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Transport Sector Cost Pressures Continue To Ease As Activity Weakens

Transport sector cost pressures continued to ease as activity weakened in the March 2024 quarter according to National Road Carriers Association’s (NRC) cost index tool collated by economics consultancy Infometrics.

Infometrics Chief Forecaster Gareth Kiernan said diesel prices were 3.5% lower than in the December 2023 quarter, while finance costs edged lower for the second consecutive quarter. Labour costs recorded their smallest quarterly increase in more than three years, at just 0.4%, and there were signs of moderating pressures across most other cost categories.

“Diesel prices look likely to be slightly higher in the June quarter than they were in March, due to the ongoing Israel-Gaza war,” said Kiernan. “To date, the reaction of international markets to the risk of Iran being drawn into the conflict has been relatively muted. Nevertheless, transport operators should keep a close watch on developments in the Middle East, given the significant cost risk posed by a spike in oil prices, which experience from previous conflicts suggests could last for six months.

“Further interest rate relief will be limited throughout 2024, as the Reserve Bank continues to signal that rate cuts are still some time away. Financial markets are picking the official cash rate will be cut from late 2024, but the Bank’s own forecasts suggest mid-2025.

“The reduction in other cost pressures in part reflects an easing labour market. With the unemployment rate rising to 4.3% in the March quarter, wage growth is gradually slowing across the private sector.

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“Stagnant economic activity means that demand for transport services is weakening. Operators are coming under financial pressure as volumes soften, meaning fixed operating costs have to be covered across a smaller revenue base.

NRC GM Policy and Advocacy James Smith said the quarterly cost index tool updates gives NRC trucking operator members timely information to plan and better manage their businesses. NRC members can log onto www.natroad.co.nz to enter their cost inputs into the cost Index tool to see the impact of economic changes on their specific business.

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