Road transport to see over 2pc annual growth by 2021-22


Cost pressures, rising wages and skills shortage key issues facing road transport, report states

Road transport to see over 2pc annual growth by 2021-22
Report states ongoing cargo port facilities developments will improve efficiency across the sector.

 

Despite internal and external pressures, the road freight sector is treading on a growth path, a recent report reveals.

Industry revenue is expected to grow by 2.3 per cent per annum from $40.5 billion in 2015-16 to $47 billion in 2021-22.

The figures are "marginally lower" than the 2.8 per cent GDP growth predictions for the same period, Bankwest’s Industry Overview Report states.

One of the reasons for this upward trajectory is the price of diesel, which has been at its lowest levels since 2010-11 at 122.7 cents per litre on an average for the past almost 12 months, the report notes.

The ongoing cargo port facilities developments and improvements are seen as another good sign for the industry.

With road and port infrastructure being major external drivers of industry efficiency, the state of the road network was a concern for the industry, Bankwest executive GM business banking Sinead Taylor says.

"Upgrades to cargo port facilities are currently underway in Sydney and Melbourne, and could add efficiency when completed," Taylor says.

"Additionally, the federal government has been encouraged to fast track a national freight supply chain to improve Australia’s freight capacity.

"Productivity gains in the industry have been minimal since the early 2000s and any future gains based on increasing load sizes may be limited by the current national road infrastructure."

On the downside, increased cost pressures, rising wages and skills shortage continue to challenge the road freight sector, the report notes.

It attributes the last two factors to regulations that call for strict safety standards and an ageing workforce "that is struggling to attract new and younger employees".

The increased costs linked with a relatively weak Australian dollar "will be likely passed on to consumers given the relatively inelastic nature of road freight transport.

"However, increased competition in the industry may force some providers to take hits to their bottom line and absorb the increased cost to maintain market share."

Other drivers identified by the report include:

  • Merchandise imports and exports - falling commodity prices and lower demand from China have had a significant negative effect on the value of exports, thereby putting downward pressure on the total value of exports.
  • Wholesale trade – this is a major customer for the road freight transport industry group and is a proxy for demand from retailers, manufacturers and importers. Total sales of goods and services for the wholesale trade industry division has grown by a modest 1 per cent in the year to June 2015, compared to 2.3 per cent for all industries, indicating modest growth in demand for road freight transport.
  • Producer Price Index (PPI) – this has grown steadily over the past 10 years, indicating higher costs for moving goods by road. The flattening of the road freight PPI is due to the road freight industry benefiting from lower wage growth and oil prices, even in the face of unfavourable movements in the exchange rate."

The full report is available here.

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