Cost pressures for the road transport industry mostly continued to weaken in the June quarter. The most upward pressure was evident for repairs and maintenance costs, which rose 1.6% from the previous quarter to be up 7.3% from a year ago. The persistence of these cost pressures is reflective of lingering services inflation across the economy, which is taking longer to dissipate than goods-based inflation.

Labour costs recorded their second-smallest quarterly increase in the last seven years, rising just 0.3% from the March quarter. This softening trend is reflected in broader labour market conditions, with private sector wage growth slowing as firms cut back on hiring and the unemployment rate rises. Although it is unlikely to be an issue in the near term, we note the potential for drivers to be in short supply again when demand picks up, given the government’s tightening of the Accredited Employer Work Visa scheme to target higher-skilled workers.

Other overhead costs recorded their first quarterly fall in nearly four years, down 0.1%, while finance costs edged slightly lower as well. The Reserve Bank’s official cash rate cut in August, and signals of continued cuts throughout the next 12-18 months, point towards more relief in terms of debt-servicing costs in coming quarters.

Diesel prices fell away in the second half of the June quarter, with the quarterly average finishing 1.8% down from the March quarter. Pump prices are currently at their lowest since July 2023, and average prices for the September quarter could be about 5% below the June quarter. On international markets at the moment, the effects of ongoing concerns about conflict in the Middle East on oil prices appear to be outweighed by worries about weak demand for oil due to sluggish global economic growth.

Although cost growth is broadly easing, weak demand conditions are maintaining pressure on profitability across the economy. With increasing amounts of spare capacity, some businesses are pricing work more cheaply to try and keep their workers and machinery busy.

Infometrics prepares a customisable road transport cost index for National Road Carriers every quarter. The quarterly cost index tool updates give 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.