Road users may be charged more to cover the infrastructure cost blow outs, Treasury has warned. Photo / Andrew Warner
Road users may be charged more to cover the infrastructure cost blow outs, Treasury has warned. Photo / Andrew Warner
Treasury has warned the fast-rising infrastructure costs will put pressure on the Government's transport budget, which could force the Government to increase petrol taxes (FED) and road user charges (RUC).
This increase would be on top of the 25 cent per litre increase (and an equivalent RUC increase), which will take place in about three months' time, when the Government's temporary package to reduce transport costs comes to an end.
Labour's 2020 election manifesto committed the party to holding FED and RUC rates level this term after it increased fuel excise duty by 3.5 cents a litre each year in its first term, along with a similar RUC increase.
Transport Minister Michael Wood said Labour remained committed to that promise.
"As a Government, we are focused on investing in critical services and providing help for Kiwis who need it. We remain committed to no increases to FED and RUC rates this parliamentary term, above their level prior to the introduction of the transport support package," Wood said.
He said the Government was aware there were pressures on the transport budget, but these could be managed from baseline expenditure.
Waka Kotahi - NZ Transport Agency manages New Zealand's National Land Transport Fund. The Fund, which is worth about $4 billion a year, is used to build and maintain roads and public transport infrastructure and provide subsidies for public transport services.
Most of its funding comes from petrol taxes and road user charges, although the Government has recently topped up the fund itself in return for cutting fuel taxes by 25 cents to help households deal with the cost of inflation.
Twice a year, it puts together forecasts known as the Half-Year Economic and Fiscal Update and the Budget Economic and Fiscal Update. These forecasts look at costs the Government is likely to incur in the future.
Transport Minister Michael Wood. Photo / Mark Mitchell
Treasury also publishes a list of "risks" to those forecasts, which detail possible alternative scenarios that could upend the Treasury's basic assumptions of what will happen in the coming years.
At the Budget, the Treasury included a new risk in its BEFU forecast, which was a risk the Government might have to put up FED and RUC to pay for ballooning infrastructure costs incurred by Waka Kotahi.
"There is a risk that fuel excise duty (FED) and/or road user charges (RUC) will need to be increased in order to manage pressures on the National Land Transport Fund and enable repayment of a $2 billion loan, which is being provided to support delivery of the National Land Transport Plan 2021," the BEFU read.
It noted that if "FED and/or RUC were to be increased, it is likely that any increases would take effect no sooner than 1 July 2024" - after the election, and when the Government is likely to draw up a new plan for land transport, setting out spending priorities and revenue commitments.
National's Transport spokesman Simeon Brown acknowledged cost pressures in the transport portfolio, but said waste had to be slashed before taxes were increased.
"Whilst there are certainly cost pressures we are also seeing significant waste. [Wood] should make sure that every single dollar of tax revenue that's raised through fuel excise duty and RUC is making New Zealand transport better," Brown said.
He said National questioned the Government's decision to "siphon" funding into coastal shipping and rail through the land transport fund, which depleted funding for roads. Rail users pay track user charges back into the land transport fund.
Wood said the Government was also working on the future of the land transport revenue system. Waka Kotahi sounded the alarm last year that changes in driving habits, like the increased use of EVs, would deplete its coffers. The Government agreed to review the land transport system which could see something like road user charges rolled out to all drivers at some point in the not too distant future.
Wood said he was "upfront" about reforming the transport revenue system.
"In addition, as we continue the transition to carbon zero, I have been upfront that we need to find new tools to support the development of our transport sector in the future," Wood said.
Brown said National was "open minded around these issues".
"There are definitely some challenges around the way FED and RUC is charged and around the future of how the funding mechanisms of transport are undertaken," Brown said.
