Government scraps 2027 fuel tax rise, pushes increases out to 2028
Last Updated on September 1, 2026
The planned 12-cent-a-litre fuel excise increase due to take effect on 1 January 2027 has been cancelled, with the Government instead spreading smaller increases from 2028, Finance Minister Nicola Willis and Transport Minister Chris Bishop announced through Beehive.govt.nz.
Fuel excise was scheduled to resume annual increases next year after a period on hold, with a 12 cent per litre jump alongside equivalent rises to road user charges. That increase has now been scrapped entirely. Instead, the first increase of 5 cents a litre will take effect from 1 January 2028, with further 5-cent rises every six months after that, before settling into annual 5-cent increases from 1 January 2030. Road user charges will rise in step at the same intervals.
Willis said the delay gives households “more time to recover from the period of post-Covid economic pain and recent uncertainty in the Middle East.” It follows an earlier decision by the Government to cancel fuel excise increases proposed by the previous Government, along with the Auckland Regional Fuel Tax, which had applied specifically to Auckland motorists before being axed.
Why officials say a delay can’t go on forever
Bishop said the cost of transport projects has risen by as much as 45 percent since 2020, while fuel excise has stayed frozen and fallen by around 20 percent in real terms once inflation is accounted for. That 45 percent figure comes from a weighted measure tracking construction costs such as steel, concrete and aggregate, but is pushed up significantly by NZTA‘s heavy exposure to bitumen, which has climbed 220 percent.
“Unless they begin again soon, the financial foundations of our land transport system will be undermined,” Bishop said, warning that without new revenue, New Zealanders would face “roads littered with potholes, cancelled projects, and an inability to respond when communities are cut off following severe weather events.”
Related: NZTA unveils 30-year strategy to ease congestion on Auckland’s motorways
How the gap will be covered
Rather than cut road maintenance, public transport services or infrastructure spending to make up the shortfall, ministers have agreed to top up the National Land Transport Fund directly. Bishop said officials advised that funding cuts on the scale needed “would not be credible without serious reductions in funded services.”
The top-up is expected to cost $1.476 billion over the forecast period. Willis said part of that will be covered by the $450 million fuel response contingency set up in Budget 2026, with the remainder managed through the Government’s finances and reflected in the upcoming Pre-election Economic and Fiscal Update.
Willis linked the ability to delay the tax to the state of the books more broadly, pointing to inflation falling from a peak of 7.3 percent, wages expected to grow faster than prices, and an estimated 220,000 new jobs forecast by 2030. She said the country remains on track to return to surplus in 2028/29, earlier than previously forecast.
What it means at the pump
For Auckland drivers, the immediate effect is that fuel and road user charges will not rise on 1 January 2027 as previously scheduled, a saving compared with what would otherwise have been a 12-cent jump. The first increase under the new schedule, 5 cents a litre, won’t land until 1 January 2028, with three further 5-cent rises at six-month intervals after that before increases settle into a steady annual 5-cent pattern from 2030.
Willis said the Government would “keep a watchful eye on international events” given ongoing uncertainty in the Middle East, and would look to support New Zealanders further if that uncertainty pushes fuel prices higher before 2028.
Source: Beehive.govt.nz.
Photo: “Grand Canyon Desert View Gas Station 03450” by Grand Canyon NPS, CC BY 2.0, via Openverse.
