Rising costs for businesses and consumers require urgent action

In News5 MinutesBy Nick LeggettNovember 25, 2022

It’s hardly a surprise – the cost of living and doing business is going up. I think everything is pointing towards next year being tougher than this year. We want our businesses to do well and not be distracted from their key role of moving freight and delivering it to their customers.

That is why Transporting New Zealand has called for the Government to extend the reduction in the excise tax on petrol, the RUC discount, and the public transport fare discount. These are all expected to end on 31 January next year. If that occurs, the impact on businesses and the public will be significant.

Our regional and sector teams are speaking with a lot of transport operators currently who are letting them know that there is significant pressure on every part of their business. As one medium-sized operator told me, “Revenue is up 25% on a year ago, but profit is down.”

For a normal truck and trailer operating at maximum weight which typically travels 100,000km in a year, the annual difference between the full and the discounted road user charges is $20,000.

We know that the RUC discount has eased costs for many transport operators. In other situations, customers have had the discount passed over to them. Either way, come February 2023, that additional $20k will be added straight onto the cost of whatever is being carried by the truck. Things are about to get a lot more expensive for New Zealanders, many of whom are already doing it tough with cost-of-living rises.

If they catch the bus or the train, that 50% discount won’t be there any longer, if they fill their car it will probably be an extra $15, and supermarket grocery bills (and most probably everything else) will be higher too. This comes at a time when inflation is nowhere near under control and is unlikely to be any time soon. Plus, of course, next year people will be feeling those interest rate increases which will continue to be a reality as mortgages come off their fixed rates, with a total of $160 billion of fixed mortgages up for renewal in 2023.

In uncertain and volatile times, we think the Government’s job is to give as much confidence and support as possible to New Zealanders as it possibly can. If the reduction comes off suddenly, it’s going to be too much at once and for businesses that are already struggling, and these increases will make all the difference to their viability.

So, what has the response been so far? The Government has said it is thinking about it, but it doesn’t sound hopeful. Transport Minister Michael Wood has written to us in response to our correspondence saying this is all very expensive and don’t count on it. We are meeting him in early December, and this will be one of the key topics we talk to him about. The road transport industry and the public need certainty.

Transporting New Zealand is here to support the industry, and our message is it’s time to get prepared for a difficult time next year financially. Our strong advice to businesses is to not wait for problems to occur; start being proactive now, particularly before Christmas. Friend of the industry, economist Cameron Bagrie, has given transport operators the message that if you feel you are going to need to restructure with your bank or finance company, or anticipate any financial issues in 2023, now is the time to have those conversations. He warns that if you wait for the problem to arise, it will likely be too late to reduce the impact on you and your business.

Also, start having those conversations with customers, if you have not done so already. If you are not charging fully the cost of doing your business to your customers, you need to start doing that now. Cameron is part of a company that offers help to businesses talking to their financial institutions. Check out details around Chaperon’s services here – www.chaperon.co.nz

 By Nick Leggett, chief executive Ia Ara Aotearoa Transporting New Zealand