Three months into the war in Iran, the largest disruption to New Zealand’s oil supply in living memory appears to have done nothing to change the government’s approach to transport.
Budget 2026 spends more on roads, less on rail and nothing on walking or cycling. It also raids bus decarbonisation to fund a review of pipes.
Finance Minister Nicola Willis warned ahead of budget day there would be no extravagance this year – and the government’s now-released spending on transport and infrastructure confirms it.
The fiscal logic underpinning its priorities assumes the Middle East conflict and its impacts on fuel markets will ease in time for a projected operating surplus by 2028/29.
Whether that happens remains to be seen. What is apparent, however, is that this budget does little to reduce the reliance of New Zealand’s transport system on fossil fuels – and instead reinforces it.
Roads of ‘national sacrifice’?
Te Waihanga, the government’s own infrastructure commission, has warned for years that the Roads of National Significance programme is unaffordable.
Budget 2026 commits NZ$1.773 billion for a single one of them, Cambridge to Piarere, to be supplemented further from the National Land Transport Fund. Another $400 million has been set aside for State Highway resilience.
Combined, that’s $2.173 billion, about three quarters of all newly allocated transport capital spending, channelled to roads and highways.
Metropolitan rail gets $106.9 million for “one year of additional capital” to clear overdue renewals in Auckland and Wellington. A further $598.2 million in capital funding and $477.1 million in operating funding is tagged for the national rail freight network.
Among the spending across all infrastructure, not a single cent is specifically earmarked for walking and cycling.
While public transport users will get no fare relief and no expanded service, the Treasury floats the option of deferring the planned 12-cents-per-litre increase to Fuel Excise Duty and Road User Charges scheduled for January 2027.
Each six-month deferral, the Treasury reports, would cost about $300 million in foregone revenue.
For comparison, $300 million for six months of relief at the pump is roughly the entire annual fare revenue generated by every public transport service in the country combined.
The same $300 million spent on free or subsidised fares would deliver a full year of relief to people who do not own cars, cannot afford to run them, or have chosen not to.
The government has also signalled it’s willing to forgo road revenue, while telling the country an equal or lower expenditure to reduce public transport fares is too expensive.
The budget does include a Public Transport Fuel Costs Support initiative, also linked to the Middle East conflict. However, the amount has been withheld on the grounds of “commercial sensitivity and negotiations”, making it difficult to assess the scale of the support being offered.
To help fund its transport package – comprising $456 million in operating spending and $2.708 billion in capital – the government is reclaiming money from existing programmes.
That includes clawing back $12.2 million from initiatives such as the now-discontinued local-road Crown Resilience Programme. It is also redirecting $170 million from the current Rail Network Investment Programme toward new metro and freight renewals.
Most pointedly, it draws $2.5 million from the Public Transport Bus Decarbonisation Fund and the Older Drivers Licence Holder Subsidy, redirecting both to a review of underground infrastructure assets in another portfolio.
While the amount is relatively small, taking money from one of the cheapest near-term ways to reduce urban transport emissions and fuel use is still notable.
Long-term risks, limited investment
Outside transport, the fiscal picture for infrastructure is no less tight.
There is no named freshwater, stormwater, wastewater or drinking-water capital package. The government allocates $29.7 million to oversee development levies, $294 million in operating spending and $13.4 million in capital spending for resource management reforms, and $400 million in tagged contingency for council housing-growth incentives.
Treasury’s own forecasts show core Crown spending on water infrastructure falling from $127 million in 2026 to $5 million per year by 2028. After a decade of weather losses already surpassing $15 billion, the country’s stormwater and flood resilience response is a dwindling budget line.
There is one new acknowledgement of the oil supply problem itself: $150 million is allocated to support additional fuel supply, including fuel reserves. The government has chosen, again, to insure people against an oil-shocked world rather than reduce exposure to it.
The Budget papers also identify several major future fiscal pressures tied to transport infrastructure.
Transport project funding is logged as a $5 billion to $10 billion risk. National Land Transport Fund sustainability is another $2 billion to $5 billion. Most of these costs sit outside the forecast horizon, which is to say the next government will pay them.
Arguably, this could not be called a transformative transport or infrastructure budget. Rather, it is a fiscally cautious package that continues to prioritise road investment over measures aimed at reducing fuel dependence or expanding transport alternatives.
Public transport subsidies and cycleways that could help reduce exposure to oil shocks are largely absent. Buses that might otherwise have been electrified will continue relying on imported diesel at a time the budget itself acknowledges fuel supply vulnerabilities.
Meanwhile, Treasury forecasts show stormwater infrastructure spending falling sharply over the coming years despite the growing costs of extreme weather events.
New Zealand’s long-term transport and infrastructure challenges are well understood. Budget 2026, however, suggests the government has chosen, at least for now, to prioritise fiscal restraint and existing transport priorities over much-needed structural change.
