Category: Business

Source: Radio New Zealand

• RBNZ govenror says NZ is likely to see higher short-term inflation
• Rates could rise if there are effects on medium-term inflation or inflation expectations
• Economic growth likely to be dampened

The Reserve Bank governor is warning of higher inflation and weaker economic growth due to the Middle East crisis.

The Israel and United States-led war against Iran has sent global energy prices soaring due to the closure of the Strait of Hormuz, and attacks on key energy infrastructure in the Gulf.

Economists had already warned of the inflationary impact facing the New Zealand economy.

In speech notes published on Tuesday, Reserve Bank (RBNZ) governor Dr Anna Breman echoed that sentiment.

“We are likely to see higher headline inflation over the near term, and somewhat weaker growth momentum,” Breman said.

Annual inflation was at 3.1 percent in the December quarter, above the RBNZ’s 1-3 percent target band.

The remarks come two weeks ahead of the RBNZ’s next monetary policy decision, where the Official Cash Rate is expected to remain on hold.

“A short-lived disruption and a temporary increase in petrol prices can – and should – be looked through from a monetary policy perspective if it is unlikely to have an impact on medium-term inflation outcomes,” Breman said.

“For this type of disruption, we would likely see higher inflation over the next few quarters, along with squeezed real incomes and demand.”

She said the peak impact of monetary policy on inflation took about six to nine quarters.

“So, tightening monetary policy in response to a short-lived disruption would only dampen growth without materially improving near-term inflation outcomes,” Breman said.

“If there are effects on medium-term inflation or inflation expectations, the appropriate policy response could be to increase interest rates to prevent these second round effects.”

Breman said “it is critical” for monetary policy to be forward-looking and focused on medium-term inflation pressures.

She said global supply chains were feeling the effects of the conflict, and it “will take time for the full effects of this shock on the global economy to play out”.

“We should try to avoid reacting too early to near-term inflation pressures that monetary policy can do little about – or reacting too late if above-target inflation becomes embedded in the economy.”

High near-term inflation, weaker growth

Breman said the higher short-term inflation spike would primarily be driven by higher petrol and diesel prices, which made up about 4 percent of the Consumer Price Index.

Higher fertiliser prices were another factor, and she believed it could take up to nine months to fully pass through to supermarket prices.

“Autumn fertiliser requirements are already on-hand in New Zealand, and fertiliser imports usually decrease over the winter months,” Dr Breman said.

“We expect fertiliser use to pick up for spring planting, which is when we may see more direct impacts on farms.”

Breman said the conflict meant New Zealand’s economic growth momentum would be “somewhat weaker” than the RBNZ’s previous assessments.

The bank’s February Monetary Policy Statement published forecasts of GDP growth of 1.1 percent in the March quarter, and 0.5 percent in the June quarter.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

ASB and Kiwibank have become the latest to increase interest rates, on the back of market fears the rising oil prices may push up inflation.

Wholesale rates have lifted since war broke out, even though the Reserve Bank has not yet moved the official cash rate.

Kiwibank is increasing its special one-year rate from 4.49 percent to 4.59 percent, its three-year rate from 5.25 percent to 5.35 percent, its four-year rate from 5.69 percent to 5.79 percent and its five-year rate from 5.79 percent to 5.89 percent.

Standard rates shift by a similar amount.

It is also lifting its term deposit rates by 20 basis points for one year, to 3.75 percent, 10 basis points for two years, to 4.1 percent, and 30 basis points for three- to five-year terms, to 4.4 percent, 4.6 percent and 4.7 percent, respectively.

ASB is cutting its six-month rate and increasing longer home loan terms and term deposit rates.

ASB’s two and three-year fixed home loan rates have increased by 14 and 20 basis points respectively, while the six-month rate is down 10 basis points.

It will offer 4.59 percent for a year, 4.49 percent for six months, 5.09 percent for two years and 5.69 percent for five years.

