Major transport projects across New Zealand may face delays as soaring fuel prices are projected to drain between $80 million and $311 million from the National Land Transport Fund (NLTF), the pool used to finance roads and public transport.
Internal documents released to 1News reveal that officials have warned the government that its signal to shelve a planned fuel excise increase could deepen this deficit. Such a move could potentially force the NZ Transport Agency Waka Kotahi (NZTA) to scale back highway maintenance plans and renegotiate existing contracts.
The Financial Shortfall
The NLTF, which relies heavily on road user charges and fuel excise duty, is projected to fall short this financial year. Treasury based these estimates on three scenarios involving oil price peaks of US$110, US$135, or US$180 a barrel.
The widening gap is attributed to a decrease in spending at the pump by motorists as fuel prices rise due to the US war with Iran, which in turn reduces the amount of fuel tax collected.
Political and Economic Tension
A planned 12-cent increase to the fuel excise duty, scheduled for January 1, has been described as “unlikely” to proceed by Prime Minister Christopher Luxon and Transport Minister Chris Bishop.
However, this position is met with warnings from government agencies:
- The Ministry of Transport: A briefing to Minister Bishop warned that delaying the increase would have a “significant impact” on NZTA’s future and current work programmes, including improvements and state highway maintenance. The briefing noted that adjusting work to a lower revenue track “will take time and will likely incur significant risks.”
- Treasury: Officials stated they do not support delaying the increase, arguing that the resulting relief would be “limited and poorly targeted,” primarily benefiting those who use the most fuel rather than households under the greatest financial pressure. Treasury also noted that cutting fuel taxes has historically been “challenging to reverse.”
Infrastructure at Risk
The government has begun implementing the $32.9 billion National Land Transport Programme (NLTP) for 2024–2027. A central component of this plan is the “Roads of National Significance” scheme, which includes several major highway projects that could be impacted by funding shortages:
- An alternative route to Brynderwyn Hills.
- The four-laning of State Highway 1 between Port Marsden and Whangārei.
- The Warkworth to Wellsford connection.
- Upgrades in the Bay of Plenty and Waikato.
- Resilience work in Hawke’s Bay and Gisborne.
- Major links in Canterbury and Wellington, including a second Mount Victoria Tunnel.
The Government’s Position
Transport Minister Chris Bishop acknowledged the “tricky situation,” noting that revenue is constrained while the public expects high-quality roading and reliable public transport. He stated that any reduction in revenue “could mean some projects progress slower than previously planned,” though final decisions have not yet been made.
Bishop highlighted that the fund’s issues extend beyond the current crisis, noting that Fuel Excise Duty and Road User Charges have not increased since 2020 and have not kept pace with inflation. While the current transport programme outlines $32.9 billion in investment, road users contribute roughly $14.3 billion, with $12.8 billion provided by the Crown.
Finance Minister Nicola Willis indicated that the government would “rejig” spending plans in the upcoming Budget to respond to the fuel crisis, which may include “tightening the belt” in other areas and building buffers for further support.
Expert Warnings
Terry Collins, principal policy adviser at the AA, warned that the government “can’t have it both ways,” asserting that if the government wants roads, they must be paid for. Collins argued that a deferral would widen the NLTF gap and that the Roads of National Significance “won’t get built on the time frames they’re talking about.”
Collins further described the delay of fuel excise increases as “inequitable,” noting that the benefit is shared by those driving inefficient luxury vehicles and those in efficient cars alike. He suggested that the issue has become a “big political event” because it was not linked to CPI or compact incremental increases.
Possible Next Steps
Further clarity on whether the government will top up the fund or delay specific projects is expected following the May 28 Budget.
While the 12-cent increase is currently viewed as unlikely, Collins noted it is “not impossible” that it could still go ahead before the end of the year, potentially if a solution regarding the Strait of Hormuz leads to a drop in fuel prices.
