The Government has abandoned a planned 12 cents per litre fuel excise increase due to take effect on 1 January 2027, opting instead to postpone rises until 2028 and to spread subsequent increases over several years. Road user charges will rise in parallel when fuel excise increases occur.
What changed
A previously scheduled annual rise in the fuel excise, which would have started with a 12 cents per litre hike on 1 January 2027, has been cancelled. The Government will now implement a 5 cents per litre increase from 1 January 2028, followed by three further 5-cent increases at six-month intervals. From 1 January 2030, annual increases will resume at 5 cents per year. Equivalent increases to road user charges will apply at the same intervals.
The fuel excise and RUC together account for roughly 70 cents per litre of the pump price for petrol and diesel. Revenue from these charges is directed to the National Land Transport Fund, which pays for road maintenance, upgrades and new transport projects.
Why the Government delayed the rise
Finance Minister Nicola Willis framed the decision as providing households and businesses additional breathing space after a period of economic strain following the Covid pandemic and recent global uncertainty. The Government said postponing the larger, one-off rise will make the transition to higher fuel taxes more gradual and manageable while the economy recovers and wages grow.
Transport Minister Chris Bishop warned that while pausing excise increases was justified during the worst of the economic turmoil, continuing to freeze fuel tax indefinitely would weaken the financial base of the land transport system. He pointed to increased costs for transport projects since 2020, noting that construction and delivery expenses have risen substantially while the real value of the excise has declined.
Ministers described the new schedule as a “more sustainable path” for fuel tax increases, intended to balance short-term cost-of-living concerns with the need to maintain roads and transport services over the medium term.