ASB has also lifted term deposit rates by up to 50 basis points across 12-month to five-year terms, including a five-year rate of 5 percent. Its one-year rate is 3.7 percent, up 20 basis points.

ASB’s executive general manager personal banking Adam Boyd said it was driven by market pricing.

“Wholesale interest rates have remained volatile and continue to trend higher. These movements reflect heightened global economic uncertainty and renewed pressures across global markets. For savers, the same environment means stronger returns, and it’s worth considering how your money could work harder.

“We understand that any increase to home loan rates is significant for households. We encourage customers to talk to us about their situation. There’s no one-size-fits-all answer, and we want to help people find the approach that works best for them.”

Westpac and ANZ announced increases last week.

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Electricity networks around the country will soon provide rebates for power exported during peak periods – but not every power company will pass those on to consumers directly.

From 1 April, the Electricity Authority will require distributors to pay rebates to reward customers generating electricity, such as rooftop solar, when the power network faces highest demand.

Vector was offering 5.24c per kWh for 7am to 11am export in June, July and August and 5pm to 10pm export in May through to September. WEL Networks is offering 6.35c per kWh from 7am to 9.30am and 5.30 to 8pm between 1 June and 31 August. Powerco is offering 7c on weekdays from 7am to 11am and 5pm to 8pm between 1 April and 30 September. Scanpower’s rebate reaches 13c.

Power companies separately offered their own prices to customers exporting power, and these could vary a lot.

The Electricity Authority said ensuring customers were fairly rewarded for supplying power to the network was part of its work programme.

“In January we announced the decision that electricity distribution businesses – lines companies – will need to pay rebates when households and small businesses supply power to the network at peak times, from April 1.

“This applies to those with a network connection size up to 45kVA and that can export up to 45kW of electricity back to the network.

“The electricity distribution companies’ rebates will be passed on to consumers through the electricity bills they receive from their retailer. While these rebates will be repackaged by the retailer, they may not be itemised on consumers’ power bills as a clear amount of money back. Some retailers itemise their bills more than others.”

Larger companies also needed to offer time-of-use pricing to encourage people to shift use to off-peak times.

Genesis chief revenue officer Stephen England-Hall said the company took into account distribution charges and rebates when it set its plans and pricing for customers.

“Customers on our day/night or other time-of-use plans typically benefit from lower network charges during off-peak periods, and these are already reflected in the appropriate tariffs.

“Effective from 1 July 2026, the Electricity Authority’s new regulations regarding export rebates will require retailers to offer time-varying plans that ‘provide a financial benefit’ to customers for export patterns that reduce pressure [on] the electricity system, including at peak times.

“Our range of products and plans will be updated to reflect this and enable customers to choose the one that suits them the best.

“We regularly review and update our pricing and product features, and will take the form and scale of these new rebates into account in this process.”

Mercury said it set buyback rates using a range of inputs including expected wholesale costs, network charges and network rebates. “We will factor these rebates into our time-of-use plans which we are due to launch in the next couple of months.”

Lisa Hannifin, chief customer officer at Meridian, said it offered customers 17c for solar export across all periods of the day.

“We’re pleased there are now more incentives available to encourage customers to export at peak times. We’re currently upgrading our billing system, which will allow for this new rebate to be incorporated into our solar plans and expect this will be reflected in our products from the middle of the year.”

At Octopus, chief operating officer Margaret Cooney said the full rebate should be passed on when it became available.

“The rebate will vary by network depending on what the circumstances are in that network and how much value they’re essentially getting based on the state of the grid and times of the year in which it’s of value to them.

“Some of them are much more generous than others, but we think it’s a great start. And I think one of the things that we hope to see is that networks learn that value of the distributed energy providing a more cost-effective solution rather than just building out more poles and wires.”

She said the rebates were intended to reward customers for what they were doing so it made sense to pass them on.

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Source: Radio New Zealand

Any businesses planning to offer extra support for their staff facing fuel cost rises will need to consider the tax implications.

