A scheduled series of increases to the fuel excise and road user charges is under renewed scrutiny after a recent jump in global oil prices. The rises are intended to bolster the national land transport fund, which pays for maintenance and new road projects, but critics say adding to pump prices during a cost of living squeeze would be politically and economically painful for motorists.
What is planned
From January next year, fuel excise and road user charges are due to increase by 12 cents per litre, with further rises of 6 cents per litre in January 2028 and 4 cents per litre in 2029. Together, the excise and RUC account for roughly 70 cents per litre of the current retail price of petrol and diesel, revenue that is directed into the national land transport fund for road upgrades, maintenance, and new construction.
Political arguments for and against the rises
Deputy Prime Minister and ACT leader David Seymour has argued the Government should proceed with the planned increases despite higher wholesale oil costs. He says failing to raise the transport fund’s revenue risks longer term deterioration of the road network, potential cancels of projects, and increased borrowing that could push costs onto future taxpayers.
National’s Transport Minister, Chris Bishop, has indicated officials recommended keeping the increases and even considering larger rises, but he has expressed concern about the political fallout given retail fuel is already at multi year highs. He described the popularity risk of adding 12 cents a litre at a time when petrol and diesel prices are elevated.
Opposition voices, including the Labour leader, have called for the Government to cancel the planned increases for next year amid consumer stress from higher fuel bills.
How fuel tax works and why the debate matters
Fuel excise is charged at a flat rate per litre, meaning the tax component does not fluctuate with retail prices. Meanwhile, the cost of road construction and repair is exposed to inflation and supply pressures, so the real value of the fund can decline if revenue is not adjusted. Postponing scheduled increases reduces short term pain at the pump, but it also reduces the money available for maintenance and new works, potentially leading to deferred projects or higher government borrowing.
