The Road Transport Contractual Chain Order – Fuel Cost Recovery – 2026, which takes effect today, April 21, is the first of its kind. It requires clients at the top of the supply chain—including local councils—to ensure that transport contractors and owner-drivers are compensated for skyrocketing diesel prices, which have recently peaked above $3.10 per litre due to global supply disruptions.

Under the new “contractual chain” laws, councils are identified as “primary parties” who commission essential road transport services. The FWC order mandates:

• Fortnightly Fuel Reviews: Rates must be adjusted every two weeks to account for changes in diesel prices.
• Enforceable Cost Recovery: Councils must ensure that funding for fuel increases is passed through the entire supply chain to the drivers and small businesses delivering services.
• Sustainability Measures: The order remains in place as long as national diesel prices stay above $2.00 per litre.

The Australian Local Government Association (ALGA) has expressed serious concern regarding the financial burden this places on the sector. While acknowledging the pressure on truck drivers, ALGA President Mayor Matt Burnett warned that councils are already struggling with escalating costs for essential community services.

“Councils and ratepayers cannot continue to absorb ever-increasing costs,” Mayor Burnett said in a statement. “In many contracting arrangements, councils sit at the top of the contractual chain. Without recognition of these unique pressures, there is a real risk to service delivery and infrastructure outcomes, particularly in regional and remote communities.”

ALGA had previously submitted to the FWC that local government should be recognised as a distinct entity to avoid “undue cost increases.” The sector body is now calling for a coordinated national response and financial support to ensure that critical services—such as waste collection, road maintenance, and water operations—remain viable.

The ruling comes as the transport industry faces what the Transport Workers’ Union (TWU) described as a “looming fuel debt cliff.” The FWC Expert Panel, led by President Justice Hatcher, expedited the order after the Federal Government amended the Fair Work Act to allow for “emergency applications” in response to the historic fuel price spike.

For local governments, the immediate focus shifts to reviewing existing contracts with transport providers. The FWC has indicated that the order will be reviewed in one month to assess its impact on business viability and administrative costs across the supply chain.

Councils are advised to:

1. Assess Contractual Obligations: Identify where fuel costs sit within current road transport and service delivery contracts.
2. Prepare for Fortnightly Adjustments: Establish administrative processes to handle the mandatory bi-weekly rate reviews.
3. Monitor Compliance: Ensure that any increased payments are reaching the contractors and owner-drivers as intended by the order.

The local government sector will continue to advocate for federal assistance to mitigate the impact of these mandatory cost increases on municipal budgets and community services.