Spike in road transport costs may hurt operators and consumers

Road transport business costs have risen almost four times higher than the general inflation rate in the last quarter – an unprecedented rise – and it’s likely to get worse, according to the latest cost index information produced for the road transport sector.

Trucking businesses are now on “cost watch,” says Ia Ara Aotearoa Transporting New Zealand Chief Executive, Nick Leggett. He warns the sharp spike in costs may force some road transport operators out of business unless they pass costs on, and the rise will also hurt consumers and add to the already soaring cost of living.

The quarterly industry cost index is produced by Grant Thornton on behalf of the peak industry body. It shows that there has been an overall quarterly increase to June 2022 of 6.24 per cent to road transport business costs, compared to a 1.66 per cent increase in the CPI inflation for the same period.

Between September 2018 and September 2020, despite an increasing CPI, transport costs managed to stay relatively stable. However, in the last two years, the transporting inflation index is showing unprecedented increases and the gap between that and CPI is growing wider.

“The index demonstrates that just passing on inflation level increases isn’t going to be enough to keep some trucking businesses afloat,” Leggett says.

“The industry cost increases are overwhelmingly higher than inflation, driven by fuel increases of 29.64 per cent followed by an increase in the cost of tyres of 4.10 per cent.” 

Transporting New Zealand believes this is a stark warning to trucking businesses that they must understand their own costs, engage with their customers, and pass those costs on. It is important for the economy that trucking companies remain viable to avoid an even more challenged supply chain than currently exists.

“We know from a recent industry survey, that one in five transport companies say they are unable to pass any of their costs on. The good news is that the same survey told us over 40 per cent of industry businesses said the Government’s Road User Charge (RUC) discount of 36 per cent was helping with these cost pressures,” said Nick Leggett.

Ia Ara Aotearoa Transporting New Zealand is continuing to advocate for an indefinite commitment from the Government to extend the RUC discount, fuel excise tax reduction and public transport fare reduction.

“Whether it’s people or freight, we know that transport gets more costly on households and businesses in tough economic times. Our fear is that we are only at the beginning of
hard times. While our members are working hard to minimise costs to customers, but they also have to survive as businesses,” said Nick Leggett.

“Government discounts on fuel make all the difference right now. Removing them on January 31, 2023, would be a disaster.”