Gareth Kiernan, Chief Forecaster, Infometrics - Falling interest rates and limited growth in labour costs continued to keep overall transport costs in check in the September quarter. With the official cash rate (OCR) reaching 3% in the September quarter, finance costs were at their lowest in three years, providing relief to the transport industry and other parts of the economy following the significant tightening in monetary conditions between 2021 and 2023. The Reserve Bank has since cut the OCR further, to 2.5%, and financial markets now expect the OCR to hold at a low of 2% or 2.25% throughout 2026. 

Weak hiring activity has seen the unemployment rate rise to 5.3% in the September quarter, leading to more subdued wage pressures across the economy. Labour cost growth for the transport industry eased below 2% pa in September for the first time since early 2021. Other economy-wide data shows small rises in both job ad numbers and filled jobs over the last three to four months, indicating the labour market could be starting to turn. However, spare capacity across the economy suggests that labour cost growth will remain relatively subdued over the next year. 

Diesel prices edged up 1.5% over the September quarter but were still 1.3% lower than in September 2024. Ongoing weakness in international oil prices has been offset by the lower New Zealand dollar, which hit a 16-year low on a trade weighted index (TWI) basis in early November. As a result, diesel prices are coming under continued upward pressure, although that pressure is reasonably modest at this stage. 

Cost growth across tyres, parts, repairs, maintenance, and other overheads remains lumpy from quarter to quarter. Overall, across these categories, the general trends point towards moderating cost pressures, although we note that repairs and maintenance costs are still up 8.1% from a year ago. 

Expectations are that the isolated pockets of persisting cost pressures across the economy dissipate during 2026. Aspects to watch in coming quarters include the effect of the lower exchange rate on the cost of imports, such as fuel and tyres, as well as the scope for improved demand conditions next year to result in less discounting occurring, as businesses start to come under less pressure to chase work.