Fuel prices have risen sharply in the past month as conflict in Iran has put pressure on oil supplies.

The price of 91 is now more than $3.30 a litre on average across the country, and forecast to rise further.

That adds to the cost of commuting – the Public Service Association earlier called for employers to allow staff to work from home to help offset the cost.

Deloitte tax partner Robyn Walker said any form of payment from an employer to an employee would generally be taxable through the PAYE system – even if it was a short-term fix for the petrol problem.

If it was offered in the form of goods or services, that could trigger fringe benefit tax.

But she said there were some exceptions for transport, which employers could consider.

The fringe benefit tax legislation has an exemption for ebikes, bikes, scooters and escooters provided by employers and used for commuting to work.

That means that as long as the employee is intending to use the bike mostly for commuting, it can be provided without needing to pay any fringe benefit tax (FBT).

She said there could also be significant benefits for employees taking a “salary sacrifice” arrangement.

This means their income is reduced by an amount equal to the cost of the bike. Because the cost of the bike was taken out of pre-tax income the final impact on the employee would be lower than if the bike was paid for out of after-tax income.

She said it could help someone afford a bike they might not otherwise be able to purchase. Some providers such as WorkRide and Northride have set up systems to streamline this process.

Another option is Extraordinary, which allows employers to offer public transport benefits either by salary sacrifice or as part of a total remuneration package, without attracting FBT.

This also has the potential to make public transport cheaper for employees.

Walker said employers could also start getting more claims for mileage from employees travelling for work in their own vehicles, where previously they might not have thought the administration was worth it.

“There are some quite detailed rules around how this works and generally ‘home to work’ travel can’t be reimbursed tax-free, but travel from home to a client – in excess of normal travel distances, or from work to a client is able to be paid tax exempt.

“Inland Revenue issues new reimbursement rates each year, which are based on historic costs. These are essentially a ‘safe harbour’, whereby they are comfortable that reimbursement at that level is reasonable; employers are not bound to use those rates, so could opt to pay a higher amount while fuel costs are high. This would need to be supported with some calculations to explain why the amount paid is reasonable.”

At present, the rate for a petrol car is $1.17 per kilometre.

“It is technically possible for an employer to provide tax-free allowances for employee transport costs in some limited circumstances. This exemption is targeted at scenarios where an employee’s commuting costs are more than what would ordinarily be expected – for example, if the employer operates in a remote location or if the location isn’t serviced by public transport and/or the employee is working hours where public transport isn’t available.”

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Source: Radio New Zealand

Explainer – Regional airlines across New Zealand are warning key air links are under growing pressure, as rising fuel and operating costs force tough decisions.

Westport is the latest town at risk of losing its only air connection and industry leaders warn it might not be the last.

Here’s what’s happening.

What changes have regional airlines made?

Originair is poised to scrap its Westport to Wellington route, unless it gets more government support, leaving the town without flights.

Air Chathams has introduced a $20 fuel surcharge per ticket citing “recent events in the Middle East impacting global fuel markets”.

Golden Bay Air chief executive Richard Molloy said his airline had reduced the number of flights between Tākaka and Wellington in May.

The airline was also the first recipient of a loan from the government’s $30 million package supporting struggling regional routes.

Sounds Air cut two routes and sold six aircraft last year with managing director Andrew Crawford warning that might not be the end of cuts.

Since the Covid-19 pandemic he said small airlines had been grappling with “spiralling, absolutely out of control costs”.

“Airways, airports, fuel, parts, finance, everything. Since Covid it’s just been an absolute nightmare trying to keep the costs under control in regional aviation,” Crawford said.

“The pressure on these airlines is extreme. Regional aviation in this country has been decimated and there’s more to come, I would say, if things keeps going like this.”

How much extra pressure is coming from fuel price rises?

Barrier Air chief executive Grant Bacon said the conflict in the Middle East had prompted sharp price shocks for regional airlines – sometimes with very little notice.

