An economist says the end of Auckland's fuel tax exposes the country's "fundamentally broken" way it funds infrastructure projects.
Shamubeel Eaqub told Breakfast the end of the tax is a "big deal" for Aucklanders, and will provide "immediate relief".
Fuel prices in the region were expected to drop by 11.5c today as the fuel tax expired.
"[It is] about a 4% savings ... it will have an immediate effect," Eaqub said.
The Government passed legislation in March to abolish the tax, which was implemented on July 1, 2018. It was meant to be in place for 10 years to raise money for infrastructure in Auckland. As of last September, the regional fuel tax had raised about $780 million.
Eaqub said the drop in fuel prices will also likely not lead to a major boost in the number of cars on the road compared to those who currently take public transport.
"Because petrol prices are just so volatile anyway, and the cost of petrol is where it is, this is not a sufficient change for people to change their behaviours.
"We have seen public transport choice being quite slow to recover after Covid, partly it's because people have changed the way they work.
"Many people are still working from home some of the time ... we're not seeing the level of public transport use as it used to be before Covid. It's slowly coming back, but this at the margin is not going to make much of a difference."
Economist Shamubeel Eaqub told Breakfast New Zealand will need to have some "tough conversations" to the "fundamentally broken" way the country funds infrastructure projects. (Source: 1News)
While the prices are currently lower than usual, Eaqub said the price of fuel historically changes "violently" and this will likely continue into the future.
"The global movements in petrol prices, oil prices, has a much bigger effect. You only have to think back to what we had seen during the Covid period or the invasion of Ukraine to know that these prices can move around violently.
"So enjoy the low prices at the moment, it might not last that long, but you know fill up your tank and think about those issues with rates and [national] debt maybe later."
Eaqub said current infrastructure projects will likely not be impacted greatly for now, but as New Zealand looks to the future, we will have to look at the way we fund infrastructure projects.
"There are no easy choices. Infrastructure is one of those things that everybody wants, but nobody wants to pay for it."
He added while Auckland is a "fantastic place to live", it will need to address the large infrastructure deficit with its growing population.
"We still don't have the right tools in place. Whether it's in terms of taxes, rates, or debt, we're running out of room to be able to fund our future infrastructure, and there's some very hard conversations to be had in our future.
"The fundamental problem is our local governments don't get the benefit of growth.
"So when we get population growth, economic growth, most of that benefit accrues to central government. Local governments get rates increases which are very small in comparison.
"As a result, they get to take on lots of debt, or increase rates to be able to fund that infrastructure.
"So there is an inherently, fundamentally broken structure of local government funding and financing in New Zealand. Until we crack that, we're not going to be able to solve it. But no politicians wants to do it, because it would be giving too much power away from the centre, to the locals."
SHARE ME