Road freight industry on an upward hill to growth

The road freight transport industry revenue is expected to grow by 2.3% per annum from $40.5 billion in 2015-16 to $47.0 billion in 2021-22, marginally lower than 2.8% GDP growth predictions for the same period.
That’s the conclusion of the Industry Overview Report on the road freight transport industry, published by Bankwest as part of its Business Insights series.
The report identified a number of factors, internal and external to the industry, that are perceived to be driving this relatively modest forecast.
Bankwest executive general manager, business banking Sinead Taylor said the report identified important drivers behind the industry’s successes.
“It’s pleasing to see the small growth of the road freight transport industry, but what’s especially useful is when we’re able to see what’s driving that success,” she said.
Fuel price is a major cost factor for the industry and Australian diesel prices have been at their lowest levels since 2010-11 at 122.7 cents per litre on average for the 12 months to June 2016.
Conversely, the increased costs associated 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.
Taylor said the state of the road network was a concern for the industry, with road and port infrastructure being major external drivers of industry efficiency.
“Upgrades to cargo port facilities are currently underway in Sydney and Melbourne, and could add efficiency when completed. 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,” she said.
Beyond cost pressures, two of the key issues facing the road freight industry are a skills shortage and rising wages. This has largely been driven by regulation to ensure that drivers meet strict safety standards and an ageing workforce that is struggling to attract new and younger employees.
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 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 1.0% in the year to June 2015, compared to 2.3% 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 can be found here.
Facts – at a glance:

  • Industry revenue (2015-16): $54 .4 billion.
  • Number of road freight workers (August 2016): 192,600, three in 10 of those employed in the Transport, Postal and Warehousing industry, or 1.8% of all workers in Australia.
  • Number of road freight transport businesses (June 2015): 48,753.
  • Road freight transport wages in 2015-16: $13.1 billion.
  • Proportion of businesses that exited market in 2014-15: 12 .4%.
  • Proportion of businesses with more than $2 million in turnover (June 2015): 6.4%.
  • Employment has grown moderately in the past 12 months, increasing by 2.9%.


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