Why are transport carriers passing on significant ‘out of cycle’ rate increases?

Home Myfreight Blog Why are transport carriers passing on significant ‘out of cycle’ rate increases?

Many transport carriers have been compelled to review their services and procedures due to the continuously evolving supply and demand patterns impacting Australian supply chains. There is upward pressure on driver pay rates, as driver demand is exceeding supply. As a consequence, many transport carriers are increasing rates well ahead of CPI inflation to keep the wheels turning and remain viable in business.

A major contributing factor to the increased transport costs is a record fall in the number of drivers available to perform transport services. This can partially be attributed to COVID-related immigration restrictions, which has restricted a central source of new entrants to the industry. Additionally, Australia is experiencing nationwide driver shortages due to the reduction in overall driver numbers and high demand for freight delivery is causing an increase in job stress. To attract new drivers, and retain current drivers, transport carriers are making increases to driver pay rates.

In addition to this, there has been a resurgence in applications by the Transport Workers Union to revaluate driver wages and working conditions across several transport companies. This has resulted in many transport providers coming to an agreement with their staff and offering wage increases, which are then passed on to customers.

Since implementing these wage increases, transport carriers have mitigated some of the associated costs by reviewing the expenses within their business to find cost savings. Following this, transport carriers have been increasing their prices through out of cycle rates increases to remain profitable. This is done as a means to allow transport providers to maintain and grow their resources and continue to facilitate the best service possible.

Many Australians will also be aware of the increasing cost of fuel which has also driven up the cost of freight delivery. While the Government has passed on a temporary reduction in fuel excise, throughout the same period the Government has removed the eligibility for Fuel Tax Credits, meaning the net benefit for heavy vehicle operators is only 4.3 cents per litre and will not yield a significant decline in the fuel levies.

The volume of out-of-cycle rate increases and increasing fuel levies in the current climate are unprecedented, and reflective of the multitude of obstacles and demands the transport industry is currently facing.