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Transport Package - Questions and Answers

Questions and Answers

General Fuel Tax

Q1 How will the average Aucklander and New Zealander be better as a result of this package?

Funding for Auckland will be focussed on transport demand management, further improving public transport and an acceleration of some roading projects.

Funding in the major urban areas outside Auckland will focus on transport demand management and improvements to passenger transport services and, along with rural areas, on worthwhile roading improvements.

Q2 What will the increase mean for the average motorist?

For the largest group of vehicle owners affected - those with two tonne vehicles - the increase will mean an extra $6.22 (including GST) per 1,000 kilometres - the equivalent of a return trip from Wellington to Hamilton.

The average household's weekly petrol costs could increase by $1.60 - which is around the price of a litre of milk.

Q3 What is the breakdown of taxes, levies etc. paid on a litre of petrol and on RUC?

A 5.625 cent (inc GST) petrol increase will result in an increase in total petrol excise and levies from 47.211 cents per litre to 52.835 cents per litre (including GST). As the full amount of the increase (excluding GST) will go into the NLTF, 22.725 will go to the NLTF (an increase from 17.725 cents).

The average increase will be 24% for those vehicles 5 tonne and under who pay road user charges.

Petrol Excise and Levies
(cents per litre)
Existing After petrol increase
Crown account 18.475 n.c. *
ACC levy 5.080 n.c.  
Fuels monitoring levy 0.025 n.c.  
Local Authorities Petrol tax 0.660 n.c.  
National Land Transport Fund 17.725 22.725 *
  41.965 46.965  
GST @ 12.5% 5.246 5.871  
total (including GST) 47.211 52.836  
n.c. = no change      
* these figures do not include the change in diversion rate as a result of the crown contribution

Q4 Why raise petrol excise by 5 cents per litre?

The 5 cent increase will provide significant revenue to address Auckland's and New Zealand's transport issues. The government considers it is sustainable in terms of increasing the capacity of the construction industry and managing the NLTF in the medium to long term.

Q5 Are there alternatives to increasing the price of petrol and RUC?

There is no single solution to providing the necessary funding for transport.

Other solutions include providing funding from general revenue (Crown account), private sector investment and the tolling of new roads. The Land Transport Management Act 2003, enacted recently, enables public/private partnerships and tolling of new roads which can provide additional revenue.

Q6 Why is an increase in the price of RUC and petrol required?

The existing revenue that is being allocated is simply not sufficient to meet current and projected demands. For example, the rail network in Auckland is under-utilised and the Wellington system needs to be improved. There are also some key road links around the country, and particularly in Auckland, which when completed would improve the effectiveness of the entire road network.

Q7 When will the petrol and RUC increases take effect?

Not immediately. They will take effect in April 2005.

Q8 Transfund currently has a surplus of $225m. Why isn't this being used?

Most of the $225 million is already fully committed to projects. These projects are either commissioned, but will take several years to build, or they have been delayed due to planning, resource, design, contracting or other unexpected delays. Transfund's financial modeling clearly shows a funding shortfall over the medium term.

Q9 Why was the Moving Forward increase not sufficient?

Transport requires continued investment over the long-term and it is not an inexpensive investment to make. The Moving Forward package was the first step in achieving a transport system which will meet the needs of New Zealand.

Q10 What was the last increase spent on?

The Moving Forward package announced in February 2002 invested a further $227m to June 2003 on roads, safety, regional roads, passenger transport, and walking and cycling. All of the increase (excluding GST) went into the NLTF, none into the Crown account.

Q11 How much of the extra fuel tax is going on transport and how much into general government coffers?

All of the additional petrol and RUC increases (exc GST) will be invested in land transport, through Transfund.

Q12 Will more money be spent on walking and cycling?

0.3% of the existing NLTF is spent on walking and cycling. It is likely that more funding will be allocated to walking and cycling, but this will always comprise a small amount of total NLTF spending. Priorities for funding in Auckland focus on TDM (including walking and cycling), further improving passenger transport, and acceleration of some roading projects.

Q13 Instead of increasing the price of petrol and RUC yet again, why doesn't all of the current petrol tax go on transport instead of so much of it going into the Crown account?

All of the increased petrol and RUC price increase (exc GST) will be invested in land transport, through Transfund. The Moving Forward package also saw all the petrol and RUC increases (exc GST) being invested in land transport.

