The New Zealand Government’s 2024 Budget announcement, featuring substantial increases in funding for roading and infrastructure projects, has been met with a positive yet cautious reception from the road transport industry.
Despite the welcome investment, industry leaders are highlighting the ongoing economic challenges faced by operators.
Industry body Transporting New Zealand is welcoming the Budget’s commitment to improving the nation’s infrastructure.
Interim chief executive Dom Kalasih emphasised the critical need for new investment in highways, including national and regional roads of significance.
“Kiwis can’t continue to put up with deteriorating roads that are jeopardising economic growth, which is vital for the community and businesses,” Kalasih says.
The Budget outlines a $1 billion expenditure to accelerate land transport projects, including Roads of National Significance (RoNS).
This is in addition to the $20.7 billion previously indicated in the Government Policy Statement on land transport. Other significant allocations include $939 million for road repairs following last year’s severe weather events in the North Island and $200 million for the maintenance and renewal of the national rail network.
Furthermore, $1.2 billion will be directed towards the new Regional Infrastructure Fund, and a National Infrastructure Agency will be established.
However, despite these developments, the road transport industry is grappling with tough economic conditions.
Kalasih says many operators are experiencing low demand and increasingly tough economic conditions.
“Many trucking firms haven’t seen the traditional post-Christmas uptick in business, with bulk and aggregate and logging operators some of the worst affected,” he notes.
‘Tough conditions’
Transporting NZ account manager Lindsay Calvi-Freeman has been checking in with members across the lower North Island, and says he’s getting a mixed picture during his calls.
“I’ve spoken to members with their revenue down 40% on last year, and others who have been forced to lay off staff, the last thing anyone wants to be doing.
“Fortunately, there are a reasonable number of operators reporting reasonably steady demand, but almost everyone has noticed an impact,” Calvi-Freeman says.
Fellow account manager Odette Geyer says the entire supply chain is feeling the strain.
“We’re seeing an increasing number of liquidations, as the cost of lending and reduced business confidence starts to bite.
“Last week we saw three transport liquidations announced in three days. The road freight industry also supports a whole range of suppliers, and so tough conditions for our members have a big flow-on effect.”
Cutting costs
Vicki Harris, who manages Transporting NZ’s member benefits and commercial partners, highlighted that members are increasingly looking for ways to cut costs and maximise efficiency.
“It’s really tough out there at the moment. A lot of members are looking to cut expenditure and maximise their bang for buck. We’re seeing a good number of referrals through to Transporting New Zealand’s supplier discount schemes, including fuel and tyre retailers.”
Economic data corroborates the tough conditions reported by trucking operators.
The Reserve Bank’s May 2024 Monetary Policy Statement noted weak economic indicators and subdued growth. The April 2024 ANZ New Zealand Business Outlook survey indicated a decline in business confidence across all sectors, and the March 2024 NZIER Quarterly Survey of Business Opinion reported a net 23% of firms experiencing a decline in activity over the March quarter. Transporting NZ says this is in line with the feedback its receiving from members.
However, the May 2024 ANZ Truckometer showed some positive signs, with the heavy traffic index up 3.3% compared to the previous year (over a three-month average) and rising 0.3% month-to-month. The heavy traffic index tracks the flows of vehicles weighing more than 3.5 tonnes on 11 key roads, and has a strong relationship to GDP. The Truckometer doesn’t reflect factors like reduced loads, or vehicle movements outside of those identified routes, that will both be impacting Transporting NZ’s membership and the wider road freight industry.
Industry resilience
Despite these challenges, Kalasih remains optimistic about the resilience of the road freight industry.
“Over the past few years, we’ve seen road freight operators successfully deal with the COVID pandemic, severe pressures on the supply chain, acute driver shortages, and cost pressures.
“Now, [they face] the dual challenges of an economic recession and continued inflationary pressure. Things are tough, but road freight firms are very resilient.”
Echoing Transporting NZ’s sentiments, the National Road Carriers Association (NRC) also welcomed the Budget, praising the balance between re-prioritisation and targeted investment.
NRC chief executive Justin Tighe-Umbers highlighted the importance of roading infrastructure for unlocking economic potential and stimulating growth.
“This Government appreciates that if we are to unlock our economic potential and stimulate growth, investment in roading infrastructure is key,” he says.
The Budget’s $2.68 billion allocation for transport, including an additional $1 billion for Roads of National Significance and major public transport projects, was noted as a crucial step.
“This Budget is rightly looking at what investment needs to happen in the short term to set us up for success in the long term.
“When it comes to freight and ensuring New Zealanders have the products they need it, when they need them, roading is critical.
“The reality of New Zealand’s topography, scale and disparate population is that every mode needs road.
“Intermodal transport solutions must work together to create efficiencies and increase productivity, so it is pleasing to see rail is also being prioritised in terms of funding as it is a key part of the freight mix,” Tighe-Umbers says.
NRC is continuing to call for a 50-year plan for roading infrastructure to promote investment and build resilience in the network.
“For our members, this increased investment in roading infrastructure means they can look forward to roads that are better maintained, repaired quicker, and ultimately safer,” he adds.
