On 1 July 2025, alcohol excise will rise by 2.5%. It sounds modest after the bruising increases of 2022 and 2023. But DB Breweries managing director Peter Hart is making a point that deserves more attention than it has received: the Customs and Excise Act caps excise adjustments at CPI, giving ministers genuine discretion to apply a smaller increase or none at all. No government has ever exercised that discretion. Not Labour, not National, not in a recession, not during a pandemic recovery. The formula runs, Treasury banks the revenue, and nobody takes a vote.
That is not tax policy. It is tax by autopilot.
The compounding hit
The numbers over the past four years tell the story. Excise rose 6.92% in 2022, the largest jump in 30 years. Then 6.65% in 2023. Then 4.1% in 2024. Now 2.5% for 2025. Cumulatively, draught beer excise has climbed from $33.24 to $37.84 per litre of alcohol since mid-2022, a rise of more than 13%.
For the industry as a whole, the 2025 increase alone adds $37.3 million in costs, of which $13.3 million falls on beer. The 2024 increase added $52.9 million. A mid-size brewery now needs to find an extra $200,000 a year just to cover the excise movement of the past three years.
Brave Brewery co-owner Gemma Smith in Hawke’s Bay puts it plainly: excise now makes up 59% of the cost of raw ingredients per batch. Half the price of a 12-pack of beer is already tax when you combine excise and GST.
Pubs are losing and homes are winning
The structural shift is stark. On-premises alcohol sales have collapsed from roughly 40% of total volume to about 15% over the past decade. New Zealanders are drinking at home because it is dramatically cheaper, and a Curia survey of more than 1,000 people found 47% occasionally choose home over a venue specifically because of cost.
Total beer consumption has fallen too. Stats NZ data shows 281 million litres available in the year to March, down from nearly 300 million in 2019. Brewers Association executive director Dylan Firth called it the biggest drop in consumption in quite some time. Shortjaw Brewing reported a 30% drop in sales in recent months.
This is not just a beer problem. Hospitality NZ CEO Kristy Phillips points out that more than 160,000 New Zealanders work in hospitality, many in regional areas where alternative employment is thin.
Everyone else has adjusted except New Zealand
The UK cut draught beer excise by 10% and introduced a lower on-premises rate. Australia paused draught beer indexation for two years at a cost of A$95 million over five years. Canada capped annual increases at 2%. New Zealand has done nothing.
Three industry bodies, Hospitality New Zealand, the Brewers Guild, and the Brewers Association, are now jointly calling for a 50% reduction in excise on draught beer sold on-premises and a 2% cap on annual increases. The fiscal cost would be modest because keg beer is a small share of total volume, and increased on-premises activity would generate offsetting GST.
Brewers Guild executive director Melanie Kees says the pressure is acute for smaller operators: ‘Breweries, especially our small and regional operators, are already under pressure from rising production and compliance costs’.
The harm argument now cuts both ways
Public health advocates defend the increases. Alcohol Healthwatch’s Rebecca Williams argues the revenue funds hospitals, police, and interventions for harm that costs around $7.85 billion annually. That is a legitimate point, but it does not answer the design question.
Associate Justice Minister Nicole McKee has acknowledged as much, noting it is ‘much more expensive to drink at a licensed venue than at home, unsupervised’ and expressing concern the price gap may increase harm. When the harm-reduction argument starts supporting a tax cut, the policy settings have clearly drifted from their original logic.
Alcohol excise revenue reached $1.29 billion in 2022/23. That is real money, and no finance minister gives it up willingly. But the question is not whether to tax alcohol. It is whether a formula that raises taxes automatically, without a vote, without reference to economic conditions, and without anyone taking responsibility, is defensible policy. The legislation gives ministers the power to apply less than CPI. Thirty years of precedent says they never will unless someone forces the debate into the open. The brewers are trying. Whether anyone in the Beehive is listening is another matter.
Sources
- NZ Herald: DB Breweries boss urges Government to pause beer excise hike as costs soar
- NZ Customs: Update on excise duty and levy rates for alcohol from 1 July 2025
- NZ Customs: New excise duty and levy rates for alcohol from 1 July 2024
- NZ Herald: Hawke’s Bay brewers call for beer excise tax reduction to bring people back to pubs
- RNZ: Craft brewers’ financial troubles – from costs, tax, contracts and more
- 1News: Kiwis likely to pay more for beer after tax increase, brewers warn (2023-05-30)
- 1News: Breweries feeling the pinch ahead of tax increase (2023-05-30)
- Drinks Biz: NZ Brewers and Hospitality call for 50% cut to draught beer excise
- The Shout: Alcohol excise tax increases again from July 1