Gareth Kiernan, Chief Forecaster, Infometrics.
Operating costs for transport companies were broadly lower in the final quarter of 2024, continuing a trend of moderating cost pressures throughout last year.
Fuel costs fell for the fourth consecutive quarter, down 1.9% from the September quarter and 13% from a year earlier. The other major decline was for financing costs as retail lending rates continued to fall in response to the Reserve Bank cutting the official cash rate. Finance costs were down 6.9% over the quarter and 11% from their peak in September 2023.
These ongoing declines were joined by a 0.3% fall in tyre costs, partly reversing out a larger-than-normal rise the previous quarter. Tyre costs were still 3.3% higher than a year ago.
Labour cost growth eased to 2.2% per annum, its slowest rate in almost four years. With recent signs that economic activity is starting to pick up, and the labour market expected to begin tightening in the second half of next year, scope for any further moderation in labour cost growth appears to be limited.
Growth in repairs and maintenance costs remains the biggest headache for transport operators, with costs up 9.2% over the last year. Repairs and maintenance costs have now risen 36% over the last four years.
Further declines in interest rates will continue to reduce debt-servicing costs and provide additional relief for businesses throughout the first half of 2025. However, the downward trend in diesel prices appears to have ended for now, with higher international oil prices and the weaker exchange rate placing some upward pressure on pump prices in New Zealand.
The lower New Zealand dollar could also lead to higher prices for tyres and other imported products in coming months. Expectations of inflation across the broader economy are for a temporary blip up later this year because of some of these factors, and the transport industry is unlikely to be immune from these pressures.
