Prime Minister Christopher Luxon has announced the Government will be scrapping the Auckland Regional Fuel Tax from the end of June.
It comes after National campaigned on scrapping the tax within its first 100 days.
Auckland Mayor Wayne Brown responded quickly to the move, saying it's "a problem that can't be solved just by making cuts".
Speaking to media on Thursday, Luxon and Transport Minister Simeon Brown announced the Auckland Regional Fuel Tax will end on June 30.
"Since 1 July 2018, Aucklanders have faced an additional 11.5 cents per litre tax on fuel, over and above what the rest of the country pays, increasing the cost of living at a time when they can least afford it," Simeon Brown told media.
"Ending this tax is one way to reduce the price of fuel and ease some of the financial pressure facing households in our largest city," Simeon Brown said.
The Transport Minister said it was a regressive tax.
"Removing this extra tax of 11.5 cents per litre on petrol and diesel means the driver of a Toyota Hilux will save around $9.20 every time they fill up, while a Toyota Corolla driver will save around $5.75."
"[The fuel tax] costs people on lower incomes with less fuel-efficient vehicles more than those who have newer more fuel-efficient vehicles. We intend to fully remove the legislative framework for regional fuel taxes."
He said as of September 2023, around $780 million in Regional Fuel Tax (RFT) revenue had been raised, with approximately $341m unspent.
"Auckland Transport has used RFT revenue to fund many non-roading projects including more cycle lanes, redlight cameras, speed humps, and lowering speed limits across the city," he said.
"I have discussed the unspent funds with Auckland Mayor Wayne Brown and signalled our intention that they are to be spent on projects which are of mutual priority to the Government and Auckland Council. These projects include the Eastern Busway, City Rail Link electric trains and stabling, road corridor improvements, and some growth-related transport infrastructure.
"Legislation removing the RFT will require Auckland Transport to only be able to use the remaining RFT revenue and unspent funds towards delivering these projects.
Mayor Brown responded to the announcement, saying Aucklanders will now have to pay higher rates or miss out on "major road and public transport improvements".
"While I acknowledge that the National Party campaigned to repeal the RFT, and they are making good on their election promise, this decision will have unintended consequences unless the Government is prepared to foot the bill for upcoming transport projects," Mayor Brown said.
He said there will now be a shortfall in transport funding by $1.2 billion over the next four years.
"Auckland Council will have no choice but to pause any further work on projects funded by the RFT, including those already contracted, to see how we can fund them in the Long-term Plan."
RFT-funded projects that could be cancelled include planned improvements to major roads such as Glenvar Road and Lake Road, as well as the fourth and final stage of the Eastern Busway and work to progress the proposed Airport-Botany Busway.
"I must be honest with Aucklanders about the financial constraints we are under. As a direct consequence of the Government's decision to cancel the RFT, some of these projects may very well be cancelled altogether," Wayne said.
"This is a problem that can't be solved just by making cuts," he said. "Every Aucklander agrees that our transport system is a mess and it's going to cost a lot of money to fix. That money must come from somewhere."
"Unfortunately, the Government has just made it a lot harder for us," he stressed.
