NZ TRUCKING ASSOCIATION - RUC increase is a kick in the guts to the trucking industry

Wednesday, July 8, 2020

…many trucking operators are struggling to make even a 3% to 5% return on their investment… this increase could well be the difference between just keeping the business afloat or permanently shutting the doors.

Recent government confirmation that they intend to go ahead with a planned 5.3% increase in road user charges (RUC) on 1 July 2020 is a real kick in the guts to the trucking industry. This is an industry that saved the government and the country from social and economic collapse during the Covid- 19 lockdown, by knuckling down in the time of crisis and getting on with the task of delivering the essential supplies, including food, toilet paper, hand sanitiser and medical supplies around New Zealand. The men and women of this industry stepped up to support the country in its time of need, often at great risk to their own health and economic wellbeing. They deserve some respect in return. The trucking industry in New Zealand is predominantly made up of small to medium businesses, with the majority employing five people or fewer. In many cases these are family businesses with the business owners working day-to-day hands-on in the business. This is a typical reflection of the majority of businesses in New Zealand that make up the backbone of the economy.

These businesses are struggling as they deal with the effects of Covid-19. They are struggling to keep staff employed, put food on the table, meet their financial commitments – and they have used up what little cash reserves they had. This is a low margin industry that struggles to get rate increases when times are good, let alone during the time of a national pandemic crisis. Road user charges are a substantial cost to trucking operators, typically between 20% and 30% of their total business costs. So a 5.3% increase in RUC costs is a substantial increase in their overall business costs. Many trucking operators will be faced with having to try and absorb the 5.3% RUC cost increase, as their customers cannot or will not accept any increase in their costs at present, as they too struggle to keep their businesses afloat. This increase will equal about a 1% increase in a trucking operator’s total costs, which if you are not working in this industry you might think is not much. But when you put this in the context that many trucking operators are struggling to make even a 3% to 5% return on their investment, then this increase could well be the difference between just keeping the business afloat or permanently shutting the doors. Most people accept the principle that road user charges are needed to fund the construction and maintenance of the New Zealand roading network, and the trucking industry is happy to pay its fair share of these costs.

The issue for our industry is the timing of this increase, which given the present business economic outlook, is abysmal to say the least. As an industry we would rather see the planned increase delayed for 12 months to give the trucking industry time to recover from the effects of the Covid-19 crisis. Also adding insult to injury is the government plans to siphon off funds from the National Land Transport Fund, which is funded by road user charges and fuel excise duty, to support other forms of transport – including rail and cycling, that do not contribute anything to the fund. By comparison, in our neighbour Australia, which funds its roading network from fuel and registration taxes, the Australian government has recognised the importance of the trucking industry to the country’s economic and social recovery from the effects of the Covid-19 crisis, and has taken guidance from the Australia Trucking Association and delayed their planned fuel and registration tax increases by 12 months to ensure the ongoing viability of the trucking industry. It’s time the government in this country took a lesson from its counterparts in Australia and recognised the importance of the New Zealand trucking industry to this country’s economic and social recovery from the effects of the Covid-19 crisis, and started treating the trucking industry with the respect it deserves.