Just three months into going out on his own, owner-driver Joel Casey is already scratching his head over the unfathomably low freight rates being charged by rivals.
From his Goulburn base, Casey, 38, says his single truck and drop-deck trailer business, Hi-Way Freight, is still picking up enough work to survive.
Thanks to reinvesting the proceeds of a property sale back into the business, Casey has also been able to avoid many of the overheads other operators have.
But after crunching the numbers on all the associated costs against a new wave of unrealistic online freight rates threatening viability, Casey is stumped over how some operators are keeping their heads above water.
“You’re forever seeing people put bids in at rates that are absolutely unachievable,” said Casey, who used to work in the public sector before chasing a new challenge in road freight transport.
“There is no possible way they could be doing it for that rate without cutting corners somewhere.
“When they’re doing it for something like a dollar per kilometre, or something ridiculous, you start to wonder, okay something’s going on here.”
Casey is so concerned about the current operating environment, he’s now written to federal Transport Minister Catherine King, and a host of other high-ranking politicians, including Senator Glenn Sterle, calling for an investigation into what’s really driving the low-rate bidding market.
“I am writing as an independent owner-operator in the Australian road transport industry to express serious concern about the escalating financial pressures and systemic inequities threatening the survival of small, locally-owned freight businesses,” Casey said in the letter also sent to Big Rigs.
“Despite strict compliance with NHVR fatigue management, insurance, registration, maintenance, safety and tax obligations, the cost of remaining compliant has become unsustainable.
“When accounting for all genuine operating expenses – fuel, maintenance, tyres, insurance, registration, NHVAS accreditation, electronic work diary fees, and accounting systems – the bare minimum required to simply break even is already far beyond what many freight rates currently offer.”
Joel Casey tabled a detailed breakdown of his costs to show ministers how tough it is for operators to survive. Graphic: Joel CaseyCasey also included a detailed table of his monthly operating costs to further illustrate his case for government intervention.
According to Casey’s numbers the average market kilometre rate is $2.80-$3 per kilometre, leaving a margin of less than 20 cents per kilometre.
But once capital replacement and wage recovery are included, the true minimum sustainable rate is closer to $3.50 per kilometre, said Casey.
“Yet the market remains filled with operators advertising rates far below these figures.
“If they’re charging $1000 to do a $1500 trip in a semi-trailer, who’s paying the fuel, who’s paying the wages?
“If it’s not the customer, and there’s no grants and there’s nothing else, there is money coming from somewhere.
“If they’re propping up these businesses with foreign money and the profits then filter back to them, then that’s going to impact our domestic economy. We’re just hemorrhaging money out as a country.”
Casey stressed that his concern is not directed toward individuals or cultural groups, but rather toward the “integrity and transparency” of business structures operating within Australian law.
“If foreign-owned or externally funded companies are using financial mechanisms or arrangements that effectively subsidise domestic operations, it creates an uneven playing field and undermines the viability of genuine Australian small businesses.”
Casey has also asked King’s office review the “real-world” cost structures of compliant heavy-vehicle operations to establish sustainable minimum benchmarks and to consider policy measures to protect small, locally-owned freight businesses through fair-rate or compliance-based incentives.
Senator Sterle told Big Rigs he’d already independently convened a roundtable with industry bosses and key ministers, including King, in Canberra today to discuss many of the underlying issues raised by Casey.
“I’ve said we have to fix this or it’s going to absolutely explode,” Sterle said
“This is the major problem facing our industry – tax avoidance and sham contracting. It will undermine everything we’ve achieved in the Closing the Loopholes part of the transport reform if it’s not crushed.”
Sterle said the rates between Melbourne, Sydney, Brisbane and Adelaide are the lowest he’s seen for years due to non-compliant companies employing drivers on ABNs and dodging their tax commitments.
“We will be pushing the case hard for action on the persistent increase of sham contracting in road freight,” added Queensland Trucking Association CEO Gary Mahon in his recent CEO message to members.
Western Roads Federation (WRF) CEO Cam Dumesny said he’d also be raising the issue of “misuse and abuse” of heavy vehicle rest areas as free depots and maintenance yards at the Canberra summit.
“This places compliant operators at risk, meaning they must inevitably choose between remaining compliant or remaining solvent,” Dumesny wrote in a note to WRF members.
“This issue, combined with the sham contracting cancer spreading through the industry, is driving the industry ‘back to the bad old days of the 80s’, to quote one member.”
The post Industry unites to find solutions to freight rate slide appeared first on Big Rigs.