Auckland Mayor Phil Goff has set out plans today to reduce council's car fleet and for half the fleet to be electric cars within five years.

Goff's first budget in his second term includes investment to tackle climate change, extending the living wage to cleaners and further reductions in public transport fares for school children.

He is proposing a general rates increase of 3.5 per cent, but rising costs for waste management and lowering rates for business could see rates tip the scales at 4.5 per cent for households.

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This would take the average household rate to nearly $2800, an increase of $126. On top of this, the average household water bill is $972 a year.

The Government pockets 15 per cent of these rates and water bills through GST.

Under Goff's plan the council's car fleet of about 1000 vehicles will be reduced by 230 petrol and diesel vehicles and 358 new electric vehicles will be added within five years. By then, nearly half of the car fleet will be electric.

Council and Auckland Transport currently have 34 electric vehicles and 75 hybrids.

The five-year target covers council and the council-controlled organisations, excluding Watercare. It is part of a target to cut council emissions by 20 per cent within five years.

Goff said the budget provides continuity, stability and certainty, but cautioned the council had to live within its means and stick with the modest promises he made during the election campaign.

They were made knowing "there was not a hell of a lot of money" and extra costs with the City Rail Link and America's Cup.

Goff said the budget included a record $2.7 billion on capital works, including more than $700m on water projects and $57m for parks and open spaces.

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He said the budget proposal did not include a big increase for climate change, but indicated substantive changes in the long-term budget next year once a climate framework, which has gone out for public consultation, is completed.

Other measures in the budget include $2.7m to plant 1.5 million mainly native trees over the next three years, $900,000 for research into climate change and $3.9m to extend the living wage to council-contracted cleaners.

Increasing the public transport subsidy for children 18 and under will cost $4.19m a year.

Finance committee chairwoman Desley Simpson said the budget proposal was fiscally responsible, cautious and not too controversial.

She said the rates proposal was a forecast only and could change between now and May next year before it is finalised. The rates come into effect on July 1 next year.

The budget proposal was approved by all but one councillor, Chris Fletcher, to go out for public consultation.