“After receiving a 95 cents per litre increase [last week] we have now also received a 12 cent increase… so it just goes on and on. Funny enough, I’ve just received another notification email from BP stating potentially more price rises. I’m too scared to open it,” he said.

“The issue is we sell tickets months in advance and we price in fuel and we consider perhaps that the fuel may increase, it may decrease and it’s a game of averages. But when you’re talking a 60 percent move in one bound it is certainly difficult to cope with.”

Molloy said fuel price rises so far equated to about $15 extra per passenger on an average Wellington to Tākaka Golden Bay Air flight.

Airlines simply could not rely on customers to pay that, he said.

“There’s a subtle equation there with fares and demand. Obviously if you increase your fares then eventually you will start to lose potential bookings,” he said.

Sounds Air managing director Andrew Crawford said he expected fuel prices would eventually double.

“This is a big problem what’s going on here – big problem. And I don’t think we’ve quite got the brunt of it yet,” he said.

Why do regional links matter?

Bacon said regional airlines, like Barrier Air, not only carried passengers and leisure tours, they also carried “freight, medical supplies, doctors, passengers that are visiting Auckland in order to receive treatment such as ongoing chemotherapy”.

“These links are just vital to communities,” he said.

Ruatoki resident Lisa Rua said she had been flying from Whakatane to Auckland for treatment of a pelvic mesh injury.

She had taken the trip about six times in the past year and could not imagine what she would do without flights.

“Driving is definitely not an option and I haven’t got a family member who is able to do that for me either… It would definitely be very difficult for my recovery if I can’t catch a plane,” she said.

“It is our only in and out of the area unless we catch a bus, which if you’re not well is not really a good option.”

New Zealand Airports Association chief executive Billie Moore said there had been a trend towards larger aircraft in New Zealand, making it harder for regional routes to be commercially viable.

“That’s why you saw some time ago, for instance, Air New Zealand withdrawing their Beechcraft fleet. Some of those routes were then picked up by smaller regional airlines.

“That overall trend – most major airlines moving to larger aircraft – means that the role of these smaller operators around New Zealand becomes more and more critical. They’re the only ones flying the types of planes that are going to work for these kinds of routes,” she said.

“What you need is a system that allows those larger airlines to grow, to support whatever regional networks they can, but also allows smaller operators to continue operating efficient fleets that serve regional New Zealand.

“At the moment that is getting harder and harder.”

What government support is available for regional airlines?

The Regional Connectivity Fund provided $30 million in concessionary loans to allow some regional airlines to consolidate debt, refinance loans and invest in aircraft maintenance or upgrades.

Associate Minister of Transport James Meager said the fund, announced last August, was designed to “stabilise the regional sector” and give airlines more headroom.

Moore said it took a lot of work and commitment from senior ministers to get off the ground but it was not a perfect fix for the current pressures.

“While the loan funding will be extremely useful and valued by these airlines, as they look to try and restructure some of their operations, it’s not going to deal with the ongoing operational cost and making some of these routes more commercial,” she said.

“There may well be points where the economics of it all make it too hard for some of these routes to operate.”

Golden Bay Air said it was yet to receive lending it had secured.

“We’re still going through the quite considerable due diligence attached to that being approved. But look, it will be good timing for sure,” Molloy said.

Bacon said the Regional Connectivity Fund appeared to be “incredibly slow moving”.

“I wouldn’t want to rely on continuity of services based on that package at this time… And I wouldn’t want to get into debt to fund loss-making routes,” he said.

What more support do airlines want?

Bacon said the most effective support would be relief from government-imposed costs.

“Probably the most valuable thing that the government could do… is that we need to see some relief on levies such as airways charges and also CAA levies,” he said.

It might also be time for the government to consider ongoing subsidies to keep regional routes operating, Bacon said.

“Overseas that’s a very regular occurrence especially in North America, Canada, a lot of routes in Europe. We bought an airplane from France a couple of years ago from an operator and that airplane was 100 percent subsidised – and they were servicing an island probably not too dissimilar to one of our main routes, which is Great Barrier Island,” he said.

