Cost pressures for the road transport industry were mixed in the September quarter. Interest costs eased 2.1% to be down 4.5% from a year ago, representing the first annual decline since 2021, as the Reserve Bank cut the official cash rate for the first time since 2020. The OCR was lowered by another 50 basis points in early October, and financial markets are pricing in further cuts during the first half of 2025 and beyond. Lower debt-servicing costs are set to have a substantial positive effect on firms’ cashflow throughout the next year.
Diesel prices in late September fell to their lowest level since January 2022, prior to the Russian invasion of Ukraine. On average over the quarter, diesel prices were 5.9% lower than in the June quarter, as weak global demand continues to keep a lid on international oil prices. Fuel prices edged back up in November, but they remain below the average price in the previous quarter. Unrest in the Middle East continues to present upside risks to fuel prices, and Donald Trump’s re-election as US president has added to uncertainty about international geopolitical stability.
A 0.7% increase in labour costs in the September quarter was bigger than for the previous six months, although annual labour cost growth is at a three-year low of 2.9%. Job losses have become more widespread across the economy over the last six months, driving the unemployment rate up to 4.8% and leading to an easing in wage pressures. Labour cost growth is expected to continue moderating during 2025, with the unemployment rate pushing up to a peak of 5.4% in the middle of next year.
Trends in costs for tyres and vehicle parts and repairs and maintenance were less favourable. Prices for tyres and vehicle parts rose 1.7% in the September quarter, taking annual growth to a 15-month high of 7.2%pa. A 5.5% jump in repairs and maintenance costs took annual cost growth for this category to a 12-month high. These results demonstrate that, although broader domestic inflationary pressures are easing, there are still lingering pockets of cost increases in some parts of the economy. Continued patchy demand conditions are likely to see these pockets dissipate further during 2025.
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.
