Removing the Auckland Regional Fuel Tax is for no purpose other than "political populism", a public transport advocate says.

On Thursday, Prime Minister Christopher Luxon and Transport Minister Simeon Brown announced the tax would be scrapped by the end of June.

The tax - of 11.5 cents per litre of fuel including GST - was something National campaigned on and promised to get rid of in its first 100 days in power.

Luxon and Brown said it was supposed to pay for important projects but had instead gone towards more cycleways, speedbumps, and red light cameras.

Removing it would lower the cost of filling a Toyota Hilux's tank by $9.20, or by $5.75 for a Toyota Corolla.

Auckland mayor Wayne Brown. Photo: RNZ / Finn Blackwell

But Auckland mayor Wayne Brown said scrapping the tax would leave a shortfall in transport funding of $1.2 billion over the next four years.

"It's an announcement that was made by the government that promised to make it but it will have unintended consequences unless the government is prepared to foot the bill for upcoming transport projects."

Brown said he was not prepared to pass the cost of the projects on to Auckland households via rates increases.

He told Checkpoint: "So we'll just have to cut things and we'll have to find some other ways of funding the things we're not going to be doing or we won't be doing them."

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Among projects now under threat without replacement revenue were: The final stages of the Eastern Busway, the Lake Road project and the proposed Airport to Botany Busway, he said.

He predicted "quite a lot of debate" between himself and the government before the fuel tax decision took effect.

Responding to the government's accusation that half of the fuel tax money ($780 million) was unspent he disagreed, citing the Eastern Busway.

He said contracts had been signed, however, because it had not been built yet the money remained in the bank.

He accused the government of "selective use of data".

He said a recent poll showed 44 percent of Auckland respondents favoured keeping the regional fuel tax whereas 22 percent opted for rates increases.

If the council went ahead with introducing congestion charges it would not be a revenue generator, instead it would act as "a demand management tool" that would encourage people to use the roads in off-peak times.

Simeon Brown said there was $340m of unspent revenue at 30 September last year and with more money to come before 1 July, it would cover the Eastern Busway, the electric trains for the City Rail Link and some local road improvements and they were the projects Wayne Brown had agreed "should be prioritised as part of our discussions".

New government legislation would ensure the remaining fuel tax funding was only spent on those projects, he told Checkpoint.

The minister repeated his criticisms of fuel tax revenue being diverted onto for example, red light cameras and speed bumps, instead of major roads such as Mill Road which will now have to be fully funded by the Crown.

The mayor could have changed the priorities for transport spending that were being promoted by the previous Labour government, Brown said.

Responding to the mayor's claim that the final stage of the Eastern Busway might have to be axed, he said it had not had approval for funding from the NZTA board, however, the government would be paying via the National Land Transport Fund to help complete it.

The minister said the government policy statement on transport was being rewritten.

It was not just about taxing people more to pay for new public transport infrastructure, a range of other funding and financing tools needed to be considered, he said.

"We are progressing work at pace on that."

LISTEN ▶ Transport Minister responds to axing Auckland fuel tax duration

Public Transport Users Association chairperson Niall Robertson said the tax being scrapped would create more problems than it would solve.

"The bottom line is, this money should have been allocated to public transport initiatives and perhaps to a certain extent, some cycling, but that's where it should have gone."

Robertson said New Zealand - and Auckland in particular - was far behind in its infrastructure development that was required for a modern city.

Public transport was "way behind the eight-ball" and there were no great infrastructure development plans for public transport despite growing numbers coming to Auckland.

Public Transport Users Association chairman Niall Robertson. Photo: RNZ / Jordan Dunn

"When you take away the funding for that, it means what little there is planned is actually going to be under the hammer as well.

"This really doesn't seem to serve any purpose at all, except political populism really."

Robertson said the original fuel tax was designed to provide more revenue for public transport alternatives in Auckland and to reduce congestion in the city.

"At the moment, the scrapping of that actually just takes it back to the original problem of just more congestion and more problems."

The Employers and Manufacturers Association said it was a double-edged-sword for businesses.

While it would be a welcome change to many businesses, head of advocacy and strategy Alan McDonald said some negative impacts could come with it too.

"One of the biggest issues for fleet managers at the moment is their maintenance bills for their fleet and already I know Auckland Transport is unable to fund all of its replacement programmes, so yeah, it's kind of giving with one hand and maybe taking away a bit with the other."

McDonald said the scrap would leave a hole in the city's infrastructure, which was already lacking.

A survey of more than 3000 New Zealanders by the Infrastructure Commission, released this month, found only 34 percent of respondents thought paying by usage was a fair way to fund roads - though this was still higher than the other ways of paying for roads presented in the survey.

This compared to much higher rates of responses who thought it was fair to pay for electricity (74 percent) and water (72 percent) based on household usage.

Aucklanders, at 31 percent, were also more likely to think congestion charging was a fair way of charging for road use at peak times than respondents from elsewhere, at 22 percent.

This story was originally published by RNZ