A 53% spike in diesel costs, due to global oil supply disruption caused by the Iran War, was the attention-grabbing number for transport firms in the June 2026 quarter. Diesel costs for the quarter were 29% above the previous record high reached in June 2022, although the 71% lift in diesel prices from a year earlier was smaller than the 97%pa rise recorded in mid-2022.
Weekly data from the Ministry of Business, Innovation and Employment shows that diesel prices peaked at $3.82/L in mid-April. Prices had retreated to $2.42/L by mid-July, but the resumption of hostilities in July has seen prices lift again to about $2.71/L at the time of writing. Nevertheless, current pricing equates to a drop of around 15% in diesel prices between the June and September quarters.
Finance costs edged up 0.9% in the June quarter, as wholesale and retail interest rates lifted in anticipation of the Reserve Bank increasing the official cash rate (OCR). The Bank lifted the OCR from 2.25% to 2.5% in early August, and it is widely expected that the OCR will reach 3% by the end of 2026, with further rises possible during 2027. The associated lift in finance costs was the first increase faced by transport firms since 2023.
Most other cost categories continued their variability of recent quarters. A 3.6% jump in costs for repairs and maintenance more than reversed out the 1.3% fall in the March quarter, and repairs and maintenance costs are now 8.8% higher than a year ago. Other overheads recorded a similar rebound, up 1.1% in June following a 0.3% fall in March, with annual cost growth for this category sitting at 3.6%pa. Prices for tyres and vehicle parts were down 0.5% from the March quarter but still up 2.4% from a year earlier.
At 0.6%, quarterly growth in transport labour costs was the strongest in 18 months, despite the unemployment rate in the June quarter lifting to an 11-year high of 5.6%. Annual labour cost growth is still relatively subdued, at 1.8%pa.
Survey data suggests that there is some risk of flow-on effects from the increase in fuel prices and transport costs into higher prices for other goods and services. However, some businesses are reluctant to raise prices because they remain concerned about soft demand conditions, implying there is some cost absorption and margin squeeze occurring across the economy. Fuel prices have also fallen substantially compared with four months ago, and the more temporary nature of the fuel price spike has meant that firms outside the transport sector have needed to absorb higher costs for a shorter period than might have been expected.
Overall, we are hopeful that inflationary pressures across the economy prove to be more muted and less persistent than was feared in March and April. Nevertheless, we note that fuel prices are still 45% above the level prevailing at the end of February when the Middle East conflict began. Uncertainty hanging over the international geopolitical situation also means that the threat of further fuel price increases cannot be discounted.
Infometrics prepares a customisable road transport cost index for National Road Carriers every quarter. The quarterly cost index tool updates give NRC trucking operator members timely information to plan and better manage their businesses. NRC members can log onto www.natroad.co.nz to enter their cost inputs into the cost index tool to see the impact of economic changes on their specific business.