As a result of the petrol excise increase 22.725 will go to the NLTF (an increase from 17.725 cents). Currently 18.475 cents per litre from the petrol excise remains in the Crown account. The government's proposal to contribute to Auckland's transport, $900 million over 10 years, will come from a decrease in the amount of the petrol excise retained in the Crown account. The amount of the diversion will be announced in July 2005.

Petrol tax and road user charges are the main means of raising funding to pay for roading and public transport. It is common practice in most developed countries for petrol excise to be allocated into government accounts. In fact, many countries put ALL the revenue into government accounts. Diverting petrol excise into the Crown account has been standard in New Zealand for more than 20 years under successive governments.

Q14 Why is the government making a $900m contribution over 10 years to Auckland transport?

The contribution from the Crown account is being made to address the specific transport issues facing Auckland. The Government also expects Auckland to make a significant contribution to addressing its transport issues. Diverting all the funds from the Crown account would have an impact on general government expenditure.

Q15 What will the government do if another region asks for a Crown contribution?

Auckland has for some years contributed more to the NLTF than it has received. An important part of this package specifically addresses the unique problems in Auckland that have resulted from unprecedented growth. The other regions will benefit from the petrol increase by $1.35 billion over the 10 year period.

Q16 Why is the government not using its budget surplus to fund these vital transport infrastructure improvements?

The government's overall fiscal strategy is to maintain a cautious fiscal stance with sufficient headroom to provide a buffer against changes or unanticipated events.

Q17 If Auckland is getting 35% of the petrol and RUC increase, how much is my region getting?

Over the next 10 years, each region will receive an allocation of the increased funds approximate to its share of the population.

Q18 Why has the government decided to allocate the 65% on a regional population basis?

Regional development is a key part of the government's economic and social objectives. Each region has its own specific transport needs. The funding will be able to assist in addressing these needs and may include safety, road widening, rail freight, passenger transport etc.

Q19 Will territorial authorities, regional councils or Transit receive the regional allocation?

For the regions, the funding will be available through Transfund, using the processes set out in the Land Transport Management Act 2003. Territorial authorities, regional councils, Transit and other approved public organisations will be entitled to make an application to receive funding.

In Auckland it is proposed that the new Auckland Regional Transport Authority (ARTA) will be responsible for co-ordinating territorial authority bids for local road funding. Transit and other approved public organisations will continue to make their own applications to receive funding.

Q20 Will all future increases be allocated regionally?

No. The proposal to regionalise the allocation of excise and RUC is for a 10 year period only.

Q21 What is wrong with a regional fuel tax in Auckland so that Aucklanders pay for their own problems?

The transport problems that need to be addressed are not specific to Auckland alone and warrant a national response. Regional fuel taxation is also problematic. Fuel companies could spread regional fuel tax costs over the country. It would also involve high compliance costs and 'boundary running'.

Q22 What was wrong with what the Auckland mayors wanted (10 cents a litre and 10 cents a litre from the Crown account)?

The level of investment that can be made in transport is constrained by the level of construction work that can be undertaken at any one time (usually a factor of available skills and materials) and the approvals processes. These constraints have helped set an upper limit for the governments contribution. However, the government also expects Auckland to make an ongoing contribution to its transport costs.

Q23 What guarantee is there that the government won't come back in another year and say yet another increase is needed?

There has been a history of under-investment in transport. Since coming into office, we have gone some way to addressing this and we are looking to continue this progress.

Q24 What is the government's long term strategy for Auckland transport?

The government introduced the New Zealand Transport Strategy in December 2002. The NZTS vision is for an affordable, integrated, safe, responsive and sustainable transport system. Transport solutions must contribute to the objectives of:

Assisting economic development
Assisting safety and personal security
Improving access and mobility
Protecting and promoting public health
Ensuring environmental sustainability.
Auckland's transport system is a vital part of achieving this vision.

Over the last four months, the government has worked with the Auckland Mayoral Forum to consider Auckland's long-term strategy and funding needs. The officials report identified the need for early investment in passenger transport, travel demand management and some acceleration in roading projects. This package addresses these issues.

Q25 What about RUC increases - what will they be and will they be the same for all weights of vehicle (if not, why not?)

