Transport Fact Sheet One
Background

Transport is vital to New Zealand reaching the top half of the OECD rankings and to Auckland's continued success as a centre of business and innovation excellence. Without an effective transport network, Auckland will not be able to realise its potential and New Zealand will not be able to achieve its economic goal.

There has been a history of under-investment in transport and under-utilisation of existing infrastructure. The rail network in Auckland is under utilised and the Wellington system requires improvement. There are key road links around the country that if completed would improve the usefulness of the entire road network. There is also a backlog of worthwhile activity on the local road network across the country.

Since coming into office, we have gone some way to addressing these issues and we are looking to continue this progress. The Moving Forward package in 2002 had a particular focus on congestion in Auckland and its implications for economic development.

This package continues to address the priority issues of congestion, safety, passenger transport, walking and cycling and provides an explicit focus on improving access to economic and social opportunities around New Zealand.

Funding package

The annual $207 million excise and RUC package announced today represents the next step towards achieving the government's vision for Auckland and for New Zealand. Together with our announcement on transport funding, changes to Auckland's transport governance will be needed.

With the implementation of this package, this government will have increased land transport funding through petrol and RUC by $370 million a year. This includes the Moving Forward package. In addition the government will have provided a further $900 million over 10 years to address the specific transport problems facing Auckland. These problems have arisen due to unprecedented growth in the region.

The funding package involves:

A national petrol excise increase of 5 cents per litre (excluding GST), effective from April 2005;
An increase in road user charges (RUC) for vehicles 5 tonnes and under by an average of 24%, effective from April 2005;
An allocation to Auckland of 35% of the petrol and RUC increase, with the remainder being allocated on a regional population basis for a 10 year period;
A $900 million government contribution over 10 years to focus on Auckland transport, effective from July 2005;
Implementation of tolling on new roads, as provided for under the Land Transport Management Act 2003 enacted last month, with some debt used to help finance these roads;
Further work on the feasibility and desirability of pricing existing roads, taking into account social, economic and environmental impacts, and other potential revenue sources such as parking levies;
Further work on infrastructure bonds.
In total, the increase in petrol excise and road user charges would provide an additional $207 million per annum for land transport ($165 million from petrol and $42 million from RUC excluding GST). This equates to $2.07 billion over the 10 year period.

All of the additional funds would be dedicated to land transport and be allocated under the National Land Transport Programme administered by Transfund New Zealand. This allocation process was recently updated in the Land Transport Management Act 2003 to include all land transport activities.

Key allocation initiatives

Auckland

For the first 10 years, up to $72 million per annum, or $720 million over 10 years, of the petrol and RUC increase will be invested in Auckland. Auckland will also receive a government contribution of $900 million for the same 10 year period. It is proposed that this funding will be made available by reducing the amount of petrol excise diverted to the Crown account.

The overall funding for Auckland amounts to $1.62 billion (ex GST) over 10 years, over and above current National Land Transport Fund (NLTF) forecast.

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

Other regions

Other regions will receive 65% of the petrol and RUC increase over 10 years. This amounts to in excess of $135 million per annum or $1.35 billion over 10 years.

The investment across New Zealand will be allocated on a regional population basis to ensure funds are available to improve business and individual access around the country.

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.

Timing

The petrol and RUC increases will be effective from April 2005.

The government contribution to Auckland will take effect from July 2005.

Further announcements will be made at these times.

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Funding Changes

Transport Fact Sheet Two
Government expenditure on state highways, local roads, traffic enforcement, road safety, public transport, walking and cycling and demand management is funded from the National Land Transport Fund (NLTF). This is a dedicated portion of the Crown account. NLTF revenue comes primarily from a proportion of fuel excise on petrol, all road user charges (RUC) on vehicles, motor vehicle registration and licence fees1.

Over the next 10 years the government will invest a further $207 million a year in land transport from increased petrol excise and RUC. This takes us a step closer to fulfilling our long-term vision for a sustainable transport system.

The funds will come from an increase in excise duty on petrol and higher road user charges on vehicles 5 tonne and under. Auckland will also receive a government contribution of $900 million over 10 years. This contribution will come from increasing the proportion of funds diverted from the Crown account.

Auckland will receive 35% of the increase in funding from the petrol excise and road user charges. The remainder of the petrol excise and road user charges will be allocated across New Zealand, on a regional population basis.

To gain the maximum benefit from this increased expenditure, it is necessary that changes are made to Auckland's transport governance.

Petrol Excise

Excise duty on petrol will increase by 5.0 cents a litre which, when GST is added, will mean an increase of 5.625 cents per litre for motorists, if passed on in full by retailers.

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).

Road User Charges

Changes in road user charges (RUC) affect vehicles of five tonnes or less (mostly diesel vehicles). Charges for these vehicles will increase by an average of 24%. The exact size of the increase depends on the weight of the vehicle.

For the biggest 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.

Government contribution

Currently 18.475 cents per litre from the petrol excise remains in the Crown account. The government's contribution to Auckland transport, $900 million over 10 years, will come from a decrease in the amount of the petrol excise retained in the Crown account.

When will the changes take effect?

The petrol excise and RUC increases will not take effect until April 2005. The government's contribution will take effect from July 2005.

ENDS

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