Moore said that also made sense to the New Zealand Airports Association.

“Intervention now shouldn’t be seen as a point of failure but we should recognise that we’ve had a lot of decades of success where we haven’t had to intervene with government funding.

“We’re at the point now where we should think carefully about how to make sure the system is resilient for the future,” she said.

“Most countries provide some kind of foundation of support for regional routes. And there’s a reason for that.”

However, Molloy said longer-term support should focus on reducing compliance and airport costs rather than directly subsidising routes.

“For us what the government has done is quite fitting over the longer term. From our perspective the route should be inherently viable and the government – by reducing sort of compliance costs, limiting landing fees – these kind of things are more appropriate measures rather than underwriting certain routes.”

What is the government planning?

Meager said the government was doing a lot of work to try to reduce cost pressures across the board.

Criticism the Regional Connectivity Fund was slow was probably fair, he said.

“With increasing pressure on prices with the conflict in Iran it’s timely that we’ve got that fund but it’s also timely that we look at what other things we can do to support regional connectivity,” he said.

While that was unlikely to include cuts to Civil Aviation Authority levies or airways charges, Meager said he had tasked the authority with a wider rules reform programme “to make sure that we aren’t putting any unnecessary regulation and costs on the aviation sector”.

“We’re looking at what the range of options are depending on how long this conflict goes.

“So in a similar way that ministers are looking at what are the triggers and scenarios for interventions on the fuel price, similarly for me in the aviation sector what are the triggers for intervention when routes are at risk particularly routes to vulnerable areas?

“We’ll be considering those options in the coming few days or weeks and making some decisions as things change.”

As the part-owner of some airports, the government was continuing to invest in capital upgrades and maintenance “to make sure that they are viable and continue to operate”, Meager said.

“I understand the arguments for more intervention. At the moment, where we are placed is that we prefer to make investments around infrastructure.”

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– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand

Source: Radio New Zealand

Home loan borrowers are taking cashback incentives to stay with their current banks, as competition continues in the mortgage market.

The focus on cashback incentives intensified through the end of 2025, when ANZ ran a campaign offering cash payments equal to 1.5 percent of loan amounts to new home loan borrowers.

That prompted other lenders to match it, and in some cases offer borrowers incentives to stay, too.

Helen Stuart, a mortgage adviser at Compass Mortgages, said she had seen “retention payments” offered by several banks lately, especially when someone had all their lending come off a fixed term.

She had one client turned down who still had a year to run on half his lending.

It is harder to change to a different lender when some of the loan is still fixed, because it usually means a break fee has to be paid.

Stuart said it was common for retention payments to be about 0.4 percent of the loan amount. “But it varies.”

Campbell Hastie, of Hastie Mortgages, said it was still happening, although the activity had slowed since December.

“The number of retention payments we organised was probably higher than the number of refinance deals we concluded.

“That’s because by the time you paid the legal fees for moving, in many cases the retention cash payment looked about the same as the refinance cash less legal fees, not to mention the effort required to actually make the change.”

Jeremy Andrews, of Key Mortgages, said what people could get would depend on how long a customer had had their loan, whether they had taken a cashback previously and whether they had more than 20 percent equity.

“Some banks will refuse retention cash if the clients are already fixed in and they see it as of no benefit to the client to refinance to another bank. Some examples include if it’d be detrimental either in break fees – they’re already on higher than market rates, or if they would need to move to higher rates in the market, or the legal costs associated exceed any cashback benefit of moving.

“When retention cash is offered it’s typically a lot less than the same bank will offer for new business – often between 0.25 percent to 0.4 percent of the lending amount, compared to currently up to 0.9 percent or even 1 percent cashback for new or refinanced lending.”

Banks said it was a response to competition in the market.

ANZ said it was “fighting to hold on to and win new customers in a very competitive market”.

“Customers consider a number of things when choosing who to get a home loan from – pricing, product, approval times and other incentives on offer. At times we will offer deals like cash contributions for customers.

