Labour leader Chris Hipkins has indicated that approximately NZ$2 billion in transport funding will be cut to offset the party’s election commitment to abandon a planned 12-cent-per-litre fuel tax increase scheduled for January 2027. The government has previously opposed the tax hike but had not detailed how it would manage the resulting shortfall in the National Land Transport Fund.
Hipkins confirmed that transport spending will be “scaled” to align with available revenues, marking a shift from the 2022 approach when Labour borrowed funds to cover lost fuel tax income. The Treasury estimates each six-month delay in implementing the tax increment costs the fund about NZ$300 million. Over a three-year deferral, this translates into roughly NZ$1.8 billion in spending reductions. Labour also plans to finance a public transport fare cap from the land transport fund, which will require an additional NZ$195 million over three years. Together, these commitments necessitate around NZ$2 billion in cuts.
According to revenue projections from the previous Government Policy Statement (GPS), foregoing the 12-cent fuel tax boost decreases Transport Fund revenue by approximately 8.5%, with the fund expected to collect just over NZ$20 billion in the next three years. Hipkins noted the coalition government has yet to publish a formal land transport plan for this period and declined to specify which projects would be scaled back. He emphasized that similar fiscal restraint is being requested from local authorities and government departments to comply with future rate caps.
National Party finance spokeswoman Nicola Willis acknowledged the coalition’s decision not to implement the January fuel tax increase but criticized the lack of clarity on longer-term plans. Willis warned that cuts to transport funding could have widespread repercussions, including job losses and impacts on road maintenance and construction sectors. She stressed the importance of transparency regarding the potential economic effects on communities.
The National Land Transport Fund, principally financed through fuel taxes and road user charges, supports road infrastructure and public transport. Fuel taxes have not increased since 2020 and have lost around 20% of their real value due to inflation, according to Transport Minister Chris Bishop. The cancelled January 2027 increase was part of a phased series, with subsequent rises of 6 cents planned for 2028 and 4 cents for 2029. Labour has pledged no further increases throughout the current parliamentary term, whereas the coalition government has only confirmed the January 2027 hike will be postponed, leaving the future of later increases uncertain.