a rise with the Government running a surplus of more than $6 billion.

"The motorist is already being socked with unbelievably high oil prices and this is just another whammy on top of it.

"Our view has been all along that the 5c should be spent on roading but it doesn't need to be an extra tax."

Transport Minister Pete Hodgson said the investment package was of an "unprecedented size" and was central to maintaining a healthy economy.

"For the first time in years it provides the certainty that contractors and the wider business community need to make investment decisions."