Auckland's policy makers need to tread very carefully as they ponder raising petrol taxes, imposing road tolls, or even asking the government to raise GST in New Zealand's biggest city to pay for a NZ$15 billion shortfall for major transport projects over the next three decades, Prime Minister John Key says.
Auckland mayor Len Brown is today releasing a discussion document outlining possible ways to pay for the projected shortfall in funding for the city's desired transport projects, which also includes visitor taxes on hotel and motel beds, and a higher airport departure tax.
The central government acknowledged Aucklanders needed to have the discussion about how to fund the projects, but was wary that households were already facing higher EQC premiums and insurance costs Prime Minister John Key said on TVOne's Breakfast programme this morning. The government was already investing a large amount of money in Auckland transport, and Aucklanders needed to think about what priority to give each desired project.
The council would have to approach the government in order to make most of the changes, meaning the government could veto the council’s ability to raise money through these mechanisms, like raising GST in Auckland.
"We like user pays, but this may not be user pays. They may well put a tax on you for something you’re not going to use,” Key said on Breakfast.
The government had closed down regional petrol taxes because it thought the administration of them, and the amount that was going to be raised, did not warrant that type of tax.
“What we worry about is any tax sucks money out of the economy. There’s a limited amount of money in the economy. So when you put up a tax, or you tax people more, then it sucks that money out,” Key said.
He noted the Green Party’s call last year for a levy to be placed on people earning more than NZ$48,000 a year to help pay for the Christchurch rebuild – a policy he was against.
“Now we’re paying three times as much for our EQC levies, and the general increase in insurance across the country is very high. A lot of people are now saying, ‘I can’t afford to pay my insurance’. My point was, how would you have paid for the levy?" Key said.
“Whenever you put another cost on a household, you’ve got to think what have they got to give up to pay for that? If you’re a high income household, you might be able to meet that cost, but for a lot of households in Auckland, they’re not high income households. So I’m saying we need to tread very carefully through this stuff," he said.
'Cost of living is an issue'
Meanwhile, speaking on Newstalk ZB this morning, Key said he did not think consumers could afford a big increase in taxes at the present time.
“We’ve just gone through an election campaign where people said cost of living is an issue,” he said.
“At one level, let’s acknowledge that [Len Brown] is saying there is a shopping list of things that he would want to deliver in terms of infrastructure, and he is saying here’s some options to pay for it," Key said.
“I would say that the government has invested, and is investing a massive amount in that infrastructure at the moment...so whatever he’s talking about is some way off. We need to work our way through all of those things," he said.
"There is no free lunch here. Yes, we have to pay for infrastructure. [But] if we put on all of those costs there will be a significant impact on consumers."
(Updates with comments on Newstalk ZB)