“For existing customers, we encourage people to connect with us to ensure they are aware of all the options available to them. We’ll always endeavour to give our customers the most competitive offer – our bankers can sometimes offer cash contributions to existing customers.”

Westpac agreed competition was fierce.

“We’re working hard to both retain existing customers and win new ones. We consider a range of options to make sure we are providing great value for all our customers.”

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Source: Radio New Zealand

ASB’s latest Regional Economic Scoreboard shows Canterbury leading New Zealand’s regional growth, Auckland making strong gains, and Wellington slipping to the bottom of the rankings.

Canterbury scored back-to-back economic wins in ASB’s latest regional economic survey.

Canterbury finished the final quarter of 2025 on a strong note, once again topping ASB’s Regional Economic Scoreboard as the country’s best‑performing regional economy.

Otago and Waikato tied for second place, while Auckland jumped from seventh to fourth.

ASB said Canterbury secured its third quarterly win of 2025, outperforming the rest of the country in employment, retail spending, housing activity and population growth.

Chief economist Nick Tuffley said the South Island continued to lead New Zealand’s multi‑speed recovery.

“Canterbury has delivered back‑to‑back wins to close out the year, supported by strong dairy incomes, steady jobs growth, resilient consumer spending and the recovery of the tourism sector,” he said.

Otago’s ranking was boosted by a strong tourism rebound, while Waikato benefited from a robust primary sector and an improving labour market.

ASB expects the upcoming Fonterra capital return from the sale of Mainland to further lift dairy farming regions through increased spending and investment.

Auckland’s rise was driven by gains in retail spending, construction activity and consumer confidence, although its labour market remains subdued.

Tuffley said Auckland’s move up the rankings showed the economic upswing was widening beyond the regions that led earlier in the cycle.

At the other end of the table, Wellington finished last, weighed down by ongoing weakness in the housing market, construction activity and discretionary spending, despite relatively strong employment growth.

Tuffley said Wellington’s economy should improve, helped by low interest rates, but emerging challenges could slow the pace of recovery.

Nationally, ASB said the economy showed signs of growth in the final quarter of 2025 as lower interest rates lifted retail spending and employment indicators stabilised.

However, Tuffley warned the conflict in the Middle East would pose fresh headwinds through higher energy costs and rising inflation.

“The situation and extent of any impact to growth and inflation is highly uncertain and will depend on how long the conflict goes on for,” he said.

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Source: Radio New Zealand

Synlait has described its half-year net loss of $80.6 million as disappointing as it pledges to deliver a pathway to recovery.

The dairy company, majority-owned by China’s Bright Dairy, reported after tax result was $85.4m lower than the same period last year.

Revenue rose just over $32m to $949m but debt soared by 88 percent to just over $472m. Synlait’s forecast base milk price rose from $9.50 to $9.70 taking forecast total milk price to $10.10 per kg/ms.

Chief executive Richard Wyeth said the company faced multiple headwinds – a major one being manufacturing problems as it tried to catch up on its supply of inventory to customers.

“The revised plan meant that we had surplus raw milk, particularly over the peak season,” he told an investor call.

“When we looked through the numbers, it became clear that the only option was to sell that milk through the peak.”

Wyeth said some of the milk sales didn’t go to plan and milk was sent back to its Dunsandel plant, which meant workers had to stop their inventory catch-up and process the extra milk into whole milk powder.

“Whole powder is the only ingredient that could be made at short notice without creating significant down time on the dryers, up to 48 hours to change.”

“To create the perfect storm, whole milk powder prices decreased sharply at the end of 2025 which impacted the returns on that ingredient portfolio.”

He described the season as one of the most frustrating seasons in his 18 years in the industry.

“We faced multiple headwinds, and had very little choice as to how we could deal with them. At each juncture, we carefully costed and analysed the options and even with the benefit of hindsight, there’s very little we would have done differently that would have improved this result,” he says.

