Why does there need to be an increase in charges?

In June 2018, the government announced plans for three annual petrol excise duty (PED) increases of 3.5 cents per litre, with equivalent increases in road user charges (RUC) rates. These increases were necessary to ensure that there was enough revenue available in the National Land Transport Fund to make the important investments in our land transport system that were signalled in the Government Policy Statement on land transport 2018 (GPS 2018).

The increases on 30 September 2018 (for PED) and 1 October 2018 (for RUC) are the first round of these increases. Further increases are intended to take effect on 1 July 2019 and 1 July 2020.

What will the increases fund?

Among other things, the increases will fund increased investment in safety upgrades, public transport, walking and cycling projects and regional roads. Funding ranges for different types of activity are laid out in GPS 2018. You can read more about GPS 2018 here(external link).

When will the increases take effect?

The increased PED rate will take effect from 30 September 2018. Increased RUC rates will take effect from 1 October 2018.

How much is PED being increased on 30 September 2018?

PED will increase by 3.5 cents per litre on 30 September 2018. This is a 5.9 percent increase in the rate. Excluding GST, the new PED rate will be 63.024 cents per litre. Including GST, the new PED rate will be 72.478 cents per litre.

The following table provides an indication of the direct weekly impact of the PED increase on households with different incomes, including GST.

Household income

Estimated average weekly increase

 

2018

2020

Average

 $     0.83

 $     2.50

Decile 1

 $     0.41

 $     1.24

Decile 2

 $     0.39

 $     1.18

Decile 3

 $     0.57

 $     1.71

Decile 4

 $     0.71

 $     2.14

Decile 5

 $     0.88

 $     2.65

Decile 6

 $     0.79

 $     2.37

Decile 7

 $     1.07

 $     3.21

Decile 8

 $     1.11

 $     3.34

Decile 9

 $     1.31

 $     3.93

Decile 10

 $     1.43

 $     4.29

     

 

What are the actual RUC increases?

Total RUC revenue increased by 5.9 percent, equivalent to the percentage increase in PED that is being implemented at the same time. The exact increases to RUC varied for different vehicle types according to their size, weight and axle configuration.

RUC for light diesel vehicles (up to 3.5 tonnes) increased by around 9.7 percent, while most small and medium heavy vehicles of more than 3.5 tonnes and up to 12 tonnes experienced increases of between zero and 10 percent. Some heavier vehicles increased by up to 10 percent, but most heavy vehicle rates are unaffected.

For a diesel car, the increase in RUC added approximately $50 to the cost of driving 10,000 kilometres, or 0.5 cents more per kilometre.

What this meant for operators of heavy vehicles

RUC represents about 10 percent of the total costs for road transport operators (the largest costs are wages and depreciation). For many heavy vehicle types, there was no increase in RUC rates for 2018. This was because the cost allocation model (referenced below) suggested that current RUC rates are recovering from these vehicle types at an appropriate level.