Some transport projects may have to be delayed after soaring fuel prices were projected to drain between $80m and $311m from the national funding pool that pays for New Zealand’s roads and public transport.
Internal documents released to 1News show officials have warned the Government's signalled move to shelve a fuel excise increase could deepen the deficit, potentially forcing NZ Transport Agency Waka Kotahi (NZTA) to renegotiate contracts and scale back highway maintenance plans.
The National Land Transport Fund (NLTF) — largely funded through fuel excise duty and road user charges — was projected to fall short by between $80 million and $311 million this financial year. The estimate was based on three Treasury scenarios, assuming oil price peaks of US$110, US$135, or US$180 a barrel.
As fuel prices rise due to the US war with Iran, motorists are cutting back on spending at the pump, reducing the fuel tax collected and contributing to the widening gap.
A Ministry of Transport briefing to Transport Minister Chris Bishop warned delaying the planned fuel excise increase would have a "significant impact" on NZTA’s current and future work programme, including state highway maintenance and improvements.
"This will take time and will likely incur significant risks, including potential contract re-negotiations as NZTA adjusts their work according to a lower revenue track," the briefing said.
Treasury also said it did not support delaying the fuel excise increase, warning relief would be "limited and poorly targeted" — benefiting those who use the most fuel rather than households under the greatest financial pressure — and past experience showed cutting fuel taxes was "challenging to reverse".
Prime Minister Christopher Luxon and Bishop have both described the proposed 12-cent increase, scheduled for January 1, as "unlikely" to go ahead.
The Government has begun rolling out a $32.9 billion National Land Transport Programme (NLTP) for 2024–2027 — a three-year investment plan setting out NZTA’s pipeline across roads, public transport and safety upgrades.
Central to the programme was National's flagship Roads of National Significance scheme, a suite of major highway projects across the country.
These include an alternative to the Brynderwyn Hills route, four-laning State Highway 1 between Port Marsden and Whangārei, and the long-planned Warkworth to Wellsford connection. Other projects span upgrades in Waikato and Bay of Plenty, resilience work in Gisborne and Hawke’s Bay, and major new links in Wellington, such as a second Mount Victoria Tunnel, and in Canterbury.
'Tricky situation' for Government – Bishop
In a statement to 1News, Bishop said it was too early to say exactly how large the impact would be, but acknowledged any reduction in revenue would impact which projects could be funded.
"It could mean some projects progress slower than previously planned."
He acknowledged the situation was difficult but said final decisions had not been made.
"The current fuel crisis is exacerbating existing funding challenges in the transport sector – revenue is constrained but New Zealanders expect delivery of reliable public transport services and a high-quality roading network.
"This is the tricky situation that we are trying to navigate and that’s why we aren’t rushing into making final decisions."
The fund's issues ran deeper than the current oil crisis, with Bishop saying Crown funding had increasingly been used to plug a growing gap.
"Fuel Excise Duty and Road User Charges haven’t increased since 2020 and haven’t kept up with inflation," he said.
The current three-year transport programme outlined $32.9 billion in investment, nearly double a decade ago, but road users were contributing roughly the same amount, around $14.3 billion, with $12.8 billion coming directly from the Crown.
"Capital contributions from general taxation have to compete with every other important priority, leaving the government with very difficult trade-offs," Bishop said.
Asked whether the Government would top up the fund or delay any projects ahead of the May 28 Budget, Bishop said there would be more to say in due course.
Finance Minister Nicola Willis told reporters at Parliament on Wednesday the Government would "rejig" its spending plans in the Budget to respond to the fuel crisis, including building buffers in case further support was needed, while "tightening the belt" elsewhere.
'You can't have it both ways'
AA principal policy adviser Terry Collins warned delaying planned fuel excise duty increases risked pushing back major projects and worsening long-term funding pressure.
"If you can't fund it, you can't do it."
He said a deferral would widen the gap in the National Land Transport Fund and affect delivery timelines for projects.
"Those Roads of National Significance… won’t get built on the time frames they’re talking about."
Collins said removing or delaying fuel excise duty might ease pressure at the pump in the short-term but would ultimately shift costs into the future.
He also echoed the Government’s view that it was not targeted to those who needed it most.
"I get the same benefit from filling up my Lamborghini, which does 15 litres per 100km — if I don’t put my foot down — as I would from driving a very efficient car. So really, it’s inequitable in some ways.
"Continuing to defer it all the time just makes the problem bigger. The longer you don't fund it adequately, the bigger the problem gets."
While confident supplies are sound, the Govt has reset the phases for dealing with any disruption to stocks. (Source: 1News)
The Government's widely-signalled decision to delay fuel excise increases had turned fuel taxes into a political issue, Collins said.
The planned January 2027 increase to the fuel excise duty was itself a deferral. National had pledged on the campaign trail at the last election to not raise fuel taxes during its first term in office.
"Now they've been caught up in some kind of cost-of-living thing, and they have to consider whether they do that or not," Collins said.
"If we’d just had it linked to CPI or small incremental increases, people wouldn’t notice it. But now it’s become a big political event."
However, it was "not impossible" that the increase could go ahead after all, Collins added.
"There's a lot that can happen between now and the end of the year when it was going to come in. One of them may be a solution around the Strait of Hormuz where you get back to some form of normality and the price drops down."
For now, he said there was a clear trade-off between easing pressure on motorists and maintaining investment in roads and infrastructure.
"You can't have it both ways. If you want to have your roads, you’ve got to pay for them."
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