Where to from here for Synlait?

The dairy company’s deal to sell North Island operations, including Pokeno manufacturing site, to global healthcare company Abbot for $307m is set to be completed by 1 April, Wyeth said.

“The transaction not only helps Synlait’s balance sheet, it removes a loss-making asset from our financial performance, and will deliver a simpler Synlait.

“From there, our stabilised, simplify and scale strategy provides a solid roadmap to return Synlait to success.”

Wyeth said it’s still working to rebuild customer inventory and expects an insurance claim to help cover some of the losses incurred as a result of manufacturing issues in the 2025 financial year.

The company did not provide guidance for the full year, with company chair George Adams saying there is a lot of work to do.

“Behind our roadmap, sits a real determination to ensure the coming 12 to 24 months will be seen as a period where Synlait under promised and over delivered,” he said.

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Source: Radio New Zealand

Diesel is now only about 20c a litre cheaper than 91 – even though 70c of the price of a litre of petrol is tax.

Data from petrol price monitoring app Gaspy showed that across the country, the national average reported price for 91 was $3.31 a litre, and for diesel it was $3.13. For 95, it has reached $3.51.

91’s price is up 37.67 percent over 28 days, while diesel’s is up 81.75 percent.

Gaspy spokesperson Mike Newton said diesel would normally be expected to be 70c cheaper than 91 because of the petrol tax, but it was only 20c. “The diesel drivers are definitely getting it worse because they’ve still got to pay their road user charges.”

Diesel is more expensive to make than petrol but the impact of fuel excise tax usually conceals this.

Billy Clemens, head of policy and advocacy at Transporting New Zealand, said diesel was usually the second-largest cost for its member businesses, after wages.

“It’s a cost that sits typically around 15 percent to 20 percent of overall costs…. And road freight’s pretty famously a pretty low margin game. So our members are in a position whether they can either pass those costs on or end up in a really difficult position with their business viability.”

He said about half the organisation’s members were likely to be using a fuel adjustment factor.

“That’s a surcharge, essentially. You might have a base freight rate, but you add on a certain surcharge based on how much the diesel price has increased over a set figure. If you’re a freight customer you might be seeing that in freight invoices coming through. That’s a sizeable cost on businesses right across the country, whether you’re in retail or construction or logging… there’ll be a real flow-on impact.”

Clemens said shortages were not widespread and seemed to be driven by demand patterns.

He said transport was about 15 percent to 25 percent of costs for businesses in the loggin industry, and up to 12 percent in grocery.

Simplicity chief economist Shamubeel Eaqub said his concern was more about the volume of diesel. Runing out of petrol could be annoying on an individual level but running out of diesel could have much larger consequences, he said.

Gaspy data shows that the cheapest 91 petrol is at Orams Marine Village – which caters to boats rather than cars, and where fuel is $2.96 a litre. Pukekohe Pak’n Save was next, at $3.08.

Newton said some of the factors that normally drove differentiation in pricing aroudn the country were not as relevant at present.

Previously, local competition had often driven certain regions to be cheaper than others. “It’s hard to know if tha still applies in the current environment because there are not a lot of discount days going on at the moment,” he said.

“In the past when you’ve got discount retailers operating in an area, they tend to drag the price for the whole area down. Then it comes down to remoteness and population density. Places that are off the beaten track and don’t have a lot of customers are going to have higher prices.”

Auckland’s Waiheke Island, for example, is recording prices near $4 for 91.

Newton said Mangawhai had been an area with cheaper prices recently. It had a new Gull station open about five months ago. “Often when a discount retailer opens up somewhere they have introductory pricing, NPD’s really well known for it. They’ll set really low prices for a f w months and often it just brings the price for the whole area down.”

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Source: Radio New Zealand

Fonterra delivered a strong first half result, beating market expectations, while lifting its full year earnings outlook and forecast farmgate milk price.

The co-operative said a “favourable product mix and resilient global demand for high value dairy Ingredients and Foodservice products” enabled Fonterra to deliver and better than expected result.

