Cost of living and inflation pressures are mounting

In News4 MinutesBy Nick LeggettMay 27, 2022

The cost of living and inflation are going up and this is creating a lot of pressure for everybody. With inflation impacting on the weekly shopping bill and other costs, plus the threat of further OCR and interest rate hikes, it’s going to be very difficult for businesses and families. With inflation currently running at 6.9%, there are massive pressures on businesses. Cost increases, uncertainty around drivers and staff, and customer pressure are among the major challenges the road transport industry is facing.

There are a couple of mild positives for us to consider. The Government has recognised the pressures on our industry – which we raised with Transport Minister Michael Wood – by giving an approximately three-month 36% discount on road user charges. This was extended by a further two months in last week’s budget until September.

It’s important that road transport businesses get an overview of their situation in a period of tense economic activity. We know very much that the old adage, “cash is king” holds true, but what else should operators be thinking about right now?

Know your costs

Know how much it costs to keep your fleet on the road and know the revenue that you are generating from your business activities; understand where the cost increases are specifically; understand your margins; and pass your costs onto customers where there are increases.

We often struggle as an industry because we are a service provider. We have to be stronger in asserting ourselves at times like this because we need road transport businesses to be viable and carry the freight task in an otherwise stressed supply chain. So, know your costs, pass those costs on, and look after your people. Don’t let them walk down the road. Now is the time to look at increasing pay if at all possible because you will be having to compete with wages if you are employing new drivers anyway.

Transporting New Zealand is always happy to talk to people about the issues and challenges their businesses are facing. The Grant Thornton report, which is due in June, is a cost index that tracks changes. This is available in the members part of our website, It is going to become more important for transport businesses to follow cost movement and then price appropriately.

Conference returning

The Transporting New Zealand national conference this year is being held in Invercargill, and will run from September 28 and 29, with the Hall of Fame taking place on September 30. This will be a good event for us to get together again as an industry. We are going to have an interesting range of speakers, including Nicole Rosie, chief executive of Waka Kotāhi, NZ Transport Agency, and economist Cameron Bagrie.

As an industry, we need to look forward and prepare for further challenges ahead. This includes the increasing role of technology, efficiency in data capture that industry is going to start seriously considering as a business tool, and the kind of change the industry will be facing.

Southland is a big trucking centre of New Zealand and it will be great for people to meet up again face-to-face. The website is open now for bookings and it pays to get in early and take advantage of the early bird discount. See here for more detail:

By Nick Leggett is chief executive of Ia Ara Aotearoa Transporting New Zealand.

You can also listen to Nick talking with David Killick here.