Bishop’s road charge changes will bring NZ into the 21st century

Thursday, 7 August 2025

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ANALYSIS: Anyone who has to buy road user charges knows the drill. You go onto the NZTA website or go into a Postshop, the AA, VINZ or VTNZ and prepay some road kilometres.

Then you get mailed a little ticket to stick in the front of your car. Once your 5000 or 10,000 kilometres runs out, you rinse and repeat. You have to keep an eye on your sticker to make sure your RUCs are up to date.

That’s one thing.

The other thing is that this inefficient system will have to be the basis on which roads are paid for into the future. The system is mostly reliant on petrol taxes, which taxes each litre of fuel burned. But in a world where hybrids and EVs are increasingly common, roads still have to be paid for.

There is also an equity component here - those on higher income can afford more fuel efficient cars and so, on the current tax system, pay less to use the roads.

There are different ways of cutting it depending on the vehicle, but if your car does fewer than 500 kms per tank and/or you fill up 20 times a year or more, you basically pay more in tax than cleaner alternatives. Plus you have to pay for the non-tax component of the petrol which is more expensive than electricity. Poorer people that can’t afford more efficient cars pay more to travel less.

But the change is broader than just the equity point. Infrastructure Chris Bishop is right to get private operators in to help collect road tolls.

Tolling makes up a small share of the national infrastructure spend. About $35 million in 2022/23 compared with annual dollar inflow into the National Land Transport Fund of $5.2 billion. Tolls barely touch the sides.

According to NZTA, about 80 cents of a $2.60 toll is gobbled up in administrative expense to just run the tolling system (that’s what NZTA charges). That’s 30% of the take. In a world of camera recognition, AI and so on, that number seems astonishingly high. In a little footnote to a Ministry of Regulation paper on tolling reform, the average global cost was 14.6%. That’s no criticism of NZTA, it was never set up to really be a toll operator and collector.

In New Zealand the cost is higher partly because there are relatively few cars going though each point, but it clearly remains high.

What Bishop’s reforms do is to open the payments and car recognition system up to competition. There isn’t like the old days of a provider getting a monopoly contract with government to provide services, but any number of different providers offering slightly different products. That might involve e-tags or licence plate recognition, the toll may be taken off each trip or an invoice sent and deducted monthly.

Same with road user charges. Your provider might simply access data from your car and deduct the RUC off your credit card each month, or make it pay-as-you-go, or you might prepay like the current system and more RUCs are automatically added when the balance falls below a certain point.

Sydney, for instance, has had e-tags (a little electronic dongle stuck to car windscreen that deducts tolls) hooked up to credit/debit cards for well over a decade. And that’s at the primitive technological end of things.

There are many companies around the world that provide these services - from large multinationals to start up twenty somethings with unpaid tolls, a phone and a dream.

In fact, Bishop noted in his speech that when a request for information was put out in 2024, 25 retailers responded. The Government will set the rules, have the checks in place and let others sort it out. This is far superior than trying to get NZTA to build its own expensive, risky - and probably janky - system.

Apart from tax collector Inland Revenue does anyone think the Government is the best -placed institution to set up what is essentially a new dynamic payments system?

(Well, perhaps the Public Service Association which put out a press release denouncing the move as privatisation and “a problem masquerading as a solution”, without acknowledging how ridiculously outdated the current RUC systems are).

There is no shortage of tech, it’s about the Government getting its end right. By 2027 the new system will be “open for business”, Bishop says, but a plan to transition the full light vehicle fleet over does not yet have a date.

The politics of this have been often deferred as too difficult. There is a political conventional wisdom that holds that - on the whole - Kiwis won’t cop paying a bunch of tolls. This is testing and pushing against that assumption. Congestion charges are also on the way and the new system being set up will be able to charge for that too.

This is a user-pays but also pro-consumer move and an important step in ensuring that those who use roads pay for them and pay a fair amount. There are plenty of other countries around who are scared to touch this particular issue. But it will be far easier to do it politically while the vast majority of cars run on petrol, than when a big amount of the fleet is electric, and people are used to paying less than they should.

Roads have to be paid for somehow.

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