RUC involves a number of different licence categories (based on weight) and it is important that any increase maintains equity between these classes. For this reason the average increase for diesel vehicles 5 tonne or below is 24%.

weight current RUC rate new RUC rate approx. % increase
1 22.58 26.69 18
2 24.74 30.96 25
3 26.83 34.29 28
4 28.36 36.27 28
5 31.32 38.26 22

All figures include GST

Q26 Why are you only increasing those vehicles 5 tonne and under?

Much of the requirement for new land transport expenditure is primarily the result of the growth in light vehicle traffic and these costs are therefore more fairly attributable to light vehicles (including diesel vehicles).

Q27 Why not just raise Aucklanders' rates?

The government expects Auckland to make an ongoing contribution to addressing its transport issues. It is for the region to decide whether to do this by rates, tolls, parking charges or by other measures.

Q28 What's in it for business?

Business will benefit from the package. Congestion relief is of obvious benefit to businesses who need to move products and people around the regions. Improvements in productivity will be made possible by a better transport system.

Q29 Why delay implementation. If the problems are as bad as they are made out to be, shouldn't we start getting the money in immediately?

Building up to the required level of construction and service provision will be a gradual process, so the additional funding is not required immediately.

Q30 Taxes on basic commodities such as petrol disproportionately affect those on lower incomes. What will be done for those who suffer hardship as a result of these changes?

The increase in petrol tax could add approximately $1.60 per week (including GST) to the average household's weekly expenditure on petrol. This translates to approximately $83 a year (including GST).

For the largest group of vehicle owners required to pay road user charges - those with two tonne vehicles - the increase will mean an extra $6.22 (including GST) per 1,000 kilometres - the equivalent of a return trip from Wellington to Hamilton

Other General
Q31 Isn't the real problem the RMA process which means crucial projects take years to get approved?

The work that was undertaken between the government and the Auckland Mayoral Forum indicated that limits on construction industry capacity are a more significant constraint than the RMA.

Q32 Is the government planning to introduce road pricing?

Tolling of new roads has been included in the recently enacted Land Transport Management Act 2003

As part of the work undertaken with the Auckland Mayoral Forum, the government will be investigating further road pricing options, taking into account the social, environmental and economic impacts. No decisions have been made at this time.

Q33 What is road pricing and how would it work?

Road pricing involves some form of charging for a use of a road. Tolls are a form of road pricing where a fixed fee is paid to use a road. RUC is another form of road pricing, with payments based on the type of vehicle and distance travelled. More sophisticated forms of road pricing use electronic means to take account of location and time of travel and could apply across entire networks.

Q34 By providing more money to build yet more Auckland roads aren't you just adding to the congestion problems?

The evidence shows new trips are generated by household and business formation rather than new roads. New roads influence existing and future trip patterns (eg. fewer trips through residential areas or longer school trips to more distant schools). New roads do fill-up over time and therefore relieve rather than eliminate congestion. This is why the government is providing for investment in passenger transport and alternatives to roading, and is undertaking further investigations into road pricing.

Q35 Isn't the real problem how to get Aucklanders out of their cars?

The problem is how to accommodate the diverse lifestyles New Zealanders enjoy. Providing a transport network which offers people choice and which is capable of providing access to a wide range of locations is vital to our social, economic and environmental wellbeing. Making alternatives to car travel more attractive and viable is the challenge. This funding package will help Auckland address the challenge.

Q36 How much of this extra money will be diverted into public transport?

Specific allocation decisions have yet to be made but passenger transport will be an important component of the package.

Q37 What roading projects will get priority access to this new funding (nationally and in Auckland?)

The package does not prioritise specific roading projects. This is for the Board of Transfund New Zealand to decide.

In Auckland it is proposed that local roading projects be co-ordinated through the new transport authority.

Q38 Does the new funding bring Transmission Gully any nearer to reality?

The Land Transport Management Act 2003 enables the use of public private partnerships and tolling to assist with funding land transport projects such as Transmission Gully. A joint investigation by Transit and the Wellington Regional Council into Transmission Gully issues is due to report by March/April 2004. This investigation will need to consider the funding options available.

Q39 How will the debt financing be paid back? Surely that's just a way of introducing increased tolling schemes?

Debt financing will only be used where tolls on new roads generate new revenue to meet the cost of borrowing. Tolling and associated borrowing is likely to be applied to the most worthwhile projects with the least associated risk. This will free public funds for projects at the margins of the programme that would otherwise not have proceeded.

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