In less than a week (4 April 2016), transport costs could rise significantly, thanks to the Road Safety Remuneration Tribunal (RSRT) order which implements a minimum rate for contractor drivers through the Contractor Driver Minimum Payments Road Safety Remuneration Order. This sets a national minimum payments for contractor drivers in the road transport industry. A few key points about the order:
- You will not be allowed to trade as either a sole trader or partnership you must use a company.
- The company that owns the truck cannot be owned by either yourself, a family member or friend.
- Driver rates from the RSRT apply only to “owner operators” not ASX listed transport operators, so an OO will have to charge a lot more.
- Freight rates will have to go up at least 40% which will flow through to the entire economy.
- The Road Safety Remuneration Tribunal (RSRT) will be around for 3 years before undergoing a review.
Many are saying that if the changes to minimum rates proceed, it will price smaller operators out of the industry, though the Transport Workers Union (TWU) is a vocal supporter of the Order. It says an increase in minimum rates will make the industry safer, and that’s worth paying for.
However, according to Business Spectator, some 35,000 people, mostly men, drive their own long-haul trucks. They have borrowed around $15 billion from Australian banks and other financiers to fund their vehicles. Most of the loans are also secured on the family home.
So, consider the implications. First, the average cost of a truck is ~200k. The Personal Property Securities Register regime means that lenders would have the power to sell the asset at once – and if they cannot on-sell the vehicle, then its scrap value of ~$23 a tonne is the going rate. Then they can turn to the borrowers other assets. We could see a spate of forced home sales.
Second, the finance sector has dedicated resources servicing the truck finance and insurance sector, plus there is a network of dealers, repairers, accommodation providers, and other services which will be impacted as demand falls for their services.
Third, who will still be on the road to provide transport services – the big guys, of course. But will they want to provide the range of services currently available? Possibly not. So will there be significant transport disruption?
At very least, what was an invisible cost is certainly going to become visible, but we wonder if the knock-on effects have really be thought through.
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