We kicked off the year with our On Schedule podcast and Infometrics chief forecaster and director, Gareth Kiernan, giving his thoughts on how 2025 will likely shape up for the transport industry and New Zealand.

It was a fascinating conversation; Gareth covered a lot of ground, so I’ve summarised a few of his key trends and predictions.

First up, the good news is that it appears our economic activity was largely at its lowest at the end of 2024, with signs that things are now picking up.

Transport predictions

Initial signs are positive that volumes are trending upwards, but it might not be until the second half of 2025 that momentum really starts to kick in.

Cost pressures also appear to be easing, relief from interest rates is starting to have a positive impact, with more interest rate cuts predicted to follow. This mix shapes up to support some margin reinstatement for the transport industry with improved volumes and profitability.

Geopolitics and the Trump Effect

With Donald Trump securing a second term, a protectionist stance on the US economy likely means more tariffs on imports. While a 10% tariff might stimulate short-term US domestic economic activity, it would come at a cost to US consumers, as local producers already compete without tariffs. In the medium term, reduced trade and slower US growth could weaken China, New Zealand’s largest market. This highlights the importance of New Zealand’s efforts to diversify trade, including strengthening agreements with countries like the UAE, Gulf States and India to mitigate geopolitical risks.

Infrastructure investment is beginning to move from promises into reality

Throughout 2024, there was a steady stream of infrastructure announcements from the government, particularly in terms of roading. Economic forecasters remain cautious as to how many projects will get shovels in the ground in 2025. Many still need to move through planning and design, with funding mechanisms and legalisation to be worked through to enable delivery.

There is no question the current government is acutely aware of the previous government’s perceived lack of delivery. Ministers appear to be keen to deliver on election promises to ‘get stuff done’, which suggests construction will commence for many significant infrastructure projects as we move through 2025.

Already the signs are positive, with construction confirmed to start on SH1 Papakura to Drury, the reopening of the Mangamukas, funding approved for the design of stage one of the Hawke’s Bay Expressway and early works on SH1 Belfast to Pegasus Motorway and Woodend Bypass (RoNS), and SH1B Telephone Road reopening confirmed.

Shortage of skilled workers remains an issue

Getting our immigration settings right remains an ongoing challenge. While the economy was grinding to a halt, the noise about worker shortages dulled. But as the economy ramps up, we are going to find ourselves having to come up with plans to entice the return of skilled machine operators who have sloped off overseas during the past four years.

Thought needs to be given by officials as what immigration pathways we can offer individuals with the technical skills we need to deliver the ambitious infrastructure projects the government has promised.

What can road operators do to protect themselves from the continued volatility?

Economists predict there will be some degree of continued lethargy in the room for another six months or so, so transport operators still need to focus on business resilience. Diversification remains key to building resilience and reduces exposure should one sector being doing it tough.

But if diversification isn’t possible, which for many it won’t be, then now is the time to ensure you understand your cost structure. It’s crucial to identify opportunities to improve efficiency or increase margins, as businesses that only absorb rising costs will eventually find this approach unsustainable. Equally important is understanding how resilient your customers are – because there is nothing worse than doing $10,000 of work only to find out they have gone under and can’t pay your bills.

Parting words

Can we expect a rapid return to the pumping economy of 2018/19? Not this year. But there are signs of green shoots emerging. Interest rates are coming down, which is a clear catalyst to get the economy moving. And while recovery is expected to be gradual and perhaps a bit patchy, predictions are that we should be gaining some momentum by the second half of the year. This will remain limited as we won’t have repaid the costs and borrowing we did during the pandemic, but things should be heading in a far better direction than they were in 2024.