The government is reconsidering the timetable for its planned fuel tax increases as it deals with the fallout from an international fuel supply shock. Transport Minister Chris Bishop signalled at the Automobile Association's annual conference that hikes scheduled to begin next year may be postponed while officials look at how best to respond to sharply higher petrol prices and changing travel patterns.
What was planned and what might change
Under current plans, the government intended to lift fuel excise duty by 12 cents per litre from January 2027, then increase it by 6 cents per litre in 2028, followed by annual rises of 4 cents per litre thereafter. Fuel excise is charged as a fixed amount per litre, so it does not adjust automatically with wholesale or retail fuel price movements.
Mr Bishop said the decision not to cut fuel excise during the crisis had deferred the broader question of how to fund transport infrastructure. He told the Automobile Association's annual conference that National campaigned on not lifting fuel taxes in its first term and maintained that stance was "the right thing to do" in a cost of living crisis. Speaking publicly at the conference, he added, "I have to be honest with you, the idea that we would raise fuel tax during a fuel crisis doesn't seem like a starter to me. So we're thinking hard about these funding challenges. They are real, and they do exist."
Those comments point to a willingness within government to hold off on the previously signalled increases while assessing the immediate economic impacts of the fuel shock on households and businesses.
Longer-term shift to user-pays and road user charges
The government remains committed to replacing fuel excise with road user charges, a system already applied to diesel and electric vehicles. Bishop argued that the transport system should operate on a user-pays basis, but said increasing reliance on general taxation has been occurring instead.
Delaying excise increases will not, by itself, change the policy direction of moving revenue collection to RUCs. But any postponement raises practical questions about the timing and scale of future RUC adjustments and how the government will bridge transport funding shortfalls in the meantime.
