This year's fuel tax increase cancelled

The planned fuel tax increase of 1.5 cents per litre which was due to come into effect on 1 July has been deferred while economic conditions remain tight, says Transport Minister Steven Joyce.

The increase was part of a package of changes agreed to by the government in March 2009, designed to make the funding of New Zealand’s land transport system simpler and more efficient. The package included the cancellation of the economically inefficient regional fuel taxes and their replacement with smaller national increases.

Mr Joyce says given the ongoing economic impact of the global recession and the Christchurch earthquakes, it makes sense to hold off on the increase for another year so as not to add further costs to the economy.

“The government’s $11 billion roading programme will not be significantly affected over the ten year plan for the programme. In fact, ongoing investment in transport infrastructure and services, which is a key economic driver, has never been higher.”

Officials are currently working on the next Government Policy Statement for Land Transport Funding (GPS), which sets out the government’s transport priorities and how they will be funded. The 2012/13 – 2021/22 GPS will include support necessary to repair Canterbury’s transport infrastructure.

Mr Joyce says it will also provide certainty for the rest of the country on the government’s commitments to supporting transport projects and economic growth.

“In order to deliver this programme of investment, it is likely that the government will need to increase FED and RUC in future years. These could be in the order of 2 cents a litre in 2012 and 1.5 cents a litre in 2013.

In New Zealand, all revenue from RUC and fuel excise is paid into a dedicated National Land Transport Fund (NLTF) to meet the investment required to support road users.

In 2009/10, NLTF revenue was over $2.6 billion, all of which was used to fund the land transport related activities outlined below