Government plans to introduce annual CPI adjustments to tolling, Transport Minister says all road users should contribute in proportion to the use of the country’s roads

All road users should contribute in proportion to their use of the country's roads, Transport Minister Chris Bishop says.

This comes as changes have been proposed not only to the country's Road User Charges system, but also to tolling in New Zealand with Bishop saying the Government is planning to introduce annual CPI adjustments to make tolling "fairer and more predictable" compared to having ad-hoc increases.

(The CPI - consumers price index - is New Zealand’s official measure of inflation for households).

Changes to the Road User Charges (RUC) system were announced by the Government in August. At the time, Bishop said all vehicles - whether they’re petrol, diesel, electric or hybrid - would eventually be paying for roads based on distance and weight through electronic road user charges.

Bishop in August said Cabinet had agreed to a series of legislative changes that would shift how New Zealand drivers pay for the country's roading network - through electronic road user charges, rather than petrol tax.

This means New Zealand drivers, who currently pay a Fuel Excise Duty (FED, or petrol tax), which is about 70 cents per litre of petrol, would be transitioning to the electronic road user charges system.

Currently, diesel, electric and heavy vehicles pay RUC based on distance travelled.

These changes are being made through the Land Transport (Revenue) Amendment Bill, which passed its first reading on Tuesday.

Speaking at the Future Roads Conference, a conference for the New Zealand roading sector, in Hamilton on Wednesday, Bishop said tolling was a key tool for bringing forward investment.

Changes to tolling in the Bill include corridor tolling, which "will allow tolling on parts of an existing road where users clearly benefit from a new project in the same corridor", Bishop said.

He said through the Bill, there would also be "new tools to manage diversion from toll roads, including restricting heavy vehicles from unsuitable alternative routes like they do overseas, and allowing toll revenue to help maintain those alternative routes when councils can’t”.

Bishop said the Government would also be introducing annual CPI adjustments “to make tolling fairer and more predictable, as well as shifting liability from the driver to the registered person to improve collection efficiency”.

Annual CPI adjustments would replace ad-hoc increases to tolling.

RUC system

Bishop said the Bill would make critical changes to prepare the transport sector for the Government’s plans to transition the light vehicle fleet to RUC.

“The current system was designed in the 1970s and still relies on manual paperwork and stickers on windscreens. That’s not good enough in 2025.”

The Bill would shift the current RUC system - it is mostly paper based which means people have to check their odometers and buy RUC in 1000 kilometre chunks - to a system that allows payment models like subscriptions or post-payment. There would also be in-vehicle technology to record distance.

On the topic, last week Bishop said: “These changes are the first step towards replacing petrol tax with RUC for light petrol vehicles. We’ll assess the improved system in 2027 before deciding on next steps for transitioning the remaining 3.5 million vehicles."

With the first reading done and passed by Parliament, the Bill is now heading to the Transport and infrastructure Select Committee, with the Government expecting the legislation to pass in 2026.

Roads of National Significance programme

Bishop said the Roads of National Significance programme (RoNs) was its largest and most ambitious project as a government.

The New Zealand Transport Agency Waka Kotahi describes RoNs as “a package of major transport projects”.

These include areas in Northland with Port Marsden Highway to State Highway 1 Whangārei, a second Mt Victoria Tunnel in Wellington, and State Highway 1 Belfast to Pegasus Motorway and Woodend Bypass in Canterbury.

Bishop said he wanted to be upfront about the challenges the Government faces when it comes to these projects, sharing that the RoNs projects were expensive.

“Based on current estimates, delivering the RoNS programme in full over the next 20 years would cost $56 billion."

“Funding this entirely from petrol tax and road user charges, would require a one-off 70% increase. Equivalent to a 49 cent per litre increase in petrol tax.”

“To be clear, this 49 cent per litre increase, would only allow the RONS to be delivered,” Bishop said.

Crown funding

Bishop told the audience the National Land Transport Fund was already “massively subscribed”.

“Our transport system is supposed to be user pays. In other words, road users pay petrol tax and road user charges and the money goes out the other end on maintenance, upgrades and new projects.”

“But in recent years, Crown funding has been tipped in more and more, which comes from general taxation – in other words, all taxpayers,” Bishop said.

Bishop said capital contributions from general taxation had to compete with “every other important priority” the Government has to fund.

“Every dollar of extra Crown capital we put into roading is a dollar that can’t go into health, or education, or defence, or any of the other calls on capital the Crown has.

“Of course, all of these areas have significant deficits and similar funding challenges.”

Bishop said he was an advocate for Crown capital helping to fund roads but was making the point that there were “difficult trade-offs”.

One option was to lift petrol tax and RUC, he said.

“Petrol tax is due to go up by 12c per litre in 2027, by six cents on 1 January 2028, and 4 cents in each year after that.

“There is obviously a limit to what Kiwis will accept both economically and politically,” Bishop said.

“As I’ve said, to deliver all of the RoNS, petrol tax and RUC would have to rise by 70% or 49c per litre. This would be on top of the planned increases we’ve set out for 2027 onwards.”

He said public-private partnerships were not a “magic money tree’ but a procurement tool.

“They are essentially the Government taking out an extra mortgage to build a road sooner. So yes, they help in terms of procurement and driving efficiency, but the projects still have to be paid for.”

And as for tolls, Bishop said while they’re useful, they don’t fully fund roads.

“Not even close. New Zealand just doesn’t have the traffic volumes. They are critical tools in helping fill in the funding stack, and provide important ongoing revenue for maintenance costs.

“But they are not going to pay for these roads by themselves.”

Bishop said the same was true for infrastructure levies and the Government had other priorities in the land transport space.

“We have critical public transport projects to fund, as well as the second harbour crossing in Auckland, which will be the most expensive infrastructure project ever built in New Zealand.”

'Hard choices lie ahead'

Bishop said while the Government was committed to delivering RoNS, “delivering them all tomorrow is not realistic”.

“What we need is a credible, long-term pipeline of transport projects with a variety of funding options and in a logical sequence,” he said.

“I’ve been calling this a Major Transport Projects Pipeline, or MTPP. It includes the RoNS but also major public transport projects we need to advance as well.

“That’s what we are committed to, as well as demonstrating a realistic funding track, synced to what the market can actually sustain. We’re working hard on that now and will have more to say soon,” Bishop said.

“This is going to be hard. Hard choices lie ahead. Not everyone is going to get what they want, exactly when they want it,” Bishop said.

“Some roads won’t be starting for many years. This is not going to be easy. But it will be worth it.”