The dairy co-operative’s net profit for the six months ended January rose 3 percent, with group revenue up 9 percent.

Key numbers for the six months ended January compared with a year ago:

• Net profit $750m vs $729m
• Revenue $1.231b vs $1.107b
• Earnings per share 45 cents vs 44cps
• Normalised earnings per share 51 cps vs 47cps
• Return on capital 11.2% vs 10.4%
• Interim dividend 24cps vs 22cps
• Special Mainland dividend 16cps – Capital return of $2 a share – expected to be paid 14 April

Current forecast vs previous forecast

• FY26 forecast earnings guidance from continuing operations between 50 – 65cps vs 45 -65 cps
• Current season forecast Farmgate Milk Price midpoint $9.70 per kgMS vs 9.50 per kgMS.
• Reaffirms target to close Mainland underlying earnings gap of $300m – FY28 to match FY25

Outgoing chief executive Miles Hurrell said the changes to the forecast Farmgate Milk Price and earnings reflected improvement in global commodity prices and the co-op’s strong underlying

margins and cost control.

However, he said significant volatility remained, particularly as the conflict in the Middle East continued.

“The underlying performance of Fonterra’s continuing business is stable, allowing the Co-op to return all earnings associated with the Mainland Group business and lift our forecasts for the remainder of the year ahead,” Hurrell said.

“Demand for our products is strong, and we’re focused on our plan to maximise both the Farmgate Milk Price and earnings.”

The co-op also delivered a return on capital of 11.2 percent, in line with its target range.

“The first half of the year has been shaped by strong milk flows, with the Co-op collecting record milk volumes in the South Island so far this season,” Hurrell said, though several adverse weather events had put pressure on operations.

“Our performance shows that we are growing the high-value parts of our business through optimal allocation of milk solids across our product mix, which is driving a strong return on capital for shareholders and unit holders.”

Managing geopolitical volatility

Hurrell said war in the Middle East was having an impact on its supply chain through the region, with potential to increase Fonterra’s inventory levels and costs over the course of the second half of the year.

There was also the potential for further volatility in global commodity prices, he said.

“The conflict is a complex and dynamic situation that is changing daily, but we are confident that we’re on the right track to get product to customers.”

He said Fonterra’s business was designed to manage volatility.

“Our scale and strong relationships with customers and logistics provider Kotahi will help us to navigate through these challenges better than most.

“With this in mind, we remain focused on delivering on our strategic targets.”

Where the growth is coming from

The company said it was focused on deepending its position as a world-leading provider of dairy ingredients.

“In line with the co-op’s strategy, we have continued to focus on optimising our product mix by allocating milk solids effectively to the highest accessible demand.

“With milk collection tracking at 2.3 percent growth year-on-year, we have leveraged flexibility in our asset network and increased the manufacture of our highest returning product portfolios, such as cheese and proteins,” it said in its interim report.

Fonterra said it was also expanding its Foodservice business in and beyond China to grow earnings.

“Diversifying our cream portfolio and expanding our customer base remains a key focus. Anchor Easy Bakery Cream continues to perform strongly in China, valued for its functionality, quality and accessible price point.

“The cream has now launched in Indonesia and Thailand, with other markets across Southeast Asia to follow.”

In addition the company said it was investing more in operations.

“During the half, we continued to invest in our assets to drive growth in our Foodservice and Ingredients businesses, and in projects intended to improve energy security, operational resilience, and reduce the Co-op’s emissions.”

It was also investing more in science and technology.

“In line with our strategy, the co-op has continued to advance its innovation pipeline across products, processes, data and new business models.

“Our team and dedicated research and development centre remains focused on core dairy and advanced nutrition, manufacturing performance and capability, and strengthening in-market application capability to support long-term growth, efficiency and resilience.”

– Published by EveningReport.nz and AsiaPacificReport.nz, see: MIL OSI in partnership with Radio New Zealand