Delaying Road Tax Increases Risks Higher Costs Later, Freight Industry Warns

New Zealand’s road freight industry is warning that delaying planned increases to fuel excise duty and road user charges may ease pressure on motorists in the short term, but risks creating a much larger transport funding problem for the next Government.

Ia Ara Aotearoa Transporting New Zealand says the decision to defer previously planned road tax increases amounts to “kicking the can down the road” at a time when the cost of maintaining and improving the country’s transport network is already rising sharply.

The warning follows the Government’s announcement that, if re-elected, the planned 12-cent-per-litre increase in fuel excise duty from January 2027, followed by another 6-cent rise in January 2028 and annual 4-cent increases from 2029, would not proceed.

Instead, the Government has proposed a slower pathway, beginning with a 5-cent-per-litre increase from January 2028, followed by three further 5-cent increases every six months through to 2030.

Fuel excise duty and road user charges have not increased since 2020.

Transporting New Zealand says that while deferring the increases may provide some short-term relief during a cost-of-living squeeze, the underlying funding problem remains.

What is changing

Road funding setting	Previous plan	Newly announced approach
January 2027	+12c per litre	No increase
January 2028	+6c per litre	+5c per litre
From 2029	+4c annually	Three further 5c increases every six months
Immediate impact	Faster rise in road charges	Slower increase
Longer-term issue	More revenue sooner	Larger funding gap in the short term

The Government has also acknowledged that pausing the increases will create a shortfall in the National Land Transport Fund, with $1.476 billion expected to be provided from alternative funding sources.

Transporting New Zealand chief executive Dom Kalasih said the issue is not simply about whether motorists pay more at the pump.

It is about whether the country can continue funding a road network that freight operators, commuters, businesses and communities rely on every day.

“Flatlining revenue from fuel tax and RUC alongside a significant increase in road construction costs means the actual purchasing power of our National Land Transport Fund has plummeted,” Kalasih said.

The cost-of-living argument cuts both ways

The Government’s announcement comes only days after Labour said it would not increase fuel excise duty or road user charges for the next three years as part of its response to the cost-of-living crisis.

On the surface, the political argument is easy to understand.

Higher fuel taxes affect motorists directly. For households already dealing with expensive groceries, electricity, rent, mortgages and other costs, another increase at the pump is unlikely to be popular.

But the freight industry argues there is another side to the equation.

If roads deteriorate, congestion worsens or freight routes become less efficient, transport companies face higher operating costs.

Those costs do not stay with trucking companies.

They eventually flow through to the price of goods.

“An inefficient transport network imposes extra costs on everyone,” Kalasih said.

“Poor roads increase freight times, spike vehicle maintenance costs, and waste fuel. These costs are inevitably passed down to consumers, for example, on supermarket shelves.”

His argument is that underinvestment in roads can itself become a hidden contributor to the cost-of-living problem.

A truck taking longer to complete a journey costs more to operate.

More fuel is used.

Vehicle components wear out faster.

Deliveries become less predictable.

Businesses then have to recover those additional costs somewhere.

Transporting New Zealand describes this as a “hidden tax” on almost every product moved around the country.

Why freight is central to the debate

The road freight sector occupies an unusually important position in New Zealand’s transport system.

According to Transporting New Zealand, road carries around 93 percent of the country’s freight task when measured by tonnage, and approximately 75 percent when measured by tonne-kilometres.

The industry employs more than 34,000 people across over 4,700 businesses and has annual turnover of around $6 billion.

That means road quality is not simply an issue for truck operators.

Almost everything from food and building materials to retail products, medical supplies and manufactured goods depends at some stage on road transport.

For rural and regional communities, the dependency can be even greater.

A poorly maintained bridge or road can affect access to farms, processing facilities, ports and towns.

A growing funding problem

The debate ultimately comes down to one difficult question: if motorists and road users are not paying more, where will the money come from?

Transporting New Zealand has welcomed the Government’s acknowledgement that deferring fuel excise and RUC increases creates a funding gap.

It has also welcomed the commitment to provide $1.476 billion from alternative sources.

But that does not resolve the longer-term issue.

Road construction and maintenance costs continue to rise.

If tax and road-user revenue remain relatively flat while expenses increase, the National Land Transport Fund can buy less work each year.

That potentially means fewer upgrades, delayed maintenance or greater reliance on funding from elsewhere in the Government budget.

Each option carries a trade-off.

Money redirected to roads cannot simultaneously be spent on health, education, policing or other public services.

Borrowing more carries its own cost.

And allowing the network to deteriorate simply moves the cost elsewhere.

Next Government likely to face difficult choices

Kalasih said whoever forms the next Government will face some difficult decisions.

“There will be trade-offs, and it’s all road users who will pay the price,” he said.

Transporting New Zealand says it will seek clarification from the next Government about how it plans to deliver the commitments contained in the current National Land Transport Programme.

That question could become increasingly important during the election campaign.

Political parties can promise to delay fuel tax increases, but they will still need to explain how road maintenance, renewals and new infrastructure will be funded.

The key test will be whether alternative funding is sustainable or simply temporary.

Is delaying increases actually saving motorists money?

For drivers, a deferred increase clearly means a smaller fuel bill in the immediate term.

But Transporting New Zealand’s argument is that the broader calculation is more complicated.

A household may save money through lower fuel taxes but pay more indirectly if transport inefficiencies increase the cost of food and other goods.

A business may avoid higher road-user charges but spend more maintaining vehicles damaged by poor roads.

A government may avoid an unpopular tax increase but eventually face a much larger infrastructure bill if maintenance is deferred.

In other words, the debate is not simply about whether people pay.

It is about when they pay, how they pay, and whether delayed investment ultimately costs more.

Freight sector preparing its election demands

Road investment will be one of the major issues in Transporting New Zealand’s 2026 Election Platform, which is due to be released on Tuesday, 8 September.

The organisation says its recommendations to the next Government will focus on five priority areas:

• fuel and supply-chain resilience
• infrastructure
• safer roads through smarter enforcement
• supporting the future workforce
• efficiency and lower-emission road freight

The election platform will be launched online and at events in Wellington, Christchurch, Dunedin, Hamilton and Hastings.

The sessions will be open to members and non-members.

The political challenge is bigger than fuel tax

The immediate debate may be about cents per litre, but the wider issue is about how New Zealand pays for transport infrastructure in an environment of rising construction costs and growing pressure on public finances.

Both major political blocs may find there is an electoral advantage in promising relief from road charges.

The harder task begins after the election.

The next Government will still inherit ageing roads, expensive infrastructure projects, maintenance obligations and a freight network that businesses depend on.

Transporting New Zealand’s warning is therefore relatively simple.

Delaying tax increases may make the problem less visible today.

It does not make the cost disappear.

And if road investment fails to keep pace with what the network requires, New Zealanders may eventually pay for it somewhere else, whether through higher prices, slower freight, damaged vehicles or deferred infrastructure.

Source: Ia Ara Aotearoa Transporting New Zealand, 31 August 2026.